-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JJUpakkqhb5+t7/pCIba3FLFXYA9hxTNjoyrA+5ZJWHWdgLxLT/s/yni2JXbaRWX TNh/fe4u07cM8gne1Ujliw== 0001047469-99-016951.txt : 19990430 0001047469-99-016951.hdr.sgml : 19990430 ACCESSION NUMBER: 0001047469-99-016951 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990415 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORTON INDUSTRIAL GROUP INC CENTRAL INDEX KEY: 0000064247 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 380811650 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-13198 FILM NUMBER: 99603980 BUSINESS ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 BUSINESS PHONE: 3092667176 MAIL ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 FORMER COMPANY: FORMER CONFORMED NAME: MLX CORP /GA DATE OF NAME CHANGE: 19960823 FORMER COMPANY: FORMER CONFORMED NAME: MCLOUTH STEEL CORP DATE OF NAME CHANGE: 19850212 8-K 1 FORM 8-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) APRIL 15, 1999 MORTON INDUSTRIAL GROUP, INC. --------------------------------------- (Exact name of registrant as specified in its charter) GEORGIA 0-13198 38-0811650 -------------------------- ------------------------- ---------------- State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation or organization Identification No.)
1021 WEST BIRCHWOOD, MORTON, ILLINOIS 61550 --------------------------------- --------- (Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code 309-266-7176 (Former name or former address, if changed since last report.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. WORTHINGTON CUSTOM PLASTICS, INC., ACQUISITION On February 26, 1999, we entered into an agreement with Worthington Custom Plastics, Inc. to acquire three manufacturing facilities which produce plastic components for construction and industrial original equipment manufacturers. On April 15, 1999 we concluded the acquisition. The business we acquired had sales of $105.1 million in 1998. The Worthington acquisition expands our plastic product offerings to include washing machine parts, electronics housings and other injection molded and thermoformed plastic products. The Worthington acquisition provides us critical mass in the plastics business and adds new original equipment manufacturers to our customer base. Pursuant to the agreement to purchase the Worthington businesses, we (i) paid Worthington Custom Plastics, Inc. $25.0 million in cash, subject to a working capital adjustment, net of certain assumed liabilities; (ii) issued 10,000 shares of preferred stock, without par value, of Morton Industrial Group, Inc. to Worthington Custom Plastics, Inc.; and (iii) provided for a contingent payment to Worthington Custom Plastics, Inc. The preferred stock is mandatorily redeemable five years from its issuance date at $1,000 per share, and will pay or accrue annual dividends at a rate of 8%. We may pay such dividends in cash or in additional shares of preferred stock. The dividend rate may be reduced upon certain pending changes in a Worthington Custom Plastics, Inc. customer contract. The contingent payment will be 15% of the fair market value of the acquired business as of December 31, 2004. For further detail, the Asset Purchase Agreement and First Amendment to Asset Purchase Agreement are filed as Exhibits 10.1 and 10.2, respectively, to this Form 8-K. The assets acquired from Worthington Custom Plastics, Inc. in this transaction are held by Morton Custom Plastics, LLC, a recently formed limited liability company wholly owned by Morton Holdings, LLC, a recently formed limited liability company. Morton Holdings, LLC is 49% owned by Morton Industrial Group, Inc. and 51% owned by recently formed Quilvest Custom Plastics, Inc. Quilvest Custom Plastics, Inc. is an affiliate of shareholders of Morton Industrial Group, Inc. Morton Industrial Group, Inc. acts as the manager of Morton Holdings, LLC and is allocated 100% of each item of Morton Holdings, LLC's income, gains, losses, deductions and credits. Quilvest Custom Plastics, Inc. has 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. To finance the acquisition of assets from Worthington Custom Plastics, Inc., Morton Custom Plastics, LLC and Morton Holdings, LLC entered into a secured revolving credit and term loan facility with General Electric Capital Corporation ("GECC") as agent and as a lender, pursuant to a Loan Agreement dated as of April 15, 1999, among Morton Holdings, LLC, Morton Custom Plastics, LLC, and GECC (the "Loan Agreement"). The Loan Agreement allows for an up to $24.0 million 4 1/2 year revolving credit facility and an up to $26.0 million 4 1/2 year term loan facility, both at variable interest rates based on LIBOR or the prime rate, at Morton Custom Plastics, LLC's option, plus various margins. Morton Custom Plastics, LLC also incurs a fee based on a certain percentage of the unused revolving credit facility. The term loan facility amortizes quarterly throughout its term. Morton Custom Plastics, LLC must also prepay certain amounts from the sale of assets, the issuance of new equity capital and from "excess cash flow." The Loan Agreement is secured by a lien on all of Morton Custom Plastics, LLC's assets, and the assets of its subsidiaries and by a pledge of Morton Holdings, LLC's membership interest in Morton Custom Plastics, LLC. For further detail, a copy of the Loan Agreement is filed as Exhibit 10.3 to this Form 8-K. The Loan Agreement includes certain financial covenants as to maximum capital expenditures; minimum fixed charge coverage ratio, minimum net income before interest, tax and depreciation; and minimum tangible net worth. The Loan Agreement also restricts certain activities of Morton Holdings, LLC and Morton Custom Plastics, LLC, including the payment of dividends to Morton Industrial Group, Inc. 2 Under the Loan Agreement, the amount available for borrowing depends on a borrowings base formula that applies varying percentages to certain values of "eligible" accounts receivable, inventory, equipment and real estate of Morton Custom Plastics, LLC. As of April 15, 1999, the total amount available for borrowing under the Loan Agreement was $42.8 million, and the total amount outstanding was $32.0 million. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. Audited financial statements of Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc., a subsidiary of Worthington Industries, Inc. for the ten months ended March 31, 1999 and for the years ended May 31, 1998 and 1997 will be filed by amendment to this Form 8-K. Morton Industrial Group, Inc. and Subsidiaries Unaudited Pro Forma Condensed Consolidated financial statements will be filed by amendment to this Form 8-K. The following documents are filed as Exhibits to this Form 8-K:
EXHIBIT NO. DOCUMENT - ----------- -------------------------------------------------------------------------------------------------------- 10.1 Asset Purchase Agreement among the Company, Morton Custom Plastics, LLC, and Worthington Custom Plastics, Inc. dated February 26, 1999. 10.2 First Amendment to Asset Purchase Agreement, dated as of April 15, 1999, among the Company, Morton Custom Plastics, LLC and Worthington Custom Plastics, Inc. 10.3 Credit Agreement dated as of April 15, 1999, among Morton Custom Plastics, LLC, Morton Holdings, LLC and General Electric Capital Corporation. 99.1 Press release dated February 26, 1999 (1998 results).
3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MORTON INDUSTRIAL GROUP, INC. (Registrant) Date: April 29, 1999 By: [SIGNATURE] Name: Daryl R. Lindemann Title: VICE PRESIDENT OF BUSINESS DEVELOPMENT AND ACQUISITIONS
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT - ----------- -------------------------------------------------------------------------------------------------------- 10.1 Asset Purchase Agreement among the Company, Morton Custom Plastics, LLC, and Worthington Custom Plastics, Inc. dated February 26, 1999. 10.2 First Amendment to Asset Purchase Agreement, dated as of April 15, 1999, among the Company, Morton Custom Plastics, LLC and Worthington Custom Plastics, Inc. 10.3 Credit Agreement dated as of April 15, 1999, among Morton Custom Plastics, LLC, Morton Holdings, LLC and General Electric Capital Corporation. 99.1 Press release dated February 26, 1999 (1998 results).
EX-10.1 2 EXHIBIT 10.1 ASSET PURCHASE AGREEMENT WORTHINGTON CUSTOM PLASTICS, INC. This Agreement is made this 26th day of February, 1999 by and between Worthington Custom Plastics, Inc., an Ohio corporation ("Seller"), Morton Industrial Group, Inc., a Georgia corporation ("Parent") and Morton Custom Plastics, Inc., a newly formed Delaware corporation ("Buyer") and wholly-owned subsidiary of Parent. W I T N E S S E T H: WHEREAS, Seller is engaged in the business, among others, of designing, manufacturing and selling molded plastic and metal parts; and WHEREAS, Seller desires to sell, and Parent, through Buyer, desires to purchase, substantially all of the assets of Seller's plastics business located at Seller's Harrisburg and Concord, North Carolina, St. Matthews, South Carolina and Lebanon, Kentucky facilities (the "Business" as further defined hereafter), and in connection therewith, Buyer has agreed to assume certain of Seller's liabilities relating to the Business, all on the terms set forth herein; and WHEREAS, certain terms used herein have the meanings assigned to them in Section 12 hereof. NOW, THEREFORE, in consideration of the foregoing and of the respective promises, covenants, representations and warranties herein contained, it is agreed: SECTION 1. PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES. 1.1 PURCHASE OF ASSETS. Subject to the terms and conditions set forth in this Agreement, on the Closing Date, Seller agrees to sell, transfer, assign, convey and deliver to Buyer, and Buyer agrees to purchase, acquire and accept from Seller, all of Seller's right, title and interest in and to all of the assets, properties and rights of Seller used by Seller solely in the conduct of the Business, as and to the extent existing on the Closing Date (except for the Excluded Assets as defined in Section 1.2) collectively, the "Assets", free and clear of all liens and encumbrances other than Permitted Liens. Without limitation of the foregoing, the Assets include the following as and to the extent existing on the Closing Date: (i) REAL PROPERTY. The Real Property owned or leased by Seller and listed on Schedule 1.1(i) hereto; (ii) INVENTORY. All Inventory of the Business; (iii) ACCOUNTS RECEIVABLE. All accounts receivable of the Business excluding accounts receivable from Seller or Seller's Affiliates; (iv) TANGIBLE PERSONAL PROPERTY. All Tangible Property, including, but not limited to, the Tangible Property listed on Schedule 1.1(iv); 1 (v) CONTRACTS. All Contracts of the Business to which Seller is a party and which relate to the conduct of the Business (the "Contracts of the Business"), including, but not limited to, those set forth on Schedule 1.1(v) hereto; but excluding those listed on Schedule 1.2(vi); (vi) PREPAID EXPENSES. All prepaid expenses of the Business; (vii) INTANGIBLE PROPERTY. Subject to Sections 1.2(vi) and 7.10 hereof, all Intangible Property, including, but not limited to, the Intangible Property listed on Schedule 1.1(vii) ; (viii) BOOKS AND RECORDS. All general, financial and personnel records, correspondence and other files and records, including customer lists and sales records, of the Business; (ix) GOODWILL. All of the Seller's goodwill in the Business; (x) CLAIMS. All claims, causes of action, rights of recovery and rights of set-off arising out of the conduct of the Business; (xi) BALANCE SHEET ASSETS. All other assets of Business set forth on the Balance Sheet, subject to changes in the ordinary course of business since the Balance Sheet Date; (xii) EMPLOYEE PLANS. The assets relating to the Plans listed on Schedule 1.1(xii). 1.2. EXCLUDED ASSETS. Notwithstanding any provision of this Agreement to the contrary, Seller shall not sell, transfer, assign or convey to Buyer, and Buyer shall not purchase, acquire or accept, and there shall be excluded from the Assets the following (the "Excluded Assets"): (i) CASH. All cash, marketable securities, commercial paper, certificates of deposit and other bank deposits, treasury bills and other cash equivalents; (ii) BANK ACCOUNTS. All rights with respect to bank accounts; (iii) INTERCOMPANY ACCOUNTS. All rights of Seller or the Business with respect to any obligations of Seller, any Seller Affiliate or any director or officer of Seller or of any Seller Affiliate; (iv) INSURANCE. All insurance policies and all rights of every nature and description under or arising out of such policies; (v) EMPLOYEE BENEFIT PLANS. Except as expressly set forth on Schedule 1.1(xii), all Plans of Seller and the assets relating thereto; 2 (vi) OTHER MATTERS. All rights of Seller (a) under this Agreement and the agreements and instruments delivered to Seller by Buyer pursuant to this Agreement, (b) to Seller's and Worthington's corporate name, logos, tradenames and trademarks, and (c) under those Contracts listed in Schedule 1.2(vi); and (vii) ASSETS NOT USED IN THE BUSINESS. Those assets not used solely in connection with the Business, including, without limitation, those listed on Schedule 1.2 (vii). 1.3 ASSUMED LIABILITIES. Subject to the terms and conditions set forth in this Agreement, Buyer agrees that, on the Closing Date, Buyer shall assume and thereafter pay, perform and discharge when due all liabilities and obligations of Seller relating to the Assets or the Business or the operation thereof (except the Excluded Liabilities as defined in Section 1.4) as and to the extent existing on the Closing Date, including, without limitation, the following obligations and liabilities as and to the extent existing on the Closing Date (the "Assumed Liabilities"): (i) all liabilities and obligations of Seller relating to the Assets or the Business to be performed after the Closing Date arising from the Contracts of the Business; (ii) all liabilities of Seller reflected or reserved against in the Closing Balance Sheet, or notes thereto, and those liabilities of Seller arising in the ordinary course of business of the Business since the Balance Sheet Date; (iii) all obligations of Seller for replacement of, or refund or credit for, damaged, defective or other returned products or for warranty claims in respect of products sold by the Business; (iv) all obligations of Seller for rebates, price adjustments, adjustments to accounts payable, future delivery obligations, discounts or promotions to the extent accrued or arising in the ordinary course of business of the Business; (v) all liabilities and obligations of Seller relating to the Assets or the Business with respect to accrued and unpaid Taxes to be assumed by Buyer pursuant to Section 7.4 hereof (other than income and franchise taxes) existing on the Closing Date including, without limitation, real estate taxes, sales taxes, general and special taxes and assessments, ad valorem taxes, water and sewer charges, federal and state withholding taxes of employees of the Business; (vi) all liabilities and obligations of Seller relating to the Plans set forth on Schedule 1.1(xii); (vii) subject to Section 10.1, all liabilities of Seller in connection with each Action or Proceeding set forth on Schedule 1.3(vii) hereto; (viii) all liabilities and obligations of Seller related to the IDB as described in Section 1.5; and 3 (ix) all other liabilities expressly set forth as being assumed or payable by Buyer as set forth in Section 7 hereof or pursuant to the Assignment and Assumption Agreement referred to in Section 9.5(e). 1.4 LIABILITIES NOT ASSUMED. Anything contained in this Agreement to the contrary notwithstanding, Buyer shall not assume and there shall be excluded from the Assumed Liabilities (i) all obligations of Seller or the Business to any Seller Affiliate or any director or officer of Seller or of any Seller Affiliate, (ii) those obligations or liabilities listed as Excluded Liabilities on Schedule 1.4, and (iii) those liabilities expressly set forth as being payable by Seller pursuant to Section 7 hereof. The liabilities of Seller not assumed by Buyer as listed in this Section 1.4 are referred to herein as the "Excluded Liabilities." 1.5 LEBANON IDB. Seller's Lebanon, Kentucky facility was financed through Industrial Building Revenue Bonds, Series 1994 issued by the City of Lebanon, Kentucky (the "IDB") which were purchased by a Seller's Affiliate. At Closing the following will occur with respect to the IDB: (a) As part of the Assumed Liabilities, Buyer shall assume all of Seller's liabilities and obligations, for payment and otherwise, under the IDB; and (b) As part of the Assets being acquired, Seller's Affiliate shall transfer the IDB to an entity designated by Buyer. SECTION 2. PURCHASE PRICE. 2.1 PURCHASE PRICE. The consideration for the Assets (the "Purchase Price") shall be (i) $25,000,000 (the "Closing Cash Payment"); (ii) non-voting shares of preferred stock of Parent, without par value (the "Preferred Stock"), having an aggregate value of $10,000,000 and the terms set forth on Exhibit A hereto; (iii) voting shares of common stock of Buyer, par value $0.01 per share (the "Common Stock"), equal to 15% of the equity value of Buyer at the Closing Date on a fully diluted basis; and (iv) Buyer's assumption of the Assumed Liabilities. The Closing Cash Payment shall be paid as provided in Section 2.3. 2.2. ADJUSTMENT OF PURCHASE PRICE. (a) The Purchase Price shall be adjusted as follows: (i) For purposes hereof, "Operating Capital" shall mean (A) net accounts receivable plus Inventory, plus investments since November 30, 1998 in fixed assets, less (B) accounts payable. "Final Operating Capital" shall mean Operating Capital of the Business as reflected in the Closing Balance Sheet referred to in Section 2.2(b); and "Target Operating Capital" shall mean Operating Capital of the Business as reflected on the November 30, 1998 Balance Sheet. (ii) If the amount of the Final Operating Capital determined in accordance with this Section is less than the Target Operating Capital, the Purchase Price shall be decreased by an amount equal to the difference between the Final Operating Capital and the Target Operating Capital. 4 (iii) If the amount of the Final Operating Capital is greater than the Target Operating Capital, the Purchase Price shall be increased by an amount equal to the difference between the Final Operating Capital and the Target Operating Capital. (b) The Final Operating Capital shall be determined as of the close of business on the day immediately preceding the day of the Closing (the "Determination Time") on the basis of the balance sheet of the Business as of the Determination Time (the "Closing Balance Sheet"). The Closing Balance Sheet (i) shall be prepared by Seller in accordance with generally accepted accounting principles consistently applied ("GAAP") as supplemented by the principles set forth in Schedule 2.2 (the "Accounting Principles"); (ii) shall reflect separately investments since November 30, 1998 in fixed assets; and (iii) shall reflect the transactions contemplated by Schedule 2.2 hereof. (c) Seller shall use its best efforts to deliver to Buyer the Closing Balance Sheet within sixty (60) days after the Closing; (i) setting forth the amount of Final Operating Capital reflected in the Closing Balance Sheet, and (ii) setting forth the amount of any required adjustment to the Purchase Price pursuant to this Section 2.2. Seller and Buyer shall reasonably agree upon the method for obtaining an accurate report of closing inventory (i.e. physical inventory, cycle count or other). The parties shall reasonably agree when any counts shall be conducted and each party and their representatives shall be permitted to observe the conduct of any counts. In connection with any physical inventory/cycle count and the preparation of the Closing Balance Sheet, the Buyer shall cause the employees of the Business to provide to Seller without charge, full access to the books, records, facilities and employees of the Business and the Buyer shall cause the Businesses employees to cooperate fully with Seller in the conduct of the physical inventory/cycle count and the preparation of the Closing Balance Sheet. The Buyer and its representatives shall be entitled to consult with personnel of Seller during the course of the preparation of the Closing Balance Sheet and to review the work papers prepared in connection therewith. (d) The Buyer shall have 30 days after its receipt of the Closing Balance Sheet (hereafter the "Dispute Period") during which it shall have the opportunity to examine the Closing Balance Sheet and to determine if it proposes any adjustments to amounts set forth therein. If adjustments are proposed, the Buyer shall provide a written notice to Seller (a "Dispute Notice") within the Dispute Period setting forth the proposed adjustments. Within 15 days after receipt of the Dispute Notice, Buyer and Seller shall meet and attempt to resolve such proposed adjustments and upon reaching agreement shall set forth such agreement in writing and prepare a final Closing Balance Sheet. In the event that Seller and Buyer are unable to resolve any such Dispute within the 15 day period (or such longer period as the parties may mutually agree) then the public accounting firm of Deloitte & Touche, LLP (Columbus office) shall be employed as arbitrator hereunder to settle the Dispute as soon as practicable. The arbitrator shall have access to all documents and facilities necessary to perform its functions as arbitrator. The arbitrator's determination with respect to any Dispute shall be the exclusive method for the resolution of that dispute, shall be final and binding upon the parties hereto and may be enforced by any court of competent jurisdiction. The arbitrator may at his discretion 5 establish binding rules of procedure for the conduct of the arbitration. Seller and Buyer shall each pay one-half of the fees and expenses of the arbitrators for such purposes. 2.3. PAYMENT OF PURCHASE PRICE. (a) At the Closing, Buyer shall pay to Seller (i) an amount equal to the Closing Cash Payment by wire transfer of immediately available funds to an account designated by Seller, and (ii) certificates issued in the name of Seller representing the Preferred Stock and Common Stock contemplated by Section 2.1. (b) Within three (3) business days after the determination of Final Operating Capital is finalized, then (i) in the event the Final Operating Capital is less than the Target Operating Capital, Seller shall pay to Buyer the amount, if any, by which the Target Operating Capital exceeds the Final Operating Capital, or (ii) in the event the Final Operating Capital exceeds the Target Operating Capital, Buyer shall pay to Seller the amount, if any, by which the Final Operating Capital is greater than the Target Operating Capital. Any such payment pursuant to this Section (b) shall be made by wire transfer of immediately available funds and shall be accompanied by payment of an amount determined by computing simple interest on the amount of that payment at the rate of interest announced publicly by Bank One in Columbus from time to time as its "reference rate" (on the basis of a 365-day year) from the Closing Date to the date of payment. 2.4 ALLOCATION. The Purchase Price shall be allocated among the Assets on a schedule to be attached hereto as Schedule 2.4 and agreed to by the parties hereto on or prior to the Closing Date. Such purchase price allocation shall be made consistent with Section 1060 of the Code. Each of the parties hereto shall not, and shall not permit any of its Affiliates to, take a position (except as required pursuant to any Order) on any Tax Return, before any governmental agency charged with the collection of any Tax, or in any judicial proceeding, that is in any way inconsistent with the allocation determined in accordance with this Section 2.4. SECTION 3. CLOSING; TERMINATION; FILINGS. 3.1. CLOSING. Subject to fulfillment or waiver of the conditions precedent set forth in Sections 8 and 9 hereof, the Closing shall take place on the Closing Date at the offices of Vorys, Sater, Seymour and Pease, L.L.P. in Columbus, Ohio at 10:00 a.m., local time, or at such other time and place on the Closing Date upon which Seller and the Buyer may mutually agree. 3.2. CLOSING DATE. The Closing Date (the "Closing Date") shall either be the later of (i) March 31, 1999 or, if applicable, the date which is five (5) business days after all waiting periods, including any extensions thereof, applicable to the transactions contemplated hereby under the HSR Act have expired or terminated, or (ii) such other date upon which Seller and the Buyer may mutually agree. Seller and Buyer shall use their best efforts to effect Closing on or before March 31, 1999. 3.3. TERMINATION. This Agreement may be terminated at any time prior to the Closing: (a) by mutual written consent of Buyer, Parent and Seller; 6 (b) by Buyer or Parent if there has been a material misrepresentation or breach on the part of Seller, or by Seller if there has been a material misrepresentation or breach on the part of Buyer or Parent, of the representations, warranties or covenants set forth in this Agreement, or if events have occurred which have made it impossible to satisfy a condition precedent to the terminating Party's obligations to consummate the transactions contemplated hereby, unless the willful breach of this Agreement by such terminating Party has caused the condition to be unsatisfied; (c) by any of Buyer, Parent, or Seller if the Closing has not occurred on or prior to April 15, 1999; provided that none of Buyer, Parent or Seller will be entitled to terminate this Agreement pursuant to this Section 3.3(c) if a willful breach of this Agreement by such party has prevented the consummation of the transactions contemplated hereby at or prior to such time; or (d) by the Buyer pursuant to the terms of Section 3.6. In the event of termination of this Agreement by Buyer, Parent or Seller as provided above, this Agreement will forthwith become void and there will be no liability on the part of any party hereto to any other party hereto or its stockholders or directors or officers in respect thereof, except for the obligations of the parties hereto in Sections 7.7, 11.9 and 11.10 and except that nothing herein will relieve any party from liability for any breach of this Agreement prior to such termination. 3.4. FILINGS; COOPERATION. (a) Prior to the Closing the parties shall proceed with diligence and in good faith to make such filings and take such other actions as may be necessary to satisfy the HSR Act, if applicable. Buyer shall be responsible for the HSR Act filing fee; provided that Seller shall reimburse Buyer for one-half of such filing fee. (b) On and after the Closing Date, the Buyer and Seller shall, on request, cooperate with one another by furnishing any additional information, executing and delivering any additional documents and/or instruments, and doing any and all such other things as may be reasonably required by the parties or their counsel to consummate or otherwise implement the transactions contemplated by this Agreement. (c) Unless otherwise consented to in writing by the other party, neither Seller nor Buyer shall cause or permit the destruction or other disposing of the documentation (including work papers) used in the development of the Closing Balance Sheet within five (5) years from the date of Closing and shall grant reasonable access to or cause reasonable access to be granted to the other party to such documentation during normal business hours and shall permit such party to make copies thereof at such party's expense. The above provision does not apply to any documentation of which both parties have copies. 3.5. NON-ASSIGNABLE CONTRACTS. To the extent that assignment hereunder by Seller to Buyer of any Contract is not permitted or is not permitted without the consent of any third party, this Agreement shall not be deemed to constitute an undertaking to assign the same if such 7 consent is not given or if such an undertaking otherwise would constitute a breach of or cause a loss of benefits thereunder. Buyer and Seller will use commercially reasonable efforts to obtain any and all such third party consents. 3.6 DISCLOSURE LETTER. Seller has delivered to Buyer a disclosure letter dated the date hereof (the "Disclosure Letter"), which contains the schedules to this Agreement. Seller shall provide supplements to the Disclosure Letter and schedules to reflect any new information discovered by Seller or Buyer prior to Closing; provided, however, that if a supplement to the Disclosure Letter or schedules, unless expressly consented to by Buyer, shall disclose any fact or event which would have a Material Adverse Effect, Buyer shall have the right to terminate this Agreement. No supplement to the Disclosure Letter or schedules shall modify, affect or diminish Buyer's right to terminate this Agreement pursuant to the terms of Section 3.3 above. SECTION 4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER. Seller represents and warrants to Buyer and Parent as follows: 4.1. ORGANIZATION, POWER. Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Ohio, and is qualified to do business in all jurisdictions in which the failure to do so would have a Material Adverse Effect. Seller has all requisite corporate power to conduct the Business and to enter into this Agreement and to carry out its obligations hereunder. 4.2 AUTHORITY. The execution and delivery of the Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action required on the part of Seller. The Agreement has been duly executed and delivered by Seller, and constitutes the valid and legally binding obligation of Seller and is enforceable against Seller in accordance with its terms. 4.3 NO CONFLICTS. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will: (i) violate or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, any of the terms, conditions or provisions of the Articles of Incorporation or Code of Regulations of Seller, or any note, bond, mortgage, indenture, deed of trust, material license agreement, loan agreement or other material agreement, instrument or obligation to which Seller is a party, or by which it or any of the Assets may be bound or affected; or (ii) violate any judgment, order, writ, injunction or decree, or any law, rule or regulation applicable to Seller or the Assets, to the extent any of the foregoing would have a Material Adverse Effect. Except as set forth on Schedule 4.3, Seller is not required to give notice or obtain any consent from any person in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. 4.4. FINANCIAL STATEMENTS. (a) DELIVERY OF FINANCIAL STATEMENTS. Seller has heretofore delivered to the Buyer a Balance Sheet of the Business as of November 30, 1998 (the "Balance Sheet Date") and a statement of earnings for the six months then ended (collectively, the "Financial 8 Statements"). The Balance Sheet of the Business as of November 30, 1998 is attached hereto as Schedule 4.4(a) and is sometimes referred to herein as the "Balance Sheet". (b) COMPLIANCE WITH GAAP. The Financial Statements have been prepared from the Seller's books and records and fairly present the financial position and results of operations of the Business, as of the dates and for the periods then ended, in conformity with GAAP consistently applied as supplemented by the principles set forth in Schedule 2.2, except for the absence of information that would ordinarily be contained in notes to audited financial statements, and except for normal year end adjustments as to the November 30, 1998 financial statements. (c) ABSENCE OF CERTAIN LIABILITIES. Except to the extent reflected or reserved for in the Balance Sheet there are no liabilities or obligations of the Business that would normally be shown on a balance sheet prepared in accordance with GAAP except (i) liabilities or obligations incurred in the ordinary course of business since the date of the Balance Sheet, (ii) liabilities and obligations disclosed on Schedule 4.4(c); and (iii) liabilities and obligations not required to be so disclosed because of their failure to meet the materiality thresholds set forth therein. (d) BOOKS AND RECORDS. The books of account and other records of the Seller maintained in connection with the operation of the Business have been made available to Buyer, accurately record transactions relating to the Business in all material respects, and have been maintained in accordance with sound business practices. 4.5. TITLE TO PROPERTIES, ABSENCE OF LIENS AND ENCUMBRANCES. (a) REAL PROPERTY. Schedule 1.1(i) sets forth all real property, owned or leased, by the Seller that is used solely in the Business. (b) TANGIBLE PROPERTY. Schedule 1.1(iv) sets forth a correct and complete list, as of the date of this Agreement, of each material item of Tangible Property owned by the Seller and used solely in connection with the Business. (c) LIENS. The Seller has good and marketable title to or a valid leasehold interest in the Assets of the Business, free and clear of all liens, mortgages, security interests, claims, charges and encumbrances, or other defects in title (collectively "Liens") except for (i) Liens set forth on Schedule 4.5(c) or the title insurance commitment for the Real Property, (ii) Liens for current Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings (iii) statutory Liens arising in the ordinary course of business; and (iv) such Liens, if any, as are not, individually or in the aggregate, substantial in character, amount or extent, and do not, individually or in the aggregate, materially detract from the value or interfere with the present use of any property or asset subject thereto or affected thereby or the operations of the Business as presently conducted (collectively items (i) through (iv) being referred to as "Permitted Liens"). (d) INTANGIBLE PROPERTY. Schedule 1.1(vii) sets forth a list, as of the date of this Agreement, of all material Intangible Property (to the extent reducible to written form) owned or used by the Seller in connection with the conduct of the Business. Except as 9 set forth on Schedule 1.1(vii) neither the Business nor any of the Intangible Property listed on Schedule 1.1(vii) infringes upon the rights of any other Person. The Seller owns or possesses licenses or other rights to use all Intangible Property necessary to conduct the Business as presently operated, and is not currently being challenged with respect thereto in any way. There is no claim or action by any person pending, or to Seller's knowledge, threatened with respect to the use of the foregoing properties or rights. 4.6. MATERIAL CONTRACTS. Schedule 4.6 sets forth a correct and complete list, as of the date of this Agreement, of each of the following Contracts to which the Seller is a party and relate to the conduct of the Business (collectively, the "Material Contracts"): (a) Contracts for the future acquisition or sale of any assets or the furnishing of any services involving $50,000 individually (or $100,000 in the aggregate, in the case of any related series of Contracts), other than acquisitions or sales of Inventory in the ordinary course of business; (b) Contracts other than as listed or excluded under clause (a) calling for future aggregate payments to or from Seller in any one year of more than $50,000 in any one case (or $100,000 in the aggregate, in the case of any related series of Contracts); (c) Contracts relating to joint ventures or partnerships; (d) Contracts containing covenants of the Seller prohibiting or materially limiting the right to compete in any line of business or prohibiting or restricting its ability to conduct business with any Person or in any geographical area; (e) Contracts relating to the acquisition by the Business of any operating business or the capital stock of any other Person for a purchase price of more than $50,000 individually (or $100,000 in the aggregate, in the case of any related series of Contracts); (f) Contracts requiring the payment by or to the Business of a royalty, override or similar commission or fee of more than $50,000 in any one year; (g) Employment agreements and commitments, severance agreements and other Contracts with current or former officers, directors or employees of the Business; (h) Collective bargaining agreements with any labor union representing any employees of the Business; (i) Mortgages, indentures, notes, bonds, letters of credit and other agreements relating to the borrowing of money which will not be paid, forgiven or otherwise terminated prior to Closing; (j) Contracts relating to the creation of Liens or the guarantee of the payment of liabilities or performance of obligations of any other Person by the Business; and (k) Licensing agreements or other contracts with respect to patents, trademarks, copyrights, trade secrets, or other intellectual property, including agreements with current 10 or former employees, consultants, or contractors regarding the appropriation or the non-disclosure of any of the Seller's patents, trademarks, copyrights, trade secrets or other intellectual property. True, correct and complete copies of all of the Material Contracts have either been delivered by Seller to Buyer or made available by Seller to Buyer for its review. Except as set forth on Schedule 4.6, (a) all of the Material Contracts are valid and in full force and are enforceable against Seller in accordance with their respective terms; (b) the Seller is not in default under any such Material Contract; and (c) no other party to any such Material Contract has given notice to the Seller that it intends to terminate or materially alter the provisions of such Material Contract. Except as reflected in the Material Contract or on Schedule 4.3, no approval or consent of any Person is needed for the Material Contract to continue to be in full force and effect. 4.7. LICENSES; PERMITS. The Business has all material governmental licenses, permits, authorizations and approvals necessary to the operation of the Business. 4.8. EMPLOYEE BENEFIT PLANS. (a) The Schedule 4.8(a) lists all Plans that cover employees of the Business. Seller has furnished or made available to Buyer, to the extent requested by Buyer, copies of the Plans (and, if applicable, related trust agreements) and all amendments thereto together with, where applicable , (i) the most recent annual report prepared in connection with any Plan to be assumed by Buyer (Form 5500 including, if applicable, Schedule B thereto), and (ii) each Plan's summary plan description and any summaries of material modifications thereto. Seller does not contribute to or have any liability or obligation under or with respect to any Plan which is a "multiemployer plan" as defined for purposes of and subject to Subtitle E of Title IV of ERISA with respect to any employees or former employees of the Business. (b) Neither Seller, nor any entity aggregated with Seller under Section 414(b) or (c) of the Code or Section 4001 of ERISA, has incurred, with respect to the Business, (i) any liability under Title IV of ERISA arising in connection with the termination of, or a complete or partial withdrawal from, any plan covered or previously covered by Title IV of ERISA or (ii) any liability under Section 412 of the Code, that in either case would become a liability of Buyer after the Closing Date. (c) Each Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified and no event has occurred since the date of such determination that would have a Material Adverse Effect on such qualification. (d) Schedule 4.8(d) sets forth a calculation of the liability of Seller for post-retirement benefits with respect to employees of the Business other than pensions, made in accordance with Financial Accounting Statement 106 of the Financial Accounting Standards Board, regardless of whether Seller is required by this Statement to disclose such information. 11 (e) Seller is in substantial compliance with all of its obligations under the Plans. (f) Seller is in substantial compliance with (i) its filing requirements under ERISA and the Code as to each Plan, and (ii) all notice and disclosure to participants requirements under either ERISA or the Code. 4.9. RELATED PARTY TRANSACTIONS. Except for the intercompany transactions between Seller and Seller's Affiliates, no officer or director of the Seller: (a) has any material direct or indirect interest in (i) any entity which does any material business with the Business; or (ii) any material property, asset or right which is used by the Business; or (b) has any material contractual relationship with the Business other than such relationship as attaches to being such officer or director. 4.10. LITIGATION. Except as disclosed on Schedule 1.3(vii) there are no material Actions or Proceedings pending or threatened against the Business or the Assets, at law or in equity, or before or by any Governmental or Regulatory Body. There exists no set of facts or circumstances that are not otherwise addressed by any other representation, warranty or covenant in this Agreement and that, if discovered as of the Closing Date, would form the basis, as of the Closing Date, of any such material Action or Proceeding. The Business is not subject to any Order directed specifically at the Business. 4.11 COMPLIANCE WITH LAW. Except as set forth on Schedule 4.11, Seller is in substantial compliance with the Laws and Orders to which the Business or the Assets or the Assumed Liabilities are subject. 4.12 CONDUCT OF BUSINESS. Except as contemplated by this Agreement or as set forth on Schedule 4.12, since the Balance Sheet Date, the Seller has conducted the Business only in the ordinary course and there has been no: (a) Material Adverse Effect; (b) sale, assignment, transfer, mortgage, pledge or lease of any material assets of the Business, except for sales transactions or leases in the ordinary course of business; (c) incurrence of any material obligation or liability (absolute, contingent or otherwise) except for liabilities and obligations not being assumed by Buyer and except for liabilities and obligations incurred in the ordinary course of business consistent with prior practice or as a result of normal intercompany transactions; (d) material damage, destruction or loss (whether or not covered by insurance) adversely affecting the Business; or (e) any actual or threatened employee strikes, work stoppages, slow downs, or walk outs. 12 4.13. TAX RETURNS. The Seller has filed (or will file when due) all Tax Returns for the Business, for all years and periods, and portions thereof for which the due date (with extension) falls on or before the Closing Date. All Taxes shown by those returns to be payable and all assessments of the Seller have been paid or will be paid when due. The federal income tax returns of the Seller through the taxable year ended May 31, 1995 have been examined by the Internal Revenue Service and any deficiencies or assessments including interest and penalties thereon, claimed or made as a result of those examinations (insofar as they affect the Business) have been paid or provided for or will be paid by Seller pursuant to Section 7.4. Except as set forth on Schedule 4.13, there are no claims or investigations by any taxing authority pending, or to the best of Seller 's knowledge, threatened against the Seller for any past due Taxes, which could become a liability of Buyer. 4.14. ENVIRONMENTAL VIOLATIONS. Except as set forth on Schedule 4.14, (i) within the last five years, no Order has been issued, no Environmental Claim has been filed, no penalty has been assessed and no investigation or review is pending or, to Seller's knowledge, threatened by any Governmental or Regulatory Body with respect to any alleged failure by the Business to have any license required under applicable Environmental Laws in connection with the conduct of the Business and (ii) the Business is not in material violation of, and has not received any claim or notice that it is currently in violation of, any Environmental Law in connection with the conduct of the Business. 4.15. LABOR MATTERS. Seller is not a party to or bound by any collective bargaining agreement or relationship with any labor organization with respect to employees of the Business. There have been no labor strikes, work stoppages, or slowdowns or other material labor disputes with respect to the Business within the past five years. 4.16 INSURANCE. Schedule 4.16 lists the insurance coverage which is maintained by or for the Business. All insurance policies maintained by or for the Business are in full force and effect, all premiums due thereon have been paid, and the Business has complied with the provisions of such policies. No notices of any pending or threatened terminations with respect to any of such insurance policies have been received. The Business has not failed to give any notice or present any material claim under any insurance policy in due and timely fashion. 4.17. BROKERS. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by Seller, without the intervention of any other person or firm in such manner as not to give rise to any valid claim against the Buyer for a brokerage commission, finder's fee or other like payment to any person or entity, except that Seller has retained Salomon Smith Barney whose fees and expenses as its investment advisor in connection herewith shall be paid by Seller. 4.18. KNOWLEDGE. To be a breach of a representation or warranty which is made to the knowledge of Seller, the knowledge required shall be the knowledge of officers or plant managers of the Seller involved with the Business, and knowledge of other employees of the Seller involved with the Business shall not be imputed to Seller. The term "knowledge" means either actual knowledge or awareness of a fact or other matter that a prudent individual could reasonably be expected to discover upon due inquiry. 13 4.19. ACCOUNTS RECEIVABLE. All accounts receivable of the Business that are reflected on the Closing Balance Sheet (collectively, the "Accounts Receivable") will represent valid obligations arising from sales actually made, services actually performed or other transactions in the ordinary course of the Business. The reserves reflected in the Closing Balance Sheet in respect of Accounts Receivable have been calculated consistent with past practice. 4.20. INVENTORY. The reserves reflected in the Closing Balance Sheet in respect of Inventory of the Business have been calculated consistent with past practice. 4.21. PRODUCT WARRANTIES. There are no claims against or liability of Seller relating to the Business outside the range normally experienced by the Business on account of product warranties or with respect to the manufacture, sale, distribution, or rental of defective products and to Seller's knowledge there is no basis for any such claim outside the range normally experienced by the Business on account of defective products heretofore manufactured, sold, distributed, or rented, except as otherwise set forth on Schedule 4.21. 4.22. CUSTOMERS AND SUPPLIERS. (a) Schedule 4.22(a) sets forth a true, accurate and complete list: (i) of the ten (10) largest customers of the Business in terms of revenue earned during the most recently completed fiscal year and the portion of the current fiscal year prior to the date of this Agreement (collectively, the "Major Customers"), showing the total revenue earned in each such period from each such customer; and (ii) of the ten (10) largest suppliers of the Business in terms of purchases during the most recently completed fiscal year and the portion of the current fiscal year prior to the date of this Agreement (collectively, the "Major Suppliers"), showing the total purchases in each such period from each such supplier; (b) Since July 1, 1998, except as set forth on Schedule 4.22(b), there has not been any material adverse change in the business relationship, and there has been no material dispute, between Seller and any Major Customer or any Major Supplier, and to Seller's knowledge, no Major Customer or Major Supplier intends to reduce its purchases from, or sales to, Seller, other than as a result of such Major Customer's or Major Supplier's normal business cycles. 4.23. PRODUCT LIABILITY CLAIMS. Schedule 4.23 sets forth the product liability claims against the Business currently pending or which have been resolved within the past two (2) full fiscal years and the portion of current fiscal year prior to the date hereof. 4.24. DISCLOSURE. No representation of warranty of Seller in this Agreement and no statement in the Disclosure Letter furnished pursuant hereto omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. SECTION 5. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer and Parent, jointly and severally, represent and warrant to Seller as follows: 14 5.1. ORGANIZATION, POWER. Buyer and Parent are corporations duly organized, validly existing and in good standing under the laws of their respective state of incorporation and are qualified to do business as foreign corporations in all jurisdictions in which the failure to do so would have a Material Adverse Effect on the results of operations or financial condition of Buyer or Parent, as applicable. Buyer and Parent have all requisite corporate power to enter into this Agreement and to carry out their respective obligations hereunder. 5.2. AUTHORITY. The execution and delivery of the Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action required on the part of the Buyer and Parent. The Agreement has been duly executed and delivered by Buyer and Parent, and constitutes the valid and legally binding obligation of Buyer and Parent and is enforceable against the Buyer and Parent in accordance with its terms. 5.3. NO CONFLICTS. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will: (i) violate or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, any of the terms, conditions or provisions of the Certificate of Incorporation or By-laws of the Buyer and the parent, or any note, bond, mortgage, indenture, deed of trust, material license agreement, loan agreement or other material agreement, instrument or obligation to which Buyer or Parent or both are a party, or by which Buyer or Parent or any of their respective properties or assets may be bound or affected; or (ii) violate any material judgment, order, writ, injunction or decree, or any law, rule or regulation applicable to Buyer or Parent or both or any of their respective properties or assets, to the extent any of the foregoing would have a Material Adverse Effect on the results of operations or financial condition of Buyer or Parent, or both. Except as set forth on Schedule 5.3, neither Buyer nor Parent is required to give notice or obtain any consent from any person in connection with the execution and delivery of the Agreement or the consummation of the transactions contemplated hereby. 5.4. CAPITALIZATION. At the Closing, Buyer's authorized capital stock shall consist of 3,000 shares of Common Stock, of which 1,000 shares are issued and outstanding. At the Closing, Parent's authorized capital stock shall consist of 20,000,000 shares of Class A common stock, par value $0.01 per share, of which 3,866,944 shares are issued and outstanding, 200,000 shares of Class B common stock, par value $0.01 per share, of which 200,000 shares are issued and outstanding, and 2,000,000 shares of Preferred Stock, without par value, none of which are issued and outstanding. At the Closing, no other securities of Buyer or Parent will be authorized, issued or outstanding and there will be no outstanding subscriptions, options, warrants, convertible securities, commitments or demands of any character, preemptive or otherwise, other than this Agreement, relating to any of Buyer's or Parent's capital stock or other securities of Buyer or Parent, other than stock options granted under Parent's 1997 Stock Option Plan and approximately $105,000,000 of bonds to provide acquisition financing and debt refinancing. Upon consummation of the transactions contemplated hereby, Seller shall own approximately 15% of the total equity capital of Buyer on a fully diluted basis. 5.5. TITLE TO STOCK. As of the date hereof Parent owns, and as of the Closing Date Parent will own, beneficially and of record, and has or will have good and marketable title to, all of the outstanding common stock of Buyer. Upon issuance, the shares of Common Stock and 15 Preferred Stock to be issued to Seller hereunder, shall be validly issued, fully paid and nonassessable and free and clear of all liens, charges, claims, pledges, restrictions and encumbrances of any kind or nature whatsoever. 5.6. BROKERS. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by the Buyer without the intervention of any other person or firm in such manner as not to give rise to any valid claim against Seller or Seller's Affiliates for a brokerage commission, finder's fee or other like payment to any person or entity. 5.7. AVAILABLE FUNDS. Attached hereto as Annex A are financing letters received by Buyer from Three Cities Research, Inc. and Harris Bank with respect to the funds necessary to consummate the transactions contemplated hereunder. Buyer shall use its best efforts to obtain the financing necessary to consummate the transactions contemplated hereby on commercially reasonable terms and conditions 5.8 DISCLOSURE. No representation of warranty of Buyer or Parent in this Agreement and no statement in the Disclosure Letter furnished pursuant hereto omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. SECTION 6. OBLIGATIONS PRIOR TO CLOSING. 6.1. CONDUCT OF BUSINESS. Prior to the Closing, Seller shall, except as otherwise provided herein: (a) conduct the Business and its affairs only in the ordinary course and consistent with prior practice, (b) maintain the assets and properties of the Business and insurance thereon, in accordance with present practices in all material respects, and (c) comply in all material respects with all Laws and Orders applicable to the Business. 6.2. ACCESS TO INFORMATION AND DOCUMENTS. Upon reasonable notice and during regular business hours, Seller will give or cause to be given to the Buyer and the Buyer's attorneys, accountants and other representatives reasonable access to the personnel of the Business and the properties, documents, contracts, books and records of the Business with respect to the assets, properties, liabilities or operations of the Business and will furnish the Buyer with copies of those documents and with that information with respect to the affairs of the Business as the Buyer may from time to time reasonably request. 6.3. TITLE INSURANCE, SURVEYS. Seller shall cooperate with the Buyer in obtaining such title commitments or opinions and such surveys, with respect to the Real Property, which Buyer may reasonably desire. Seller and Buyer shall each be responsible for one-half of all expenses incurred in connection with title searches, reports, commitments insurance and surveys, if necessary. 16 6.4. DISCOVERY BY BUYER. Buyer shall provide prompt, written notice to Seller in the event it obtains actual knowledge at any time prior to Closing of any breach of any of the representations and warranties made in Section 4 or elsewhere in this Agreement, or of an event or circumstance it believes would give Buyer the right to terminate this Agreement or to make a claim against Seller after Closing. 6.5. THIRD PARTY CONSENTS. Seller and Buyer agree to use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, including, without limitation, the obtaining of all necessary waivers, consents and approvals and the continuance in full force and effect of the permits, contracts and other agreements set forth on the schedules to this Agreement and the fulfillment of each condition to the other party's obligations set forth in Sections 8 and 9. 6.6. REGULATORY AND OTHER APPROVALS. Seller and Buyer will (i) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and use all commercially reasonable efforts, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental or Regulatory Bodies required of such parties or their Affiliates to consummate the transactions contemplated hereby, (ii) provide such other information and communications to such Governmental or Regulatory Bodies as such parties or such Governmental or Regulatory Bodies may reasonably request in connection therewith and (iii) cooperate with each other as promptly as practicable in connection with the foregoing. In addition to and not in limitation of the foregoing, Seller and Buyer will (A) take promptly all actions necessary to make the filings required of each of them or their Affiliates under the HSR Act, (B) comply at the earliest practicable date with any request for additional information received by each of them or their Affiliates from the Federal Trade Commission or the Antitrust Division for the Department of Justice pursuant to the HSR Act and (C) cooperate with each other in connection with any filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission, the Antitrust Division of the Department of Justice or state attorneys general. SECTION 7. ADDITIONAL AGREEMENTS AND ACKNOWLEDGMENTS. 7.1. INSURANCE AND PRODUCT CLAIMS. (a) Worthington and Seller shall terminate the participation of the Business and its employees in Worthington's self-insurance program and coverage under insurance policies procured by Worthington effective as of the Closing Date. The Buyer shall be responsible for obtaining and providing insurance coverage with respect to the Business and its employees from and after the Closing Date. (b) Notwithstanding the provisions of Section 10 and except for those liabilities assumed by Buyer pursuant to Section 1.3, Seller shall retain liability for and defend, indemnify and hold harmless the Business and the Buyer, and their respective successors and assigns, against and in respect of, any and all damages, claims, losses, liabilities and expenses (collectively, "Losses") resulting from loss of life, bodily injury or property 17 damage due to events which occur before the Closing Date and as to which claims alleging such liability are filed prior to the Closing Date. The obligation of Seller to retain the liability and indemnification provided for in this Section 7.1(b) is conditioned upon the Buyer's performance of the following covenants: (i) the Buyer shall cause the Business and its personnel to cooperate fully with Seller in the defense of any such claims and provide Seller with access to the facilities, books, records and personnel of the Business; and (ii) so long as Seller is defending any such claim in good faith, the Buyer shall not, and shall not cause or permit the Business to, settle or compromise any such claim, without the written consent of Seller. (c) Buyer shall insure against all liability claims resulting from a loss of life, bodily injury or property damage that are made against the Business after Closing with respect to events that occurred prior to Closing. Seller agrees to reimburse Buyer for each such claim in amount equal to the lesser of (i) the deductible amount under the Buyer's insurance, and (ii) $100,000. (d) Buyer shall assume liability for and defend and hold harmless the Seller and Worthington, and their respective successors and assigns, against and in respect of any and all Losses resulting from loss of life, bodily injury or property damage arising from or relating to the Business due to events which occur after the Closing Date. (e) Buyer shall assume liability for and defend and hold harmless the Seller and Worthington and their respective successors and assigns, against and in respect of any and all Losses arising out of the replacement of, or refund or credit for, damaged, defective or other returned products or for warranty claims in respect of products sold by the Business. 7.2. EMPLOYEE MATTERS. (a) Except for those individuals listed on Schedule 7.2 hereof, whose employment with the Business shall terminate as of the Closing Date, the Buyer shall offer to employ all employees of the Business effective immediately after the Closing. The terms of such employment shall be competitive with industry standards, and the Buyer shall implement the employee benefit plans and fringe benefit plans providing benefits set forth on Schedule 7.2. (b) Buyer will not, and will not permit the Business to, take any action which would cause Seller to have any liability under the Workers Adjustment and Retraining Notification act of 1988, or any similar or successor federal, state or local law, regulation or ordinance. 7.3. BENEFIT COVERAGE. (a) The participation of the Business (and its employees and former employees) in the Worthington employee benefit plans shall cease as of the Closing Date. The costs of all 18 obligations with respect to employees or former employees of the Business under any benefit plan applicable to them shall be assumed by Buyer after the Closing Date except to the extent provided below. The above provision notwithstanding, the following benefits for the employees and/or former employees of the Business shall be made available by Seller. (i) Subject to subsection (ii) below, Seller shall pay or otherwise discharge (or shall cause the insurance company to pay or otherwise discharge) claims for benefits relating to health care services rendered prior to the Closing Date to current and former employees of the Business as and to the extent required by the terms of the health care plans not being assumed by Buyer that apply to such employees of the Business on the Closing Date ("Worthington Health Plans") regardless of when such claims are filed. Seller may apply normal plan cut-off dates. (ii) Buyer shall reimburse Seller or Worthington for all amounts paid pursuant to Section 7.3(a)(i) under claims filed after the Closing Date with respect to employees of the business, except for amounts covered by true insurance (i.e. amounts for which Seller or Worthington is not ultimately liable). (b) Seller agrees that it shall be responsible for making available to former employees of the Business who are covered by the Worthington Health Plans and who leave the employ of the Business prior to the Closing Date (and such former employee's eligible dependents) the election to continue coverage under the Worthington Health Plans to the extent required by federal or state law, at the former employee's or dependent's expense. (c) Seller agrees that it shall make available to former employees of the Business who were covered by the Worthington Health Care Plan and who have retired under the Worthington Deferred Profit Sharing Plan prior to the Closing Date, the option to purchase health benefits under the Worthington Health Plans to the extent that such benefits are made available to Worthington retirees in general under such plan. (d) Nothing in this Section 7.3 or elsewhere in this Agreement shall expand the benefits or coverage which would have been available to any employee or former employee of the Business under the Worthington Health Care Plans or other plans had the transaction contemplated by this Agreement not occurred. (e) Following the Closing Date, the Buyer shall be responsible for and shall provide health care and disability benefits to persons who, on the Closing Date, are employees (including inactive employees on disability or layoff who are eligible for such insurance) of the Business and their dependents consistent with industry practice. Subject to Section 10.1, the Buyer shall assume liability for, and shall make payments in respect of, disability and health care benefits for all employees and former employees of the Business receiving such disability and health care benefits under any plan in existence on the Closing Date, provided however, that after a total of 42 months of disability as defined in the plan, it is understood that such employees who are disabled at the Closing 19 Date will be covered by disability insurance currently provided by Worthington through an outside insurance carrier. (f) Following the Closing Date, and subject to Section 10.1, the Buyer shall be responsible for and shall assume all of Seller's obligations to provide health care benefits to certain former employees of the Harrisburg, North Carolina facility as more particularly described on Schedule 7.3(f). 7.4. TAX MATTERS. (a) INCOME TAXES. Seller shall include the results of operations of the Business through the Closing in Worthington's consolidated U.S. federal income tax returns and shall make all state and local income tax filings and payments for the Business for the tax period ending on the Closing Date. All liabilities, including interest or penalties, under U.S. federal and state income tax laws attributable to the operations of the Business through the Closing Date shall be borne by Seller, and any refunds or credits or rights to refunds or credits with respect thereto (including interest and penalties) shall be the property of Seller. (b) ALLOCATION OF NON-INCOME TAX LIABILITY. All tax liabilities attributable to the Business or its assets, operations, purchases, sales, income, payroll, capital stock or surplus incurred prior to the Closing Date (other than federal, state and local income tax liabilities) shall be borne by the Buyer to the extent that such liabilities are, in the aggregate, reserved for on the Closing Balance Sheet. The reserve on the Closing Balance Sheet shall not include a reserve for those U.S. federal income tax liabilities or any state or local income tax liabilities which are required to be paid by Seller pursuant to this Agreement. Tax liabilities incurred by the Business prior to the Closing Date in excess of the reserve therefor on the Closing Balance Sheet shall be borne by Seller, provided that the liability is not increased due to actions by the Buyer after Closing. In the event that the reserve on the Closing Balance Sheet exceeds those tax liabilities which the Business or the Buyer actually pays, the Buyer shall promptly refund to Seller the amount of any such excess. (c) POST CLOSING TAXES. All Taxes attributable to the Business or its properties, assets, operations, purchases, sales, income, payroll, capital stock or surplus incurred subsequent to Closing shall be the responsibility of the Buyer. (d) REIMBURSEMENTS. If either party pays any Taxes to be borne by the other party under this Section 7.4, the other party shall promptly reimburse such party for the Taxes paid. If, in preparing Tax filings or payments after Closing, it appears to the Buyer or the Business that the Seller will be asked to pay additional Taxes, the Buyer shall so notify Seller, and provide Seller a reasonable opportunity to review any related returns prior to filing them and paying the Tax. If either party receives any refunds or credits which are the property of the other party under this Section 7.4, such party shall promptly pay the amount of such refunds or credits to the other party. As soon as practicable after the Closing, Seller shall furnish to the Buyer copies of the Business's portion of the final income tax information included in Seller's combined federal income tax return and in 20 any consolidated or combined state income tax return required to be filed by Worthington or Seller after the Closing relating solely to the operations of the Business through the Closing Date. (e) TRANSFER TAXES. Seller shall file all necessary documentation and returns with respect to sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar Taxes and fees (such Taxes and fees, including any interest or penalties thereon, are herein sometimes called "Transfer Taxes"). Buyer and Seller shall each be responsible for one-half (1/2) of all transfer taxes arising out of or in connection with the transactions effected pursuant to this Agreement. (f) COOPERATION. Buyer shall and shall require the Business to make available to Worthington, Seller and their representatives all records and materials reasonably required by them to pursue or contest any Tax matters and shall provide reasonable cooperation to Worthington and Seller in such case, including having personnel of the Business provide reasonable assistance to Worthington and Seller, consistent with the manner in which such matters would have been dealt with prior to Closing. Worthington and Seller shall make available to Buyer and its representatives those records and materials reasonably required by them to prepare, pursue or contest any Tax matters arising after Closing which have factual reference to the pre-Closing periods. 7.5 DEFERRED PROFIT SHARING AND CASH PROFIT SHARING PLANS. (a) Buyer shall assume the liability for and shall make any payments which may be due to employees of the Business in connection with the Cash Profit Sharing Plan applicable to employees of the Business and any payments of executive bonuses which may be owing to employees of the Business; provided that Seller shall pay to Buyer an amount equal to the portion of the payment allocable to Seller in excess of applicable reserves reflected in the Closing Balance Sheet (based upon the assumption that the determination period ended as of the Closing Date). (b) The participation of the employees of the Business in Worthington's Deferred Profit Sharing Plan shall cease as of the Closing Date. Seller shall pay over to the Deferred Profit Sharing Plan the amount of any required contribution to such Plan which is allocable to Seller in excess of applicable reserves reflected in the Closing Balance Sheet (based upon the assumption that the determination period ended as of the Closing Date). All benefits under such Plan shall be calculated and paid in accordance with the provisions of the Worthington Deferred Profit Sharing Plan. 7.6. BOOKS AND RECORDS; TAX CLOSING PACKAGE. Unless otherwise consented to in writing by Seller, the Buyer shall not destroy or otherwise dispose of any of the existing books and records of the Business within four (4) years from the date of Closing, and the Buyer shall grant and cause the Business to grant Seller and its affiliates and their representatives reasonable access thereto during normal business hours. Thereafter, the Buyer shall not destroy or otherwise dispose of such books and records without first offering to surrender to Seller such books and records or any portion thereof. The Buyer shall cause the personnel of the Business to prepare the final audit package, monthly financial package and tax package for the Business. 21 7.7. EXPENSES. (a) Except as otherwise provided in this Agreement, Seller shall pay all of its costs and expenses (including attorneys' and accountants' fees, legal costs and expenses) incurred in connection with this Agreement and the consummation of the transactions contemplated herein. (b) The Buyer shall pay all of its costs and expenses (including attorneys' and accountant's fees, legal costs and expenses) incurred in connection with this Agreement and the consummation of the transactions contemplated herein, including, but not limited to, the costs of preparing an audit of the Business. 7.8. WORKERS' COMPENSATION. The workers' compensation liabilities for employees of the Business are covered through insurance policies obtained by Worthington. Worthington shall continue to pay (or shall cause its insurance company to pay) up to and through the Closing Date for workers' compensation injuries which occurred prior to Closing. After such time coverage and payments under the Worthington policies shall terminate. Effective as of Closing Date, and subject to Section 10.1, Buyer shall obtain appropriate workers' compensation coverage for the employees of the Business and shall assume continuing responsibility for workers' compensation injuries that occurred prior to Closing and were previously covered by Worthington. 7.9 PREPARATION OF PAYROLL FORMS. Buyer shall prepare and file, and Seller shall take all action reasonably required pursuant to Internal Revenue Service Rev. Proc. 96-60 1996-2 C.B. 399 so that Buyer may file, Forms W-2 for the employees of the Business for the 1998 calendar year. 7.10. PACKAGING AND OTHER MATERIALS - NAME CHANGE. The Buyer shall not hold the Business out as an affiliated company or subsidiary of Worthington following the Closing Date. Neither the Buyer nor the Business shall have the right to use any packaging or other materials which contain the names Worthington Industries, Worthington Custom Plastics or any derivation or modification thereof, or any trademark, logo or design of Worthington Industries or Worthington Custom Plastics (the "Restricted Names or Marks"). The Buyer shall not cause or permit the Business to use, after the Closing Date, any advertising or other materials which contain any Restricted Names or Marks without first obliterating such Restricted Names or Marks thereon by overprinting, stamping out or otherwise removing the Restricted Names or Marks from those materials. Furthermore, the Buyer shall not order, buy, produce or otherwise procure any packaging, advertising or other materials containing any of the Restricted Names or Marks. 7.11 CREDIT UNION. The employees of the Business have been eligible to participate in the Worthington Industries Credit Union. To the extent permitted by law, the Buyer agrees to cause the Business to continue payroll deduction for any employees currently paying off existing loans from such credit union through payroll deductions, and to pay over the amount withheld to the credit union. Payroll deductions for employees of the Business will not be available for new loans from the Worthington Industries Credit Union following the Closing. 22 7.12. RELEASE FROM GUARANTEES. To the extent that Seller, Worthington or any Seller Affiliate are liable in connection with any obligations of the Business, either directly as guarantor, surety or otherwise, Buyer shall use its best efforts in conjunction with Seller (including agreeing to replace Seller, Worthington or the Seller Affiliate as guarantor, surety, etc. and providing bonds or letters of credit in lieu thereof), in order to have Seller, Worthington or any Seller Affiliate removed from such liabilities either directly or as guarantor, surety, etc. In the event that Seller, Worthington or any Seller Affiliate cannot be so removed from such obligations, Buyer shall indemnify such company with respect thereto as set forth in Section 10.2. 7.13. PREPARATION OF FINANCIAL STATEMENTS. Seller shall cooperate with Buyer in the preparation of: (a) audited balance sheets of the Business as at the end of each of the last full three (3) fiscal years of the Business, and the related statements of income, changes in stockholders' equity, and cash flow for each such fiscal year, together with the report thereon of Ernst & Young, independent certified public accountants, (b) a balance sheet of the Business as at the Closing Date, and the related statements of income, changes in stockholders' equity, and cash flow for the partial year then ended, including each case the notes thereto. SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer under this Agreement to enter into and complete the Closing shall, at the option of the Buyer, be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions precedent (any or all of which may be waived by Buyer). 8.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All warranties and representations made by Seller in this Agreement (considered collectively), and each of such representations and warranties (considered individually) shall be true and correct in all material respects on and as of the Closing Date with the same effect as if such warranties and representations had been made on and as of the Closing Date except those expressly stated to be made as of a specified date, and any supplement to the Disclosure Letter added after the date of this Agreement shall not disclose any fact or event which would have a Material Adverse Effect. 8.2 COMPLIANCE WITH COVENANTS. Seller shall have performed or complied with all covenants, agreements and conditions contained in this Agreement on its part required to be performed or complied with at or prior to the Closing. 8.3. NO INJUNCTION, ORDER. At the Closing, there shall not be any Order outstanding against any party hereto or Law promulgated that restrains, prohibits, invalidates or otherwise prevents consummation of the transactions contemplated by, or seeks damages as a result of or otherwise interferes with the Agreement or any of the conditions to the consummation of the transactions contemplated by this Agreement or would be likely to have any Material Adverse Effect on the Business or the Assets. 8.4. CONSENTS, WAIVERS, LICENSES, FILINGS, ETC. All consents, approvals, authorizations, licenses, registrations, declarations or filings listed on any Schedule to this Agreement shall have been obtained or made, as the case may be, except where the failure to obtain or make any of the foregoing (or in lieu thereof waivers) would not reasonably be 23 expected, individually or in the aggregate with other such failures, to have a Material Adverse Effect. 8.5. NO MATERIAL ADVERSE EFFECT. During the period from the date hereof to the Closing Date, there has been no Material Adverse Effect. 8.6. ABSENCE OF LITIGATION. No action, suit, investigation or proceeding shall have been commenced or threatened by a governmental agency or third party against Buyer, the Seller, the Subsidiary, or any of the affiliates, officers or directors of any of them, with respect to the transactions contemplated hereby, challenging the rights of the parties hereto to consummate such transactions or which reasonably could be expected to have a Material Adverse Effect. 8.7. CLOSING DELIVERIES. Seller shall deliver, or cause to be delivered, to the Buyer at or prior to the Closing the following documents: (a) The opinion letter of Dale T. Brinkman, counsel for the Seller, dated the Closing Date substantially in the form of Exhibit B. (b) A certified copy of resolutions adopted by the Board of Directors of Seller authorizing the execution and delivery of this Agreement and the transactions contemplated hereby. (c) Executed copies of (i) an Assignment and Assumption Agreement in substantially the form of Exhibit C; and (ii) a Bill of Sale, in substantially the form of Exhibit D. (d) Executed and acknowledged limited or special warranty deeds necessary to transfer the Real Property listed in Schedule 1.1(i). (e) Executed copies of appropriate assignment and assumption documents with respect to the leased Real Property in a form reasonably satisfactory to both Buyer and Seller. (f) An officer's certificate, dated the Closing Date, signed by the President or Vice President of Seller, stating that (i) all representations and warranties made by Seller under this Agreement are true and correct in all material respects at and as of the Closing Date, and (ii) all of the agreements, covenants and obligations to be performed on the part of the Seller under this Agreement as of the Closing Date have been timely and duly performed in all material respects. (g) Executed copies of (i) a Transition Services Agreement in substantially the form attached herto as Exhibit E and (ii) a Shareholder's Agreement in substantially the form attached hereto as Exhibit F. (h) All documents, certificates, instruments necessary to transfer the IDB to an entity designated by Buyer. (i) Such other documents, assignments and other good and sufficient instruments of conveyance and transfer, in form reasonably satisfactory to each of the parties hereto, as 24 shall be reasonably requested by Buyer to consummate the transactions contemplated hereby. 8.8. HSR ACT. The applicable waiting period under the HSR Act in respect of the transactions contemplated hereby shall have expired or been terminated. 8.9 CERTAIN GE BUSINESS. Seller and Buyer shall have reached a mutually acceptable agreement with respect to (i) two GE appliance parts contracts currently being fulfilled at the Lebanon, Kentucky facility, (ii) certain GE production at Seller's Mason, Ohio facility that is to be transferred to the Lebanon, Kentucky facility, and (iii) certain equipment used in connection with GE production that is currently located at the St. Matthews, South Carolina facility and is to be transferred to the Lebanon, Kentucky facility. 8.10. HARRIS CONSENT. Buyer shall have received the consent to the consummation of the transactions contemplated by this Agreement from its senior lender, Harris Trust and Savings Bank, Chicago, Illinois. 8.11. SATISFACTORY FINANCING. Buyer shall have either obtained the proceeds from a private placement of high yield bonds, or obtained a commitment for financing the transactions contemplated by this Agreement and the operation of the Business from a reputable lender or lenders. 8.12. CINPRES INTELLECTUAL PROPERTY. Seller and Buyer shall have reached a mutually acceptable agreement with respect to certain Cinpres technology and equipment used at Seller's Lebanon, Kentucky facility. This technology and equipment is currently the subject of a License Agreement and a Lease Agreement between Seller and Cinpres Limited, each of which also cover Cinpres technology and equipment located at certain of Seller's other facilities that are not part of the Business. SECTION 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations of Seller under this Agreement to enter into and complete the Closing shall, at the option of Seller, be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions precedent (any or all of which may be waived by Seller). 9.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All warranties and representations made by the Buyer in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same effect as if such warranties and representations had been made on and as of the Closing Date except those expressly stated to be made as of a specific date; 9.2 COMPLIANCE WITH COVENANTS. Buyer shall have performed or complied with all covenants, agreements and conditions contained in this Agreement on its part required to be performed or complied with at or prior to the Closing. 9.3. NO INJUNCTION, ORDER. At the Closing, there shall not be any Order outstanding against any party hereto or Law promulgated that restrains, prohibits, invalidates or otherwise prevents consummation of the transactions contemplated by, or seeks damages as a result of or 25 otherwise interferes with the Agreement or any of the conditions to the consummation of the transactions contemplated by this Agreement or would be likely to have any Material Adverse Effect on the Business or the Assets. 9.4. CONSENTS, WAIVERS, LICENSES, FILINGS, ETC. All consents, approvals, authorizations, licenses, registrations, declarations or filings listed on any Schedule to this Agreement shall have been obtained or made, as the case may be, except where the failure to obtain or make any of the foregoing (or in lieu thereof waivers) would not reasonably be expected, individually or in the aggregate with other such failures, to materially adversely affect Buyer or to have a Material Adverse Effect. 9.5. CLOSING DELIVERIES. The Buyer shall deliver or cause to be delivered to Seller at the Closing the following: (a) A wire transfer of the Closing Cash Payment; (b) Certificates representing the shares of Common Stock and the shares of Preferred Stock to be issued to Seller as contemplated by Section 2.1; (c) An opinion of Husch & Eppenberger, L.L.C., counsel to the Buyer and Parent, dated the Closing Date, substantially in the form of Exhibit G. (d) Certified copies of resolutions adopted by the Board of Directors of Buyer authorizing the execution and delivery of the Agreement and the transactions contemplated thereby. (e) Executed copies of (i) an Assignment and Assumption Agreement in substantially the form of Exhibit C; and (ii) a Bill of Sale, in substantially the form of Exhibit D. (f) Executed copies of appropriate assignment and assumption documents with respect to the leased Real Property in a form reasonably satisfactory to both Buyer and Seller. (g) Executed copies of (i) a Transition Services Agreement in substantially the form attached herto as Exhibit E and (ii) a Shareholder's Agreement in substantially the form attached hereto as Exhibit F. (h) An officer's certificate, dated the Closing Date, signed by the President or Vice President of Buyer, stating that (i) all representations and warranties made by Buyer under this Agreement are true and correct in all material respects at and as of the Closing Date, and (ii) all of the agreements, covenants and obligations to be performed on the part of the Buyer under this Agreement as of the Closing Date have been timely and duly performed in all material respects. (i) All documents, certificates, instruments necessary to assume all of Seller's liabilities and obliations, for payment and otherwise, under the IDB. 26 (j) Such other documents, assignments and other good and sufficient instruments of conveyance and transfer, in form reasonably satisfactory to each of the parties hereto, as shall be reasonably requested by Seller to consummate the transactions contemplated hereby. 9.6. HSR ACT. The applicable waiting period under the HSR Act in respect of the transactions contemplated hereby shall have expired or been terminated. 9.7. CERTAIN GE BUSINESS. Seller and Buyer shall have reached a mutually acceptable agreement with respect to (i) two GE appliance parts contracts currently being fulfilled at the Lebanon, Kentucky facility, (ii) certain GE production at Seller's Mason, Ohio facility that is to be transferred to the Lebanon, Kentucky facility, and (iii) certain equipment used in connection with GE production that is currently located at the St. Matthews, South Carolina facility and is to be transferred to the Lebanon, Kentucky facility. 9.8. CINPRES INTELLECTUAL PROPERTY. Seller and Buyer shall have reached a mutually acceptable agreement with respect to certain Cinpres technology and equipment used at Seller's Lebanon, Kentucky facility. This technology and equipment is currently the subject of a License Agreement and a Lease Agreement between Seller and Cinpres Limited, each of which also cover Cinpres technology and equipment located at certain of Seller's other facilities that are not part of the Business. SECTION 10. INDEMNIFICATION. 10.1. INDEMNIFICATION BY SELLER. (a) Except as hereinafter set forth, Seller shall indemnify and hold harmless the Buyer, Buyer's Affiliates and their respective successors and assigns, against, and in respect of, any and all Losses, including, without limitation, reasonable legal, accounting and other expenses, which may arise out of any of the following (collectively the "Indemnity Claims"): (i) any breach or violation of any agreement in this Agreement on the part of Seller; (ii) any breach of any of the representations, warranties or covenants made in this Agreement by Seller; (iii) the Excluded Liabilities; (iv) the Actions and Proceedings set forth on Schedule 1.3(vii); (v) all payments of workers' compensation liability, and out-of-pocket expenses directly related thereto, made by Buyer pursuant to Buyer's obligation under Section 7.8 to assume continuing responsibility for workers' compensation injuries of employees of the Business that occurred prior to the Closing; 27 (vi) all payments made by Buyer and not covered by insurance with respect to Buyer's obligation under Section 7.3(e) to assume responsibility for all disability benefits and health care benefits during the period of disability for all employees or former employees of the Business receiving disability benefits on the Closing Date; and (vii) all health care premiums paid by Buyer pursuant to Buyer's obligation under Section 7.3(f) to assume responsibility for certain health care benefits to certain former employees of the Harrisburg, North Carolina facility; PROVIDED HOWEVER, THAT, EXCEPT for Indemnity Claims (A) arising with respect to breaches by Seller of representations, warranties or covenants contained in Sections 7.1, 7.4 and 4.5 hereof (to which the Basket does not apply), or (B) that concern the Actions and Proceedings set forth in Schedule 1.3(vii) or any Action or Proceeding hereinafter instituted that constitutes a breach of Seller's warranty in Section 4.10 (to which the Litigation Basket applies), the Buyer shall be entitled to indemnification hereunder only when, and only to the extent of amounts by which the aggregate of all such Indemnity Claims (excluding those excepted from this limitation) exceed $500,000 (the "Basket"); and provided further that Buyer shall be entitled for indemnification hereunder only when and to the extent of the amounts by which Losses attributable to the Actions and Proceedings set forth on Schedule 1.3(vii), or for any Action or Proceeding hereinafter instituted that constitutes a breach of Seller's warranty in Section 4.10, exceed $125,000 in the aggregate or $50,000 individually (the "Litigation Basket"). (b) Except for (I) Indemnity Claims and other obligations which Seller has specifically assumed in Section 7 hereof, and (II) Indemnity Claims relating to items (iv)-(vii) of Section 10.1, all of which shall survive until the termination of all liabilities arising from the subject matter thereof pursuant to applicable statutes of limitation, the warranties, representations and covenants of Seller contained in this Agreement, or any certificate, document, instrument or agreement delivered pursuant to this Agreement, shall survive the execution and delivery of this Agreement, the Closing and the consummation of the transactions called for by this Agreement but shall expire on April 30, 2000; provided that if there shall then be pending any Indemnity Claim previously asserted by the Buyer, such Indemnity Claim shall continue to be subject to indemnification in accordance herewith. (c) Buyer acknowledges and agrees that (i) other than the representations and warranties of Seller specifically contained in this Agreement or in any other instrument or document executed pursuant hereto, there are no representations or warranties of Seller either expressed or implied with respect to the transactions contemplated hereby, with respect to Seller, the Business or the Assets, (ii) Buyer shall have no claim or right to indemnification pursuant to this Section 10.1 with respect to any information documents or materials furnished by Seller or any of its officers, directors, employees, agents or advisors to Buyer in expectation of the transactions contemplated hereby other than this Agreement, the Disclosure Letter and Schedules hereto and any supplements thereto and any instruments and documents executed pursuant hereto and (iii) if the Closing occurs, Buyer's sole and exclusive remedy with respect to any and all Losses relating to this 28 Agreement or any instrument or document delivered by Seller pursuant hereto, the transactions contemplated hereby, Seller, the Business and the Assets shall be pursuant to the indemnification provisions set forth in this Section 10.1. In furtherance of the foregoing, Buyer hereby waives, from and after the Closing, any and all rights, claim and causes of action Buyer may have against Seller and its Affiliates arising under or based upon any federal, state, local or foreign statute, law, ordinance, rule or regulation or otherwise (except pursuant to the indemnification provisions set forth in this Section 10.1). 10.2. INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify and hold harmless Seller and Seller's Affiliates and their successors and assigns, against and in respect of, any and all Losses which may arise out of (i) any breach or violation of any agreement in this Agreement on the part of the Buyer; (ii) any breach of any of the representations, warranties or covenants made in this Agreement by the Buyer; (iii) obligations under the Worker Adjustment and Retraining Notification Act, 29 U.S.C.A. Section 2101 with respect to employees of the Business; or (iv) any obligations or occurrences relating to the Business or Assets of the Business for which Seller or a Seller Affiliate is primarily, secondarily or jointly and severally liable, whether as guarantor, surety or otherwise (except for those obligations or occurrences specifically retained by Seller or a Seller Affiliate hereunder and those obligations or occurrences for which Buyer has a right of indemnification against Seller under the provisions of this Agreement). 10.3. NOTICE OF CLAIM. Upon obtaining knowledge thereof, the Buyer or Seller (the "Indemnitee") shall promptly notify the party against whom indemnity is being sought, either Seller or the Buyer, as the case may be, (the "Indemnitor") in writing of any damage, claim, loss, liability or expense which the Indemnitee has determined has given or could give rise to a claim under Sections 10.1 or 10.2 hereof (such written notice being hereinafter referred to as a "Notice of Claim"). A Notice of Claim shall specify, in reasonable detail, the nature and estimated amount of any such claim giving rise to a right of indemnification. 10.4. DEFENSE OF THIRD PARTY CLAIMS. With respect to any action or any claim or demand set forth in the Notice of Claim relating to a third party claim, the Indemnitor may defend, in good faith with reasonable diligence and at its expense, any such claim or demand, and the Indemnitee, at its expense, shall have the right to participate in the defense of any such third party claim. So long as the Indemnitor is defending in good faith any such third party claim, the Indemnitee shall not settle or compromise such third party claim. The above provisions notwithstanding, if the third party claim seeks a remedy other than payment of monetary damages and such other remedy, if awarded to claimant, could have a material adverse effect upon the Indemnitee, then the parties shall meet and reasonably agree upon an appropriate manner in which to defend and manage the claim, so as to protect the interests of both Indemnitor and Indemnitee. The Indemnitee shall make available to the Indemnitor or its representatives all records and other materials reasonably required by them for its use in contesting any third party claim and shall cooperate fully with the Indemnitor in the defense of all such claims. If the Indemnitor does not so elect to defend any such third party claim, the Indemnitee shall have no obligation to do so. 10.5. DISPUTED INDEMNIFICATION. In the event of a dispute concerning whether a party has an obligation to indemnify and the matter proceeds to litigation, the parties agree that the 29 trier of fact may require the non-prevailing party to pay all or part of the prevailing party's costs of the litigation (including attorney's fees) if the trier of fact believes that the equities require such an award based upon the non-prevailing party's lack of good faith in asserting or defending such claim. 10.6. LIMITATION OF CLAIMS. The aggregate amount of all claims subject to indemnification hereunder by Seller as Indemnitor shall not exceed the aggregate Purchase Price. 10.7. CALCULATION OF LOSSES. For purposes of this Section 10, in computing such aggregate amounts of Losses, the amount of each Loss shall be deemed to be an amount (i) net of any insurance proceeds and any indemnity, contribution or other similar payment payable by any third party with respect thereto, and (ii) net of any reserves provided for the situation in question which are included in Assets. SECTION 11. MISCELLANEOUS 11.1. ENTIRE AGREEMENT. This Agreement (including the Disclosure Letter and supplements thereto, the Schedules and Exhibits) contain the entire agreement between the parties with respect to the transactions contemplated hereby, and supersedes all negotiations, representations, warranties, commitments, offers, contracts, and writings prior to the date hereof. No waiver and no modification or amendment of any provision of this Agreement shall be effective unless specifically made in writing and duly signed by the party to be bound thereby. 11.2. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together, shall constitute one and the same instrument. 11.3. SEVERABILITY. If any provision hereof shall be held invalid or unenforceable by any court of competent jurisdiction or as a result of future legislative action, such holding or action shall be strictly construed and shall not affect the validity or effect of any other provision hereof. 11.4. ASSIGNABILITY. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto; provided, that neither this Agreement nor any right hereunder shall be assignable by Seller or the Buyer without the prior written consent of the other party, and any other purported assignment shall be null and void. 11.5. CAPTIONS. The captions of the various Sections of this Agreement have been inserted only for convenience of reference and shall not be deemed to modify, explain, enlarge or restrict any of the provisions of this Agreement. 11.6. WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. 30 11.7. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without regard to principles of conflicts of law. Any judicial proceeding brought against any of the parties to this Agreement on any dispute arising out of this Agreement or any matter related hereto shall be brought in the courts of the State of Ohio, and, by execution and delivery of this Agreement, each of the parties hereto accepts the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. 11.8. NOTICES. All notices, requests, demands, and other communications under this Agreement shall be in writing and delivered in person or sent by FAX or sent by certified mail, postage prepaid, and properly addressed as follows: TO SELLER: Worthington Custom Plastics, Inc. c/o Worthington Industries, Inc. 1205 Dearborn Drive Columbus, OH 43085 FAX: (614) 840-3706 Attn: Date T. Brinkman, General Counsel TO BUYER: Morton Industrial Group, Inc. 1021 West Birchwood P.O. Box 429 Morton, IL 61550-0429 Attn: Daryl R. Lindemann, Vice President Any party may from time to time change its address for the purpose of notices to that party by a similar notice specifying a new address, but no such change shall be deemed to have been given until it is actually received by the party sought to be charged with its contents. All notices and other communications required or permitted under this Agreement which are addressed as provided in this Section 11.8 if delivered personally or by FAX, shall be effective upon delivery; and, if delivered by mail, shall be effective three days following deposit in the United States mail, postage prepaid. 11.9 PUBLIC ANNOUNCEMENTS. Neither the Buyer, Seller nor affiliates or representatives of either of them shall make any public announcement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other party hereto, unless such party is advised by counsel that such disclosure is required by law. 11.10. CONFIDENTIALITY. Upon execution of this Agreement, through and beyond the Closing, Seller shall, and shall cause its Affiliates to, continue to maintain the confidentiality of all information, documents and materials relating to the Business, including all such materials which remain in the possession of Seller, except to the extent disclosure of any such information is required by law or authorized by Buyer or reasonably occurs in connection with consummation of the transactions contemplated by, or disputes over the terms of, this Agreement, and Buyer shall maintain the confidentiality of all information, documents and materials relating to Seller 31 (other than that relating to the Business) which Buyer has obtained in connection with this Agreement or with the transactions contemplated herein, except to the extend disclosure of any such information is required by law or authorized by Seller or reasonably occurs in connection with consummation of the transactions contemplated by, or disputes over the terms of this Agreement. In the event that any party reasonably believes after consultation with counsel that it is required by law to disclose any confidential information described in this Section 11.10, the disclosing party will (a) provide the other party with prompt notice before such disclosure in order that any party may attempt to obtain a protective order or other assurance that confidential treatment will be accorded such confidential information and (b) cooperate with the other party in attempting to obtain such order or assurance. The provisions of this Section 11.10 shall not apply to any information, documents or materials which are, as shown by appropriate written evidence, in the public domain or, as shown by appropriate written evidence, shall come into the public domain or, as shown by appropriate written evidence, shall come into the public domain other than by reason of breach by the applicable party bound hereunder or its Affiliates. If this Agreement is terminated, the Buyer shall return to Seller any and al such documents, reports and other written materials (including financial statements) concerning the Business and shall destroy all notes or other documents prepared by Buyer containing such confidential information. 11.11 FURTHER ASSURANCES. At any time and from time to time, each party hereto, without further consideration shall cooperate, take such further actions and execute and deliver such further instruments and documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. SECTION 12. DEFINED TERMS 12.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms have the following meanings unless the context otherwise requires: "ACTION OR PROCEEDING" means any claim, action, suit, proceeding or arbitration by any Person, or any investigation or audit by any Governmental or Regulatory Body. "AFFILIATE" means with respect to any Person, any other Person controlling, controlled by or under common control with such first Person. "BUSINESS" shall mean the business of designing, manufacturing, assembly and selling molded plastic parts as currently engaged in by Worthington Custom Plastics, Inc. from its Lebanon, Kentucky, St. Matthews, South Carolina and the PMI operations in Concord and Harrisburg, North Carolina. The term "Business" specifically excludes the plastics operations in Worthington Custom Plastics, Inc.'s Novi, Michigan sales office , and its Mason, Salem and Upper Sandusky, Ohio facilities. The term "Business" also specifically excludes the Seller's land, building and other assets in Cumming, Georgia. "BUSINESS DAY" means any day on which commercial banks are not authorized or required by law to close in Columbus, Ohio. "CODE" means the Internal Revenue Code of 1986, as amended. 32 "CONTRACTS" means all executory contracts, agreements, understandings, indentures, notes, bonds, loans, instruments, leases (for real and personal property), mortgages, franchises, licenses or commitments. "ENVIRONMENTAL CLAIM" means, with respect to any Person, any written notice or claim by any other Person alleging or asserting such Person's liability for investigatory costs, clean-up costs, Governmental or Regulatory Body response costs, damages to natural resources or other property, personal injuries, fines or penalties arising out of, based on or resulting from (a) the presence or release into the environment, of any Hazardous Material or (b) circumstances forming the basis of any violation of any Environmental Law. "ENVIRONMENTAL LAW" means any Law or Order relating to the regulation or protection of the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants or toxic or hazardous wastes into the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "GOVERNMENTAL OR REGULATORY BODY" means any court, tribunal, arbitrator or any government or political subdivision thereof, whether federal, state, county, local or foreign, or any agency, authority, official or instrumentality of any such government or political subdivision. "HAZARDOUS MATERIAL" means any chemicals or other materials or substances which are defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants" or words of similar import under any Environmental Law. "HSR ACT" means the Hart-Scott-Radino Anti-trust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "INTANGIBLE PROPERTY" means all patents and applications therefor, copyrights and applications therefor (including rights to renew), trademarks and applications therefor, tradenames and applications therefor and servicemarks and applications therefor, owned by Seller or Worthington and used solely in connection with the Business. "INVENTORY" means all raw materials, work-in-process, finished goods, office and other supplies, parts, packaging materials and other accessories and supplies related thereto. "LAW" means any law, statute, rule, regulation, ordinance and other pronouncement having the effect of law of the United States of America, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Body. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the results of the operations or financial condition of the Business, but excluding any such effect resulting from the loss of the AYP business. "ORDER" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Body, in each case whether preliminary or final. 33 "PERSON" means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental or Regulatory Body or other entity. "PLAN" means an "employee benefit plan" for purposes of Section 3(3) of ERISA, and each other employee benefit plan, contract and other arrangement, whether or not subject to ERISA, maintained, administered, or contributed to by Seller, and which covers any employees of the Business or under which the Business has liability. "REAL PROPERTY" means the real property used solely in connection with the Business, together with all easements, licenses, interests and all of the rights arising out of the ownership thereof, together with the buildings, fixtures and other improvements and appurtenances, if any, belonging or in any way appertaining thereto. "SELLER AFFILIATE" means an Affiliate of Seller. "TANGIBLE PROPERTY" means all furniture, fixtures, equipment (including motor vehicles), machinery, tools, dyes, castings, fixed assets, computers, printers, servers, spare parts and other items of tangible personal property of every kind and description (other than Inventory) used solely in connection with the Business and owned or leased by Seller. "TAX" and "TAXES" means all taxes or other assessments imposed by any federal, state, local, or foreign taxing authority, including income, excise, property, sales, use, ad valorem, and franchise taxes other than Transfer Taxes. "TAX RETURN" means any return, report, information return, or other document (including any related or supporting information) filed or required to be filed with any federal, state, local or foreign governmental entity or other authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax. "WORTHINGTON" means Worthington Industries, Inc., a Delaware corporation, which is the ultimate parent entity of the Seller. 12.2 TERMS DEFINED ELSEWHERE. The following terms are defined in the Sections listed opposite their name:
DEFINED TERM SECTION ------------ ------- Accounting Principles 2.2(b) Accounts Receivable 4.19 Assets 1.1 Assumed Liabilities 1.3 Balance Sheet 4.4(a) Balance Sheet Date 4.4(a) Closing Balance Sheet 2.2(b) Closing Cash Payment 2.1 34 Closing Date 3.2 Common Stock 2.1 Contracts of the Business 1.1(v) Determination Time 2.2(b) Disabling Condition 7.3(a) Disclosure Letter 3.6 Dispute Notice 2.2(d) Dispute Period 2.2(d) Excluded Assets 1.2 Excluded Liabilities 1.4 Final Operating Working Capital 2.2(a)(i) Financial Statements 4.4(a) GAAP 2.2(b) IDB 1.5 Indemnitee 10.3 Indemnitor 10.3 Indemnity Claims 10.1(a) Liens 4.5(c) Losses 7.1(b) Major Customers 4.23(a)(i) Major Suppliers 4.23(a)(ii) Material Contracts 4.6 Notice of Claim 10.3 Operating Capital 2.2(a)(i) Permitted Liens 4.5(c) Preferred Stock 2.1 Purchase Price 2.1 Restricted Names or Marks 7.10 Target Operating Capital 2.2(a)(i) Transfer Taxes 7.4(e) Worthington Health Plans 7.3(a)(i)
35 (Remainder of page intentionally left blank) 36 IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase Agreement as of the date first above written. WORTHINGTON CUSTOM PLASTICS, INC. MORTON INDUSTRIAL GROUP, INC. By: By: ------------------------------ ----------------------------- Its: Its: ----------------------------- ---------------------------- MORTON CUSTOM PLASTICS, INC. By: ----------------------------- Its: ---------------------------- 37 EX-10.2 3 EXHIBIT 10.2 FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT The Asset Purchase Agreement (the "APA") made and entered as of the 26th day of February, 1999, by and among Worthington Custom Plastics, Inc., an Ohio corporation ("Seller"), Morton Industrial Group, Inc., a Georgia corporation ("MGRP"), and Morton Custom Plastics, Inc., a Delaware corporation ("MCP") is hereby amended in the following respects and the parties hereto agree as follows: 1. ASSIGNMENT OF RIGHTS; ASSUMPTION OF OBLIGATIONS. MGRP and MCP hereby assign to Morton Custom Plastics, LLC, a Delaware limited liability company ("Buyer"), all their right, title, and interest in, to and under the APA, and Buyer does hereby assume from MGRP and MCP, and shall pay, perform and discharge in accordance with the terms of the APA, and shall indemnify and hold harmless MGRP and MCP from and against, the obligations of MGRP and MCP thereunder. Pursuant to Section 11.4 of the APA, Seller does hereby grant its consent to this assignment; provided that neither MGRP or MCP shall be released from its obligations under the APA. 2. ASSIGNMENT TO GE CAPITAL. The parties hereto acknowledge that as part of the requirements for obtaining financing for the acquisition of the assets pursuant to the APA, Buyer's lenders, including General Electric Capital Corporation (the "Lenders"), will require an assignment of Buyer's rights under the APA to the Lenders or their agent for collateral purposes. Seller hereby consents to such assignment. 3. AMENDMENT TO PURCHASE PRICE. Section 2.1 of the APA is hereby deleted and a new Section 2.1 is hereby substituted therefore as follows: 2.1 PURCHASE PRICE. The Consideration for the Assets (the "Purchase Price") shall be (i) $25,000,000 (the "Closing Cash Payment"); (ii) 10,000 shares of preferred stock of Parent, without par value (the "Preferred Stock") on the terms set forth on Exhibit A hereto (which the parties agree has a value of $4,250,000); (iii) a Contingent Payment as provided in Exhibit A attached hereto; and (iv) Buyer'' assumption of the Assumed Liabilities. The Closing Cash Payment shall be paid as provided in Section 2.3. The Shareholder Agreement set forth in Exhibit F of the APA is hereby deleted. 4. CLOSING. Section 3.1 of the APA is hereby amended to reflect that the Closing will take place at the offices of Paul, Hastings, Janofsky & Walker LLP, 1055 Washington Blvd., Stamford, Connecticut. Section 3.2 is hereby amended by substituting the date hereof for the March 31, 1999 date contained therein. Section 3.3 of the APA is amended by substituting April 20, 1999 for April 15, 1999. 5. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants to Seller that: (a) Buyer is a limited liability company duly formed and validly existing under the laws of the State of Delaware and is qualified to do business as a foreign limited liability company in all jurisdictions in which the failure to do so would have a Material Adverse Effect on the results of operations or financial condition of Buyer. Buyer has all requisite power and authority to enter into this First Amendment and assume and perform the obligations of MGRP and MCP under the APA and to carry out its obligations hereunder and thereunder. (b) The execution and delivery of this First Amendment and the consummation of the transactions contemplated hereby and by the APA have been duly authorized by all necessary limited liability company actions required on the part of the Buyer. This First Amendment has been duly executed and delivered by Buyer, and this First Amendment and the APA constitute the valid and legally binding obligations of Buyer and are enforceable against the Buyer in accordance with their respective terms. (c) Neither the execution and delivery of this First Amendment, the assumption of MGRP's and MCP's obligations under the APA, nor the consummation of the transactions contemplated hereby and by the APA will: (i) violate or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, any of the terms, conditions or provisions of the Articles of Organization or Operating Agreement of the Buyer, or any note, bond, mortgage, indenture, deed of trust, material license agreement, loan agreement or other material agreement, instrument or obligation to which Buyer is party, or by which Buyer or any of its properties or assets may be bound or affected; or (ii) violate any material judgment, order, writ, injunction or decree, or any law, rule or regulation applicable to Buyer or any of its properties or assets, to the extent any of the foregoing would have a Material Adverse Effect on the results of operations or financial condition of Buyer. Buyer is not required to give notice or obtain any consent from any person in connection with the execution and delivery of this First Amendment for the consummation of the transactions contemplated hereby or by the APA. 6. GE CAPITAL FINANCING. In lieu of the financing contemplated by the APA, the parties acknowledge that financing will be provided by Buyer and its sole member, Morton Holdings, LLC, a Delaware limited liability company, by borrowing such funds from the Lenders. 7. SERIES 1999A PREFERRED. Exhibit A of the APA is hereby amended to provide that the designation of the preferences, limitations and relative rights of the Series 1999A Preferred shall be as set forth on EXHIBIT B attached hereto and made a part hereof by this reference. 2 8. TRANSITION SERVICES AGREEMENT. EXHIBIT E of the APA is hereby amended to provide that the form of the Transition Service Agreement shall be as set forth on EXHIBIT C, attached hereto and made a part hereof by this reference. 9. CAPITALIZATION. Section 5.4 is hereby amended to provide that bonds for acquisition and debt financing will not be issued by Parent and to clarify that the Parent has outstanding employee and director stock options in addition to those granted under Parent's 1997 Stock Option Plan. 10. OPINION OF BUYER'S COUNSEL. The opinion to be given by Buyer's counsel as set forth in Exhibit G of the APA shall be appropriately modified to reflect the changes in the APA made by this First Amendment and may be delivered by separate counsel for Buyer, namely, Winston & Strawn, as well as Husch & Eppenberger, LLC. 11. GE BUSINESS; POSSIBLE REDUCTION IN DIVIDEND RATE. As required pursuant to Sections 8.9 and 9.7 of the APA, Seller and Buyer have reached a mutually acceptable agreement with respect to certain GE business which is reflected in a separate agreement of even date. Pursuant to that agreement, the dividend rate on the Series 1999A Preferred may be reduced; therefore, an appropriate legend will be affixed to the certificate or certificates evidencing the Series 1999A Preferred in the hands of Seller, substantially as follows: THE DIVIDEND RATE SET FORTH IN THE DESIGNATION OF PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF THE SERIES 1999A PREFERRED MAY BE REDUCED UNDER CERTAIN CIRCUMSTANCES AS SET FORTH IN THAT CERTAIN AGREEMENT DATED APRIL 15, 1999 BY AND BETWEEN WORTHINGTON CUSTOM PLASTICS, INC., MORTON INDUSTRIAL GROUP, INC., AND MORTON CUSTOM PLASTICS, LLC, A COPY OF WHICH IS AVAILABLE FROM THE SECRETARY OF THE CORPORATION. As a condition to any transfer of the Series 1999A Preferred by Seller, Seller will require that the transferee agree in writing to the foregoing limitations. 12. PARTIES. Buyer is hereby added as a party to the APA. 13. LEBANON IDB. The parties agree that section 1.5 of the APA shall be deemed amended as appropriate to reflect the letter to Firstar Bank, N.A. from Worthington Steel of Michigan, Inc. and Morton Lebanon Kentucky IRB, LLC dated as of the date hereof (the "Letter") and further that notwithstanding any provision herein, in the Assignment and Assumption Agreement or any other document relating to the APA, Buyer shall not assume or be liable in respect of the IDB or the bonds issued thereunder (the "Bonds") and the Bonds shall not be transferred to Buyer or its affiliates until the Letter has been fully executed and delivered by all parties thereto (and properly attested to the extent required thereby). The parties shall use best efforts to cause such transfer and assumption to occur at the earliest practical date. 3 14. DEFINITION. Capitalized terms contained herein that are not otherwise defined herein shall be construed as defined in the APA. 15. BINDING EFFECT. This First Amendment shall be binding upon the parties and their successors and assigns. The terms and conditions of the APA shall continue in full force and effect except as modified herein. IN WITNESS WHEREOF, the parties have executed this First Amendment to Asset Purchase Agreement as of this ________ day of April, 1999. WORTHINGTON CUSTOM PLASTICS, MORTON INDUSTRIAL GROUP, INC. INC. By: By: ------------------------------- ------------------------------ Its Its ---------------------------- --------------------------- MORTON CUSTOM PLASTICS, INC. MORTON CUSTOM PLASTICS, LLC By: By: ------------------------------- ------------------------------ Its Its ---------------------------- --------------------------- 4 EXHIBIT A TO FIRST AMENDMENT CONTINGENT PAYMENT 1. SELLER'S RIGHT TO DEMAND CONTINGENT PAYMENT. Seller shall have the right to compel Buyer to pay to Seller an amount equal to 15% of the "Enterprise Value" (as defined below) of Buyer (the "Contingent Payment") as of December 31, 2004 by notifying Buyer in writing of the demand within the 30-day period following the later of (i) March 31, 2005 or (ii) the date on which Seller is provided audited financial statements of the Buyer with respect to the year ended December 31, 2004 on the terms and conditions set forth below. 2. BUYER RIGHT TO PROVIDE CONTINGENT PAYMENT. Buyer shall have the right to compel Seller to receive the Contingent Payment based on the Enterprise Value of Buyer as of December 31, 2004 by notifying Seller in writing of the exercise of its right within the 30-day period following March 31, 2005 on the terms and conditions set forth below. 3. CONTINGENT PAYMENT ABSENT EXERCISE. If neither Seller nor Buyer exercises its right to receive or pay the Contingent Payment based on the December 31, 2004 Enterprise Value of Buyer, the Contingent Payment shall be equal to 15% of the Enterprise Value of Buyer as of December 31, 2005. 4. AMOUNT OF THE CONTINGENT PAYMENT. The Enterprise Value of the Buyer shall be the fair market value of a 100% equity ownership interest in Buyer as of the appropriate date. Such value shall be determined by the mutual agreement of the parties, or, if the parties cannot agree on the Enterprise Value of the Buyer within 30 days of the exercise of the right under Section 1 or 2 by April 30, 2006 if no exercise is made, then the Enterprise Value of the Buyer shall be determined by appraisal as follows: The parties shall each appoint, at its own cost, within 15 days following the expiration of the time for mutual agreement, a qualified appraiser ("Qualified Appraiser"), who shall be a professional appraiser, certified public accountant, or investment banker qualified by experience and ability to appraise a closely held business of the magnitude conducted by Buyer. In determining the Enterprise Value of the Buyer for purposes of determining the Contingent Payment, no discounts shall be taken for lack of marketability of the enterprise or minority interest or the like. Rather, the determination of Enterprise Value of the buyer shall be based on a valuation of the Buyer as a going concern. The Contingent Payment shall then be determined by multiplying Enterprise Value by 15%. If both Qualified Appraisers agree on the Enterprise Value of the Buyer, their opinion, which shall be submitted in writing, shall be conclusive and binding on the parties. If only one of the parties appoints a Qualified Appraiser, that appraiser's written opinion on the Enterprise Value of the Buyer shall be conclusive and binding on the parties. If the two Qualified Appraisers disagree on the Enterprise Value of the Buyer, they shall appoint a third Qualified Appraiser mutually acceptable to them, and the opinion of the third Qualified Appraiser, whose fees and expenses shall be divided equally between the parties, shall be conclusive and binding as to the Enterprise Value of the Buyer. Provided, however, that if the Enterprise Value of the Buyer in question found by the third Qualified Appraiser is greater than the higher of the first two appraisals, the higher of the first two appraisals shall constitute the Enterprise Value of the Buyer, and if Enterprise Value as found by the third appraiser is less than the lower of the first two appraisals, the lower of the first two appraisals shall constitute the Enterprise Value of the Buyer. In determining such Enterprise Value as of any date, Buyer shall be deemed to have additional cash assets (or, as applicable, to have its assets decreased) in an amount equal to (a) the sum of (i) all cash distributed by Buyer to its members in their capacity as such on or prior to such date (other than distributions to pay or reimburse its members for tax liabilities actually paid by such members attributable to the taxable income of Buyer) plus (ii) the fair market value of all non-cash assets distributed by Buyer to its members in their capacity as such (in each case determined as of the time of distribution) on or prior to such date plus (iii) payments to Affiliates of Buyer for products or services to the extent such payments are in excess of their reasonable value plus (iv) interest on such distributions or excess payments at the Wall Street Journal national prime rate of interest in effect from time to time (the "Prime Rate") from the date of such distributions or excess payments to the date of determining such Enterprise Value minus (b) the sum of (i) the amount of all capital contributions made to Buyer (valued at fair market value as of the date of such contribution) plus (ii) interest on such capital contributions at the Prime Rate from the date of such capital contributions to the date of determining such Enterprise Value. In no event shall the amount of such Contingent Payment exceed $35,000,000 plus interest as provided below. In determining such Enterprise Value, payments to Affiliates in excess of their reasonable value shall be added back to cash flow, income or other similar computations. The parties hereto agree to negotiate in good faith concerning additional adjustments to the calculation of the Contingent Payment to address extraordinary charges or events with the respect to the Buyer which were not contemplated by the parties hereto as of the date hereof. For purposes of this Exhibit, the following definitions shall apply: "AFFILIATE" shall mean, with respect to any Person (a) each Person that, directly or indirectly, owns or controls, whether beneficiary, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the equity or voting interest of such Persons, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, descendants of individuals of any of the foregoing. For the purposes of this definition, "CONTROL" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "PERSON" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof). 2 5. PAYMENT OF CONTINGENT PAYMENT. The Contingent Payment shall be paid in cash, or by wire transfer or certified or cashier's check on or before the 30th day following the determination of the Contingent Payment pursuant to Section 4 above and shall be accompanied by interest from the date as to which the Enterprise Value is determined to the date of payment at the Prime Rate. 6. DEBTOR-CREDITOR RELATIONSHIP. The parties intend for Seller to be viewed as an unsecured creditor of Buyer with respect to the Contingent Payment. Nothing in the APA (including this Amendment) shall be construed as creating a partnership or joint venture between Seller and Buyer. 7. ACCESS TO RECORDS. Buyer shall provide to Seller access to Buyer's officers and employees and to Buyer's books and records and all financial information including projections as is reasonably necessary to calculate Enterprise Value. 3 RESOLUTIONS OF THE BOARD OF DIRECTORS OF MORTON INDUSTRIAL GROUP, INC. (Designating the preferences, limitations, and relative rights of the Series 1999A Preferred) WHEREAS, the board of directors of the Corporation is authorized by the Corporation's articles of incorporation to issue shares of preferred stock not to exceed 2,000,000, no par value, from time to time in one or more series; and WHEREAS, the articles of incorporation authorizes the board of directors to determine the preferences, limitations, and relative rights of any series of preferred stock; and WHEREAS, the board of directors now desires to designate a series of preferred stock pursuant to its authority; NOW, THEREFORE, BE IT RESOLVED, that the board of directors of Morton Industrial Group, Inc. hereby designates 15,000 shares of its authorized non-par value preferred stock as a series designated "Series 1999A Preferred"; and it is RESOLVED, that the preferences, limitations and relative rights of the Series 1999A Preferred are as follows: Except as otherwise provided herein, dividends on each share of the Series 1999A Preferred shall accrue at the rate of 8% per annum of the sum of the (i) Liquidation Value (as hereafter defined) thereof plus (ii) all accumulated and unpaid dividends thereon as of the immediately preceding Dividend Reference Date (as hereafter defined). Such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. No dividends can be paid on any share of Common Stock until all accumulated dividends on the Series 1999A Preferred have been paid. Dividends on the Series 1999A Preferred shall be paid annually on the last day of each March beginning March 31, 2000, ("Dividend Reference Date") either, at the option of the Corporation, in cash or by issuance of that number of additional shares of Series 1999A Preferred equal to the dividend payable divided by 1,000; provided, however, that no dividends on the Series 1999A Preferred shall be declared by the board of directors of the Corporation or paid or set apart for payment by the Corporation at such time as, and to the extent that, the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, or any provisions of the Corporation's articles of incorporation or a declaration relating to any series of preferred shares ranking senior to the Series 1999A Preferred as to dividends, prohibit such declaration, payment or setting apart for payment or provide that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment will be prohibited by law. Notwithstanding the foregoing, dividends on the Series 1999A Preferred shall accrue whether or not the Corporation has earnings, whether or not there are funds legally available for payment of such dividends and whether or not such dividends are declared. The Series 1999A Preferred shall not have any voting powers either general or specified. The shares of Series 1999A Preferred shall not be subject to conversion into any other securities of the Corporation. The Corporation shall purchase or redeem five years after the date of initial issuance of any of such shares (herein the "Maturity Date"), the entire amount of the Series 1999A Preferred then issued and outstanding, and pay the holders of the shares so purchased or redeemed an amount equal to $1,000.00 per share plus the unpaid accumulated dividends accrued thereon (including such dividends which have accrued but not been declared). In the event any of the shares of Series 1999A Preferred are not tendered for redemption hereunder, the Corporation may deposit the aggregate redemption price with any bank or trust company in the City of Columbus, Ohio named in a notice sent to the holders of the Series 1999A Preferred, payable in the amounts stated to the respective record holders of the shares to be redeemed on endorsement and surrender of their stock certificates, and upon the making of such deposit the holders shall cease to be shareholders with respect to the Series 1999A Preferred and from and after the making of such deposit the holders shall have no interest in or claim against the Corporation with respect to the shares of Series 1999A Preferred, but shall be entitled only to receive the monies from the bank or trust company without interest. Any monies unclaimed at the end of one year from the date of the deposit shall be repaid to the Corporation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, there shall be paid to the holders of the Series 1999A Preferred $1,000.00 per share ("Liquidation Value") plus accrued and unpaid dividends before any sum shall be paid to or any assets distributed among the holders of the Common Stock; and after such payment to the holders of the Series 1999A Preferred all remaining assets and funds of the Corporation shall be paid to the holders of the Common Stock according to their respective shares without further participation by the holders of the Series 1999A Preferred. The rights and preferences conferred here on the Series 1999A Preferred shall not be changed or altered or revoked without the consent of the holders of the majority of the Series 1999A Preferred outstanding at the time. 2 The consolidation or merger of the Corporation at any time, or from time to time with any other corporation, shall not be regarded or construed to be a liquidation, dissolution or winding up of the Corporation within the meaning herein, but no such consolidation or merger shall in any way impair the rights of the Series 1999A Preferred. The Corporation may issue one or more additional series of preferred stock without the consent of the holders of the Series 1999A Preferred so long as the ranking as to preference on liquidation, dissolution or winding up of the Corporation is either subordinate to such rights of the Series 1999A Preferred or on a parity with the Series 1999A Preferred. 3 EX-10.3 4 EXHIBIT 10.3 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CREDIT AGREEMENT Dated as of April 15, 1999 among MORTON CUSTOM PLASTICS, LLC, EACH OTHER BORROWER PARTY HERETO, MORTON HOLDINGS, LLC AND THE OTHER CREDIT PARTIES SIGNATORY HERETO, as Credit Parties, THE LENDERS SIGNATORY HERETO FROM TIME TO TIME, as Lenders, and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
INDEX OF APPENDICES - ------------------- Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance Exhibit 1.1(a)(ii) - Form of Revolving Note Exhibit 1.1(b) - Form of Term Note Exhibit 1.1(c)(ii) - Form of Swing Line Note Exhibit 1.5(e) - Form of Notice of Conversion/Continuation Exhibit 4.1(b)(i) - Form of Revolving Borrowing Base Certificate Exhibit 9.1(a) - Form of Assignment Agreement Schedule 1.1 - Responsible Individual Schedule 1.4 - Sources and Uses; Funds Flow Memorandum Schedule 3.2 - Executive Offices; FEIN Schedule 3.4(A) - Financial Statements Schedule 3.4(B) - Pro Forma Schedule 3.4(C) - Projections Schedule 3.5 - Material Events Schedule 3.6 - Real Estate and Leases Schedule 3.7 - Labor Matters Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding Stock Schedule 3.11 - Tax Matters Schedule 3.12 - ERISA Plans Schedule 3.13 - Litigation Schedule 3.15 - Intellectual Property Schedule 3.17 - Hazardous Materials Schedule 3.18 - Insurance Schedule 3.19 - Deposit and Disbursement Accounts Schedule 3.20 - Government Contracts Schedule 3.22 - Material Agreements Schedule 5.1 - Corporate and Trade Names Schedule 6.3 - Indebtedness Schedule 6.4(a) - Transactions with Affiliates Schedule 6.7 - Existing Liens Annex A (Recitals) - Definitions Annex B (SECTION 1.2) - Letters of Credit Annex C (SECTION 1.8) - Cash Management System Annex D (SECTION 2.1(a)) - Schedule of Additional Closing Documents Annex E (SECTION 4.1(a)) - Financial Statements and Projections -- Reporting Annex F (SECTION 4.1(b)) - Collateral Reports Annex G (SECTION 6.10) - Financial Covenants Annex H (SECTION 9.9(a)) - Lenders' Wire Transfer Information Annex I (SECTION 11.10) - Notice Addresses Annex J (from Annex A - - Commitments as of Closing Date Commitments definition)
TABLE OF CONTENTS 1. AMOUNT AND TERMS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . 2 1.1. Credit Facilities . . . . . . . . . . . . . . . . . . . . . . 2 1.2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 7 1.3. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . .10 1.5. Interest and Applicable Margins . . . . . . . . . . . . . . .10 1.6. Eligible Accounts . . . . . . . . . . . . . . . . . . . . . .13 1.8. Cash Management Systems . . . . . . . . . . . . . . . . . . .17 1.9. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 1.10. Receipt of Payments . . . . . . . . . . . . . . . . . . . . .17 1.11. Application and Allocation of Payments. . . . . . . . . . . .18 1.12. Loan Account and Accounting . . . . . . . . . . . . . . . . .18 1.13. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . .19 1.14. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . .20 1.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 1.16. Capital Adequacy; Increased Costs; Illegality; Replacement of Lender in Respect to Increased Costs . . . . . . . . . . .21 1.17. Single Loan . . . . . . . . . . . . . . . . . . . . . . . . .23 2. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . .23 2.1. Conditions to the Initial Loans . . . . . . . . . . . . . . .23 2.2. Further Conditions to Each Loan . . . . . . . . . . . . . . .25 2.3. Additional Borrowers. . . . . . . . . . . . . . . . . . . . .26 3. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .26 3.1. Corporate or Limited Liability Company Existence; Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . .26 3.2. Executive Offices; FEIN . . . . . . . . . . . . . . . . . . .27 3.3. Corporate or Limited Liability Company Power, Authorization, Enforceable Obligations . . . . . . . . . . . . . . . . . . .27 3.4. Financial Statements and Projections. . . . . . . . . . . . .27 3.5. Material Adverse Effect . . . . . . . . . . . . . . . . . . .28 3.6. Ownership of Property; Liens. . . . . . . . . . . . . . . . .29 3.7. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . .29 3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . .30 3.9. Government Regulation . . . . . . . . . . . . . . . . . . . .30 3.10. Margin Regulations. . . . . . . . . . . . . . . . . . . . . .30 3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 3.12. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 3.13. No Litigation . . . . . . . . . . . . . . . . . . . . . . . .32 3.14. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . .32 3.15. Intellectual Property . . . . . . . . . . . . . . . . . . . .32 i 3.16. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . .32 3.17. Environmental Matters . . . . . . . . . . . . . . . . . . . .33 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .34 3.19. Deposit and Disbursement Accounts . . . . . . . . . . . . . .34 3.20. Government Contracts. . . . . . . . . . . . . . . . . . . . .34 3.21. Customer and Trade Relations. . . . . . . . . . . . . . . . .34 3.22. Agreements and Other Documents. . . . . . . . . . . . . . . .34 3.23. Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . .34 3.24. Worthington Acquisition Agreement . . . . . . . . . . . . . .35 3.25. Status of Holdings; IRB Subsidiary. . . . . . . . . . . . . .35 4. FINANCIAL STATEMENTS AND INFORMATION. . . . . . . . . . . . . . . . .35 4.1. Reports and Notices . . . . . . . . . . . . . . . . . . . . .35 4.2. Communication with Accountants. . . . . . . . . . . . . . . .36 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .36 5.1. Maintenance of Existence and Conduct of Business. . . . . . .36 5.2. Payment of Obligations. . . . . . . . . . . . . . . . . . . .36 5.3. Books and Records . . . . . . . . . . . . . . . . . . . . . .37 5.4. Insurance; Damage to or Destruction of Collateral . . . . . .37 5.5. Compliance with Laws. . . . . . . . . . . . . . . . . . . . .39 5.6. Supplemental Disclosure . . . . . . . . . . . . . . . . . . .39 5.7. Intellectual Property . . . . . . . . . . . . . . . . . . . .39 5.8. Environmental Matters . . . . . . . . . . . . . . . . . . . .39 5.9. Landlords' Agreements, Mortgagee Agreements and Bailee Letters . . . . . . . . . . . . . . . . . . . . . . . . . . .40 5.10. Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . .40 5.11. Further Assurances. . . . . . . . . . . . . . . . . . . . . .41 6. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . .41 6.1. Mergers, Subsidiaries, Etc. . . . . . . . . . . . . . . . . .41 6.2. Investments; Loans and Advances . . . . . . . . . . . . . . .41 6.3. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . .41 6.4. Employee Loans and Affiliate Transactions . . . . . . . . . .42 6.5. Capital Structure and Business. . . . . . . . . . . . . . . .42 6.6. Guaranteed Indebtedness . . . . . . . . . . . . . . . . . . .43 6.7. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 6.8. Sale of Stock and Assets. . . . . . . . . . . . . . . . . . .43 6.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 6.10. Financial Covenants . . . . . . . . . . . . . . . . . . . . .44 6.11. Hazardous Materials . . . . . . . . . . . . . . . . . . . . .44 6.12. Sale-Leasebacks . . . . . . . . . . . . . . . . . . . . . . .44 6.13. Cancellation of Indebtedness. . . . . . . . . . . . . . . . .44 6.14. Restricted Payments . . . . . . . . . . . . . . . . . . . . .44 6.15. Change of Corporate or Limited Liability Company Name or Location; Change of Fiscal Year . . . . . . . . . . . . . . .45 ii 6.16. No Impairment of Intercompany Transfers . . . . . . . . . . .45 6.17. No Speculative Transactions . . . . . . . . . . . . . . . . .45 6.18. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . .45 6.19. Credit Parties Other than Borrowers . . . . . . . . . . . . .46 6.20. Modifications of Certain Documents. . . . . . . . . . . . . .46 7. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . .46 7.2. Survival of Obligations Upon Termination of Financing Arrangements. . . . . . . . . . . . . . . . . . . . . . . . .46 8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES. . . . . . . . . . . . . . . .46 8.1. Events of Default . . . . . . . . . . . . . . . . . . . . . .46 8.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .49 8.3. Waivers by Credit Parties . . . . . . . . . . . . . . . . . .49 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT . . . . . . . . .50 9.1. Assignment and Participations . . . . . . . . . . . . . . . .50 9.2. Appointment of Agent. . . . . . . . . . . . . . . . . . . . .52 9.3. Agent's Reliance, Etc . . . . . . . . . . . . . . . . . . . .52 9.4. GE Capital and Affiliates . . . . . . . . . . . . . . . . . .53 9.5. Lender Credit Decision. . . . . . . . . . . . . . . . . . . .53 9.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . .53 9.7. Successor Agent . . . . . . . . . . . . . . . . . . . . . . .54 9.8. Setoff and Sharing of Payments. . . . . . . . . . . . . . . .55 9.9. Advances; Payments; Non-Funding Lenders; Information; Actions in Concert. . . . . . . . . . . . . . . . . . . . . .55 10. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . .57 10.1. Successors and Assigns. . . . . . . . . . . . . . . . . . . .57 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 11.1. Complete Agreement; Modification of Agreement . . . . . . . .58 11.2. Amendments and Waivers. . . . . . . . . . . . . . . . . . . .58 11.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . .60 11.4. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . .61 11.5. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .62 11.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . .62 11.7. Conflict of Terms . . . . . . . . . . . . . . . . . . . . . .62 11.8. Confidentiality . . . . . . . . . . . . . . . . . . . . . . .62 11.9. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . .63 11.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .64 11.11. Section Titles. . . . . . . . . . . . . . . . . . . . . . . .64 11.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .64 11.13. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . .64 11.14. Press Releases. . . . . . . . . . . . . . . . . . . . . . . .65 11.15. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . .65 iii 11.16. Advice of Counsel . . . . . . . . . . . . . . . . . . . . . .65 11.17. No Strict Construction. . . . . . . . . . . . . . . . . . . .65
iv v vi vii CREDIT AGREEMENT, dated as of April 15, 1999, among MORTON CUSTOM PLASTICS, LLC, a Delaware limited liability company ("MCP"), each other Borrower, if any, party hereto, MORTON HOLDINGS, LLC, a Delaware limited liability company ("HOLDINGS"), the other Credit Parties signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (in its individual capacity, "GE CAPITAL"), for itself, as Lender, and as Agent for Lenders, and the other Lenders signatory hereto from time to time. RECITALS WHEREAS, Borrowers desire that Lenders extend revolving and term credit facilities to Borrowers of up to $50,000,000 in the aggregate (i) on the Closing Date (x) to finance a portion of the Worthington Acquisition including related expenses to the extent permitted hereunder and (y) to finance the Preferred Stock Contribution, and (ii) at any time on or after the Closing Date to provide working capital financing for Borrowers and funds for other general corporate or limited liability company purposes of Borrowers; and for these purposes, Lenders are willing to make certain loans and other extensions of credit to Borrowers of up to such amount upon the terms and conditions set forth herein; and WHEREAS, Borrowers desire to secure all of their obligations under the Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon all of their existing and after-acquired personal and real property; and WHEREAS, Holdings is willing to guaranty all of the obligations of Borrowers to Lenders under the Loan Documents and to pledge to Agent to secure such guaranty, for the benefit of Agent and Lenders, all of the equity interests in each Borrower owned by Holdings (which, in the case of MCP, will consist of 100% of the outstanding membership interests of MCP); and WHEREAS, capitalized terms used in this Agreement shall have the meanings ascribed to them in ANNEX A. All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively, "APPENDICES") hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows: 1. AMOUNT AND TERMS OF CREDIT 1.1. CREDIT FACILITIES (a) REVOLVING CREDIT FACILITY. (i) Subject to the terms and conditions hereof, each Revolving Lender agrees to make available from time to time until the Commitment Termination Date its Pro Rata Share of revolving credit advances (each, a "REVOLVING CREDIT ADVANCE"). The Pro Rata Share of the Revolving Loan of any Revolving Lender shall not at any time exceed its separate Revolving Loan Commitment. The obligations of each Revolving Lender hereunder shall be several and not joint. The aggregate amount of Revolving Credit Advances outstanding shall not exceed at any time the lesser of (A) the Maximum Amount and (B) the Aggregate Revolving Borrowing Base, in each case less the sum of the Letter of Credit Obligations and the Swing Line Loan outstanding at such time ("BORROWING AVAILABILITY"). Moreover, the sum of the Revolving Loan and Swing Line Loan outstanding to any Borrower shall not exceed at any time that Borrower's separate Revolving Borrowing Base. Until the Commitment Termination Date, Borrowers may from time to time borrow, repay and reborrow under this SECTION 1.1(a). Each Revolving Credit Advance shall be made on notice by Borrower Representative on behalf of the applicable Borrower to the representative of Agent identified on SCHEDULE 1.1 at the address specified thereon. Those notices must be given no later than (1) 11:00 a.m. (New York time) on the Business Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan, or (2)11:00 a.m. (New York time) on the date which is three (3) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a "NOTICE OF REVOLVING CREDIT ADVANCE") must be given in writing (by telecopy or overnight courier) substantially in the form of EXHIBIT 1.1(a)(i), and shall include the information required in such Exhibit and such other information as may be required by Agent. If any Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower Representative must comply with SECTION 1.5(e). (ii) Each Borrower shall execute and deliver to each Revolving Lender a note to evidence the Revolving Loan Commitment of that Revolving Lender. Each note shall be in the principal amount of the Revolving Loan Commitment of the applicable Revolving Lender, dated the Closing Date and substantially in the form of EXHIBIT 1.1(a)(ii) (each a "REVOLVING NOTE" and, collectively, the "REVOLVING NOTES"). Each Revolving Note shall represent the obligation of each Borrower to pay the amount of each Revolving Lender's Revolving Loan Commitment or, if less, the applicable Revolving Lender's Pro Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances to such Borrower together with interest thereon as prescribed in SECTION 1.5. The entire unpaid balance of the aggregate Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date. 2 (iii) At the request of Borrower Representative, in its discretion Agent may (but shall have absolutely no obligation to), make Revolving Credit Advances to Borrowers on behalf of Revolving Lenders in amounts which cause the outstanding balance of the aggregate Revolving Loan to exceed the Aggregate Revolving Borrowing Base (less the Swing Line Loan) or which cause the outstanding balance of the Revolving Loan owing by any Borrower to exceed that Borrower's separate Revolving Borrowing Base (less the Swing Line Loan advanced to that Borrower) (any such excess Revolving Credit Advances are herein referred to collectively as "REVOLVING OVERADVANCES"), and no such event or occurrence shall cause or constitute a waiver by Agent or Lenders of any Default or Event of Default that may result therefrom or of Agent's, Swing Line Lender's or Revolving Lenders' right to refuse to make any further Revolving Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any Letter of Credit Obligations, as the case may be, at any time that a Revolving Overadvance exists or would result therefrom. In addition, Revolving Overadvances may be made even if the conditions to lending set forth in SECTION 2 have not been met. All Revolving Overadvances shall constitute Index Rate Loans, shall bear interest at the Default Rate and shall be payable on demand. Except as otherwise provided in SECTION 1.13(b), the authority of Agent to make Revolving Overadvances is limited to an aggregate amount not to exceed $1,500,000 at any time, shall not cause the aggregate Revolving Loan to exceed the Maximum Amount, and may be revoked prospectively by a written notice to Agent signed by Revolving Lenders holding fifty percent (50%) or more of the Revolving Loan Commitments. (b) TERM LOAN. (i) Subject to the terms and conditions hereof, each Term Lender agrees to make a term loan on the Closing Date to MCP (the "TERM LOAN") in the original principal amount of its Term Loan Commitment, and the Term Loan shall consist of (and shall in no event exceed): (1) $18,000,000 (such amount being hereinafter called the "IN-FORMULA TERM SUB-LIMIT"); PLUS (2) $8,000,000 (the "TERM OVERADVANCE"). The obligations of each Term Lender hereunder shall be several and not joint. The Term Loan shall be evidenced by promissory notes substantially in the form of EXHIBIT 1.1(b) (each a "TERM NOTE" and collectively the "TERM NOTES"), and MCP shall execute and deliver its respective Term Note to the applicable Term Lender. Each Term Note shall represent the obligation of MCP to pay the amount of the applicable Term Lender's Term Loan Commitment to MCP, together with interest thereon as prescribed in SECTION 1.5. (ii) On each date set forth below, MCP shall pay the principal amount of the Term Loan in the installment set forth opposite such date (with all such principal payments being deemed to be applied first to the Term Overadvance until the Term Overadvance is repaid in full, and then to the In-Formula Term Sub-Limit): 3
Payment Installment Date Amount ------- ------ September 30, 1999 $200,000 December 31, 1999 $500,000 March 31, 2000 $2,300,000 June 30, 2000 $750,000 September 30, 2000 $750,000 December 31, 2000 $750,000 March 31, 2001 $750,000 June 30, 2001 $1,000,000 September 30, 2001 $1,000,000 December 31, 2001 $1,000,000 March 31, 2002 $1,000,000 June 30, 2002 $1,500,000 September 30, 2002 $1,500,000 December 31, 2002 $1,500,000 March 31, 2003 $1,500,000 June 30, 2003 $5,000,000 October 15, 2003 $5,000,000
(iii) Notwithstanding the foregoing CLAUSE (ii), the aggregate outstanding principal balance of the Term Loan shall be due and payable in full in immediately available funds on the Commitment Termination Date, if not sooner paid in full. (iv) Each payment of principal with respect to the Term Loan shall be paid to Agent for the ratable benefit of each Term Lender making a Term Loan ratably in proportion to each such Term Lender's respective Term Loan Commitment. (c) SWING LINE FACILITY. (i) Agent shall notify the Swing Line Lender upon Agent's receipt of any Notice of Revolving Credit Advance. Subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, make available from time to time until the Commitment Termination Date advances (each, a "SWING LINE ADVANCE") in accordance with any such notice. The aggregate amount of Swing Line Advances outstanding shall not exceed the lesser of (A) the Swing Line Commitment and (B) the lesser of the Maximum Amount and (except for Revolving Overadvances) the Aggregate Revolving Borrowing Base, in each case, less the outstanding balance of the Revolving Loan at such time ("SWING LINE AVAILABILITY"). Moreover, except for Revolving Overadvances, the Swing Line Loan outstanding to any Borrower shall not exceed at any time that Borrower's separate Revolving Borrowing Base less the Revolving Loan outstanding to such Borrower. Until the Commitment Termination 4 Date, Borrowers may from time to time borrow, repay and reborrow under this SECTION 1.1(c). Each Swing Line Advance shall be made pursuant to a Notice of Revolving Credit Advance delivered to Agent by Borrower Representative on behalf of the applicable Borrower in accordance with SECTION 1.1(a). Those notices must be given no later than 11:00 a.m. (New York time) on the Business Day of the proposed Swing Line Advance. Notwithstanding any other provision of this Agreement or the other Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan. Borrowers shall repay the aggregate outstanding principal amount of the Swing Line Loan upon demand therefor by Agent. (ii) Each Borrower shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment. Each note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of EXHIBIT 1.1(c)(ii) (each a "SWING LINE NOTE" and, collectively, the "SWING LINE NOTES"). Each Swing Line Note shall represent the obligation of each Borrower to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances made to such Borrower together with interest thereon as prescribed in SECTION 1.5. The entire unpaid balance of the Swing Line Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full. (iii) REFUNDING OF SWING LINE LOANS. The Swing Line Lender, at any time and from time to time in its sole and absolute discretion, but not less frequently than weekly, may on behalf of any Borrower (and each Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Revolving Lender (including the Swing Line Lender) to make a Revolving Credit Advance to such Borrower (which shall be an Index Rate Loan) in an amount equal to such Revolving Lender's Pro Rata Share of the principal amount of such Borrower's Swing Line Loan (the "REFUNDED SWING LINE LOAN") outstanding on the date such notice is given. Unless any of the events described in SECTIONS 8.1(h) OR 8.1(i) shall have occurred (in which event the procedures of SECTION 1.1(c)(iv) shall apply) and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m. (New York time), in immediately available funds on the Business Day next succeeding the date such notice is given. The proceeds of such Revolving Credit Advances shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Swing Line Loan of the applicable Borrower. (iv) PARTICIPATION IN SWING LINE LOANS. If, prior to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to SECTION 1.1(c)(iii), one of the events described in SECTIONS 8.1(h) OR 8.1(i) shall have occurred, then, subject to the provisions of SECTION 1.1(c)(v) below, each Revolving Lender will, on the date such Revolving Credit Advance was to have been made for the benefit of the applicable Borrower, purchase from the Swing Line Lender an undivided participation interest in the Swing Line Loan to 5 such Borrower in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request, each Revolving Lender will promptly transfer to the Swing Line Lender, in immediately available funds, the amount of its participation. (v) REVOLVING LENDERS' OBLIGATIONS UNCONDITIONAL. Each Revolving Lender's obligation to make Revolving Credit Advances in accordance with SECTION 1.1(c)(iii) and to purchase participating interests in accordance with SECTION 1.1(c)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the Swing Line Lender, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of any Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement on the date upon which such participating interest is to be purchased or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Revolving Lender does not make available to Agent or the Swing Line Lender, as applicable, the amount required pursuant to SECTION 1.1(c)(iii) or 1.1(c)(iv), as the case may be, the Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of non-payment until such amount is paid in full at the Federal Funds Rate for the first two Business Days and at the Index Rate thereafter. (d) RELIANCE ON NOTICES; APPOINTMENT OF BORROWER REPRESENTATIVE. Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Revolving Credit Advance, Notice of Conversion/Continuation or similar notice believed by Agent to be genuine. Agent may assume that each Person executing and delivering such a notice was duly authorized, unless the responsible individual acting thereon for Agent has actual knowledge to the contrary. Each Borrower hereby designates MCP as its representative and agent on its behalf for the purposes of issuing Notices of Revolving Credit Advances and Notices of Conversion/Continuation, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or Borrowers hereunder to Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower. 6 1.2. LETTERS OF CREDIT. Subject to and in accordance with the terms and conditions contained herein and in ANNEX B, Borrower Representative, on behalf of the applicable Borrower, shall have the right to request, and Revolving Lenders agree to incur, or purchase participations in, Letter of Credit Obligations in respect of each Borrower. 1.3. PREPAYMENTS (a) VOLUNTARY PREPAYMENTS. Borrowers may at any time on at least five (5) days' prior written notice by Borrower Representative to Agent voluntarily prepay all (but not less than all) of the Term Loan; PROVIDED that MCP shall be permitted to make partial prepayments of the Term Overadvance so long as any such prepayments shall be in a minimum amount of $500,000 and integral multiples of $100,000 in excess of such amount. In addition, Borrowers may at any time on at least ten (10) days' prior written notice by Borrower Representative to Agent terminate the Revolving Loan Commitment; provided that upon such termination, all Loans and other Obligations shall be immediately due and payable in full. Any such voluntary prepayment and any such termination of the Revolving Loan Commitment must be accompanied by the payment of the fee required by SECTION 1.9(c), if any, plus the payment of any LIBOR funding breakage costs in accordance with SECTION 1.13(b). Upon any such prepayment and termination of the Revolving Loan Commitment, each Borrower's right to request Revolving Credit Advances, or request that Letter of Credit Obligations be incurred on its behalf, or request Swing Line Advances, shall simultaneously be terminated. Any partial prepayments of the Term Overadvance of any Borrower shall be applied to prepay the scheduled installments of such Borrower's Term Loans in inverse order of maturity (it being understood that such payments shall be deemed to be applied first against the Term Overadvance of such Borrower). (b) MANDATORY PREPAYMENTS. (i) If at any time the outstanding balance of the aggregate Revolving Loan exceeds the lesser of (A) the Maximum Amount and (B) the Aggregate Revolving Borrowing Base, LESS, in each case, the aggregate outstanding Swing Line Loan at such time, Borrowers shall immediately repay the aggregate outstanding Revolving Credit Advances to the extent required to eliminate such excess. If any such excess remains after repayment in full of the aggregate outstanding Revolving Credit Advances, Borrowers shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in ANNEX B to the extent required to eliminate such excess. Furthermore, if the outstanding balance of the Revolving Loan of any Borrower exceeds that Borrower's separate Revolving Borrowing Base at any time less the outstanding balance of the Swing Line Loan of such Borrower at such time, the applicable Borrower shall immediately repay its Revolving Credit Advances in the amount of such excess (and, if necessary, shall provide cash collateral for its Letter of Credit Obligations as described above). Notwithstanding the foregoing, any Revolving Overadvance made pursuant to Section 1.1(a)(iii) shall be repaid only on demand. 7 (ii) Immediately upon receipt by any Credit Party of proceeds of any asset disposition (including condemnation proceeds, but excluding proceeds of asset dispositions permitted by SECTION 6.8 (a)) or any sale of Stock of any Subsidiary of any Credit Party, Borrowers shall prepay the Loans in an amount equal to all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with CLAUSE (c) below. (iii) Until the date on which (x) the Term Overadvance is repaid in full and the aggregate principal amount of the Term Loan outstanding is less than $9,000,000, if Holdings or any Borrower issues any Stock or incurs any Indebtedness (other than Indebtedness permitted by SECTION 6.3), no later than the Business Day following the date of receipt of the proceeds thereof, all Borrowers (in the case of an issuance by Holdings) or the issuing/incurring Borrower shall prepay the Loans in an aggregate amount equal to all such proceeds, net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith. Any such prepayment shall be applied in accordance with CLAUSE (c) below. (iv) Until the date on which the Term Overadvance is repaid in full, Borrowers shall prepay the Obligations on the earlier of the date which is ten (10) days after (A) the date on which Holdings' annual audited Financial Statements for the immediately preceding Fiscal Year are delivered pursuant to ANNEX E or (B) the date on which such annual audited Financial Statements were required to be delivered pursuant to ANNEX E, in an amount equal to 75% of Excess Cash Flow for the immediately preceding Fiscal Year. Any prepayments from Excess Cash Flow paid pursuant to this CLAUSE (iv) shall be allocated to each Borrower's Obligations based upon such Borrower's relative contribution to Excess Cash Flow and shall be applied in accordance with CLAUSE (c) below. Each such prepayment shall be accompanied by a certificate signed by Borrower Representative's chief financial officer certifying the manner in which Excess Cash Flow, the resulting prepayment, and the method of allocation to each Borrower's Obligations were calculated, which certificate shall be in form and substance satisfactory to Agent. (c) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. 8 (i) Any prepayments made by any Borrower pursuant to CLAUSE (b)(ii) above shall be applied as follows: FIRST, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; SECOND, to interest then due and payable on MCP's Term Loan; THIRD, to prepay the scheduled installments of MCP's Term Loan in inverse order of maturity, until such Loan shall have been prepaid in full (it being understood that such payments shall be deemed to be applied first against the Term Overadvance); FOURTH, to interest then due and payable on such Borrower's Swing Line Loan; FIFTH, to the principal balance of the Swing Line Loan outstanding to such Borrower until the same shall have been repaid in full; SIXTH, to interest then due and payable on Revolving Credit Advances made to such Borrower; SEVENTH, to the principal balance of Revolving Credit Advances outstanding to such Borrower until the same shall have been paid in full; EIGHTH, to any Letter of Credit Obligations of such Borrower to provide cash collateral therefor in the manner set forth in ANNEX B, until all such Letter of Credit Obligations have been fully cash collateralized in the manner set forth in ANNEX B; NINTH, to interest then due and payable on the Swing Line Loan of each other Borrower, PRO RATA; TENTH, to the principal balance of the Swing Line Loan outstanding to each other Borrower, PRO RATA, until the same shall have been repaid in full; ELEVENTH, to interest then due and payable on the Revolving Credit Advances outstanding to each other Borrower, PRO RATA; TWELFTH, to the principal balance of the Revolving Credit Advances made to each other Borrower, PRO RATA, until the same shall have been paid in full, and LAST to any Letter of Credit Obligations of each other Borrower, PRO RATA, to provide cash collateral therefor in the manner set forth in ANNEX B, until all such Letter of Credit Obligations have been fully cash collateralized. Neither the Revolving Loan Commitment nor the Swing Line Commitment shall be permanently reduced by the amount of any such prepayments. (ii) Any prepayments made by any Borrower pursuant to CLAUSE (b)(iii) above shall be applied as follows: FIRST, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; SECOND, to interest then due and payable on that portion of MCP's Term Loan in excess of $9,000,000; and THIRD, to prepay the scheduled installments of MCP's Term Loan in inverse order of maturity until (x) the Term Overadvance shall have been repaid in full and (y) the aggregate principal amount of the Term Loan outstanding is less than $9,000,000 (it being understood that such payments shall be deemed to be applied first against the Term Overadvance). (iii) Any prepayments made by any Borrower pursuant to CLAUSE (b)(iv) above shall be applied as follows: FIRST, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; SECOND, to interest then due and payable on the Term Overadvance; and THIRD, to prepay the scheduled installments of MCP's Term Loan in inverse order of maturity until the Term Overadvance shall have been prepaid in full. (d) APPLICATION OF PREPAYMENTS FROM INSURANCE PROCEEDS. Prepayments from insurance proceeds in accordance with SECTION 5.4(c) shall be applied as follows: 9 insurance proceeds from casualties or losses to cash or Inventory shall be applied, first, to the Swing Line Loans and, second, to the Revolving Credit Advances of the Borrower that incurred such casualties or losses; insurance proceeds from casualties or losses to Equipment, Fixtures and Real Estate shall be applied to scheduled installments of the Term Loan in inverse order of maturity. Neither the Revolving Loan Commitment nor the Swing Line Loan Commitment shall be permanently reduced by the amount of any such prepayments. If the insurance proceeds received as to a particular Borrower exceed the outstanding principal balances of the Loans to that Borrower or if the precise amount of insurance proceeds allocable to Inventory as compared to Equipment, Fixtures and Real Estate are not otherwise determined, the allocation and application of those proceeds shall be as reasonably determined by Agent, subject to the approval of Requisite Lenders. (e) Nothing in this SECTION 1.3 shall be construed to constitute Agent's or any Lender's consent to any transaction referred to in CLAUSES (b)(ii) and (b)(iii) above which is not permitted by other provisions of this Agreement or the other Loan Documents. 1.4. USE OF PROCEEDS. Borrowers shall utilize the proceeds of the Term Loan, the Revolving Loan and the Swing Line Advances solely (x) on the Closing Date, for the Worthington Acquisition and to finance the Preferred Stock Contribution (and, in each case, to pay any related transaction expenses), and (y) at any time on or after the Closing Date, for the financing of Borrowers' ordinary working capital and general corporate and limited liability company needs (but excluding in any event the making of any Restricted Payment not specifically permitted by SECTION 6.14). DISCLOSURE SCHEDULE (1.4) contains a description of Borrowers' sources and uses of funds as of the Closing Date, including Loans and Letter of Credit Obligations to be made or incurred on that date, and a funds flow memorandum detailing how funds from each source are to be transferred to particular uses. 1.5. INTEREST AND APPLICABLE MARGINS. (a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in arrears on each applicable Interest Payment Date, at the following rates: (i) with respect to the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, based on the aggregate Revolving Credit Advances outstanding from time to time; (ii) with respect to the In-Formula Term Sub-Limit, the Index Rate plus the Applicable In-Formula Term Loan Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable In-Formula Term Loan LIBOR Margin per annum; (iii) with respect to the Term Overadvance, the Index Rate plus the Applicable Overadvance Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Overadvance LIBOR Margin per annum; and (iv) with respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per annum. 10 The Applicable Revolver Index Margin, Applicable In-Formula Term Loan Index Margin, Applicable Overadvance Index Margin, Applicable Revolver LIBOR Margin, Applicable In-Formula Term Loan LIBOR Margin and Applicable Overadvance LIBOR Margin will be 0.50%, 0.50%, 2.00%, 2.50% 2.50% and 4.00% per annum, respectively, as of the Closing Date. The Applicable Margins will be adjusted (up or down) prospectively on a quarterly basis as determined by Holdings' consolidated financial performance, commencing with the first day of the first calendar month that occurs more than five (5) days after delivery of Holdings' quarterly Financial Statements to Lenders for the Fiscal Quarter ending June 30, 2000. Adjustments in Applicable Margins will be determined by reference to the following grids:
----------------------------------------------------------------------------------------------- IF EBITDA FOR THE FOUR-QUARTER LEVEL OF PERIOD THEN ENDED IS: APPLICABLE MARGINS: ----------------------------------------------------------------------------------------------- GREATER THAN $15,000,000 Level I ----------------------------------------------------------------------------------------------- GREATER THAN $12,500,000, but LESS THAN OR EQUAL TO $15,000,000 Level II ----------------------------------------------------------------------------------------------- GREATER THAN $6,600,000, but LESS THAN OR EQUAL TO $12,500,000 Level III ----------------------------------------------------------------------------------------------- GREATER THAN $5,600,000, but LESS THAN OR EQUAL TO $6,600,000 Level IV ----------------------------------------------------------------------------------------------- LESS THAN OR EQUAL TO $5,600,000 Level V -----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- APPLICABLE MARGINS - -------------------------------------------------------------------------------------------------------------------- LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V - -------------------------------------------------------------------------------------------------------------------- Applicable Revolver Index Margin 0.0% 0.25% 0.50% 0.75% 1.00% - -------------------------------------------------------------------------------------------------------------------- Applicable Revolver LIBOR Margin 2.00% 2.25% 2.50% 2.75% 3.00% - -------------------------------------------------------------------------------------------------------------------- Applicable In-Formula Term Loan Index 0.0% 0.25% 0.50% 0.75% 1.00% Margin - -------------------------------------------------------------------------------------------------------------------- Applicable In-Formula Term Loan LIBOR 2.00% 2.25% 2.50% 2.75% 3.00% Margin - -------------------------------------------------------------------------------------------------------------------- Applicable Overadvance Index Margin 2.00% 2.00% 2.00% 2.00% 2.00% Applicable Overadvance LIBOR Margin 4.00% 4.00% 4.00% 4.00% 4.00% - --------------------------------------------------------------------------------------------------------------------
All adjustments in the Applicable Margins after June 30, 2000 will be implemented quarterly on a prospective basis, for each calendar month commencing at least five (5) days after the date of delivery to Lenders of the quarterly unaudited or annual audited (as applicable) Financial Statements of Borrowers evidencing the need for an adjustment. Concurrently with the delivery of those Financial Statements, Borrower Representative shall deliver to Agent and Lenders a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margins. 11 If a Default or Event of Default shall have occurred or be continuing at the time any reduction in the Applicable Margins is to be implemented, that reduction shall be deferred until the first day of the first calendar month following the date on which such Default or Event of Default is waived or cured. (b) If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (c) All computations of Fees calculated on a per annum basis and interest shall be made by Agent on the basis of a three hundred and sixty (360) day year, in each case for the actual number of days occurring in the period for which such interest and Fees are payable. The Index Rate shall be determined each day based upon the Index Rate as in effect each day. Each determination by Agent of an interest rate and Fees hereunder shall be conclusive, absent manifest error. (d) So long as an Event of Default shall have occurred and be continuing under Section 8.1(a), (h) or (i) or so long as any other Default or Event of Default shall have occurred and be continuing and at the election of Agent (or upon the written request of Requisite Lenders) confirmed by written notice from Agent to Borrower Representative, the interest rates applicable to the Loans and the Letter of Credit Fees shall be increased by two percent (2%) per annum above the rates of interest or the rate of such Fees otherwise applicable hereunder ("DEFAULT RATE"), and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest and Letter of Credit Fees at the Default Rate shall accrue from the initial date of such Default or Event of Default until that Default or Event of Default is cured or waived and shall be payable upon demand. (e) So long as no Default or Event of Default shall have occurred and be continuing, and subject to the additional conditions precedent set forth in SECTION 2.2, Borrower Representative shall have the option to (i) request that any Revolving Credit Advances be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with SECTION 1.13(b) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the last day of the LIBOR Period of the Loan to be continued. Any Loan to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $2,000,000 and integral multiples of $500,000 in excess of such amount. Any such election must be made by 11:00 a.m. (New York time) on the third (3rd) Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with 12 respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower Representative wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower Representative in such election. If no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York time) on the third (3rd) Business Day prior to the end of the LIBOR Period with respect thereto (or if a Default or an Event of Default shall have occurred and be continuing or if the additional conditions precedent set forth in SECTION 2.2 shall not have been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the end of its LIBOR Period. Borrower Representative must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a "NOTICE OF CONVERSION/CONTINUATION") in the form of EXHIBIT 1.5(e). (f) Notwithstanding anything to the contrary set forth in this SECTION 1.5, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the "MAXIMUM LAWFUL RATE"), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; PROVIDED, HOWEVER, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest which would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in SECTIONS 1.5(a) through (e) above, unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount which such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. If, notwithstanding the provisions of this SECTION 1.5(f), a court of competent jurisdiction shall finally determine that a Lender has received interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent permitted by applicable law, promptly apply such excess in the order specified in SECTION 1.11 and thereafter shall refund any excess to Borrowers or as a court of competent jurisdiction may otherwise order. 1.6. ELIGIBLE ACCOUNTS. Based on the most recent Revolving Borrowing Base Certificate delivered by each Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Accounts of each Borrower shall be "ELIGIBLE ACCOUNTS" for purposes of this Agreement. In determining whether a particular Account of any Borrower constitutes an Eligible Account, Agent shall not include any such Account to which any of the exclusionary criteria set forth below applies. Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any such 13 criteria, to establish new criteria, in its reasonable credit judgment, subject to the approval of Supermajority Revolving Lenders in the case of adjustments or new criteria which have the effect of making more credit available. Eligible Accounts shall not include any Account of any Borrower: (a) which does not arise from the sale of goods or the performance of services by such Borrower in the ordinary course of its business; (b) (i) upon which such Borrower's right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever or (ii) as to which such Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process or (iii) if the Account represents a progress billing consisting of an invoice for goods sold or used or services rendered pursuant to a contract under which the Account Debtor's obligation to pay that invoice is subject to such Borrower's completion of further performance under such contract or is subject to the equitable lien of a surety bond issuer; (c) to the extent that any defense, counterclaim, setoff or dispute is asserted as to such Account; (d) that is not a true and correct statement of bona fide indebtedness incurred in the amount of the Account for merchandise sold to or services rendered and accepted by the applicable Account Debtor; (e) with respect to which an invoice, acceptable to Agent in form and substance, has not been sent to the applicable Account Debtor; (f) that (i) is not owned by such Borrower or (ii) is subject to any right, claim, security interest or other interest of any other Person, other than Liens in favor of Agent, on behalf of itself and Lenders; (g) that arises from a sale to any director, officer, other employee or Affiliate of any Credit Party, or to any entity which has a majority of directors who are also directors of any Credit Party; (h) that is the obligation of an Account Debtor that is the United States government or a political subdivision thereof, or any state or municipality or department, agency or instrumentality thereof unless Agent, in its sole discretion, has agreed to the contrary in writing and such Borrower, if necessary or desirable, has complied with the Federal Assignment of Claims Act of 1940, and any amendments thereto, or any applicable state statute or municipal ordinance of similar purpose and effect, with respect to such obligation; 14 (i) that is the obligation of an Account Debtor located in a foreign country other than Canada (excluding the provinces of Quebec, Newfoundland, Nova Scotia and Prince Edward Island) unless payment thereof is assured by a letter of credit assigned and delivered to Agent, satisfactory to Agent as to form, amount and issue; PROVIDED that obligations of the Permitted Foreign Account Debtors to the extent not in excess of $2,000,000 in the aggregate shall not be excluded from Eligible Accounts by reason of this CLAUSE (i); (j) to the extent such Borrower or any Subsidiary thereof is liable for goods sold or services rendered by the applicable Account Debtor (including, without limitation, with respect to any resin expenses owing to General Electric Company or any of its Affiliates) to such Borrower or any Subsidiary thereof but only to the extent of the potential offset; (k) that arises with respect to goods which are delivered on a bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale or other terms by reason of which the payment by the Account Debtor is or may be conditional; (l) that is in default; PROVIDED, THAT, without limiting the generality of the foregoing, an Account shall be deemed in default upon the occurrence of any of the following: (i) it is not paid within the earlier of: sixty (60) days following its due date or ninety (90) days following its original invoice date; (ii) if any Account Debtor obligated upon such Account suspends business, makes a general assignment for the benefit of creditors or fails to pay its debts generally as they come due; or (iii) if any petition is filed by or against any Account Debtor obligated upon such Account under any bankruptcy law or any other federal, state or foreign (including any provincial) receivership, insolvency relief or other law or laws for the relief of debtors; (m) which is the obligation of an Account Debtor if fifty percent (50%) or more of the dollar amount of all Accounts owing by that Account Debtor are ineligible under the criteria set forth in clause (l) of this SECTION 1.6; (n) as to which Agent's Lien thereon, on behalf of itself and Lenders, is not a first priority perfected Lien; (o) as to which any of the representations or warranties pertaining to Accounts set forth in this Agreement or the Borrower Security Agreement is untrue; (p) to the extent such Account is evidenced by a judgment, Instrument or Chattel Paper; 15 (q) to the extent such Account exceeds any credit limit established by Agent, in its reasonable discretion, following prior notice of such limit by Agent to Borrower Representative; (r) to the extent that such Account, together with all other Accounts owing by such Account Debtor and its Affiliates as of any date of determination exceed ten percent (10%) (or, in the case of an Account Debtor consisting of any (i) Account Debtor (other than the ones referred to in clause (ii) below) whose senior unsecured long-term debt is rated at least BBB by Moody's Investors Service, Inc. or the equivalent thereof by Standard & Poor's Ratings Group or other nationally recognized rating agency acceptable to Agent, twenty percent (20%) or (ii) of General Electric Corporation, International Business Machine Corporation, BE Aerospace, Inc. or Phillips Corporation, twenty-five percent (25%)) of all Eligible Accounts; (s) which is payable in any currency other than Dollars; or (t) which is unacceptable to Agent in its reasonable credit judgment relating to such Account or the applicable Account Debtor. 1.7. ELIGIBLE INVENTORY. Based on the most recent Revolving Borrowing Base Certificate delivered by each Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of each Borrower shall be "ELIGIBLE INVENTORY" for purposes of this Agreement. In determining whether any particular Inventory of any Borrower constitutes Eligible Inventory, Agent shall not include any such Inventory to which any of the exclusionary criteria set forth below applies. Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any such criteria and to establish new criteria, in its reasonable credit judgment, subject to the approval of Supermajority Revolving Lenders in the case of adjustments or new criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower that: (a) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of itself and Lenders, and Permitted Encumbrances in favor of landlords and bailees to the extent permitted in SECTION 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (b) (i) is not located on premises owned or leased by such Borrower or (ii) is stored with a bailee, warehouseman or similar Person, unless Agent has given its prior consent thereto and unless (x) a satisfactory bailee letter or landlord waiver has been delivered to Agent, or (y) Reserves satisfactory to Agent have been established with respect thereto, or 16 (iii) is located at any site if the aggregate book value of Inventory at any such location is less than $100,000; (c) is placed on consignment or is in transit; (d) is covered by a negotiable document of title, unless such document has been delivered to Agent with all necessary endorsements, free and clear of all Liens except those in favor of Agent and Lenders; (e) in Agent's reasonable determination, is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (f) consists of display items or packing or shipping materials, manufacturing supplies or replacement parts; (g) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of such Borrower's business; (i) as to which Agent's Lien, on behalf of itself and Lenders, therein is not a first priority perfected Lien; (j) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Borrower Security Agreement is untrue; (k) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Materials or goods that can be transported or sold only with licenses that are not readily available; (m) is not covered by casualty insurance meeting the requirements of this Agreement or the other Loan Documents; or (n) is otherwise unacceptable to Agent in its reasonable credit judgment relating to such Inventory. 1.8. CASH MANAGEMENT SYSTEMS. On or prior to the Closing Date, Borrowers will establish and will maintain until the Termination Date, the cash management systems described on ANNEX C (the "CASH MANAGEMENT SYSTEMS"). 1.9. FEES. (a) Borrowers shall pay to GE Capital, individually, the Fees specified in that certain fee letter of even date herewith among Holdings, MCP and GE Capital (the "GE CAPITAL FEE LETTER"), at the times specified for payment therein. 17 (b) As additional compensation for the Revolving Lenders, Borrowers agree to pay to Agent, for the ratable benefit of such Lenders, in arrears, on the first Business Day of each month prior to the Commitment Termination Date and on the Commitment Termination Date, a fee for Borrowers' non-use of available funds in an amount equal to 0.50% percent per annum (calculated on the basis of a 360 day year for actual days elapsed) of the difference between (x) the Maximum Amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balances of the aggregate Revolving Loan and the Swing Line Loan outstanding during the period for which such fee is due. 1.10. RECEIPT OF PAYMENTS. Borrowers shall make each payment under this Agreement not later than 2:00 p.m. (New York time) on the day when due in immediately available funds in Dollars to the Collection Account. For purposes of computing interest and Fees and determining Borrowing Availability or Net Borrowing Availability as of any date, all payments shall be deemed received on the day of receipt of immediately available funds therefor in the Collection Account prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New York time on any Business Day shall be deemed to have been received on the following Business Day. 1.11. APPLICATION AND ALLOCATION OF PAYMENTS. (a) So long as no Default or Event of Default shall have occurred and be continuing, (i) payments consisting of proceeds of Accounts received in the ordinary course of business shall be applied to the Swing Line Loan and the Revolving Loan; (ii) payments matching specific scheduled payments then due shall be applied to those scheduled payments; (iii) voluntary prepayments shall be applied as determined by Borrower Representative, subject to the provisions of SECTION 1.3(a); and (iv) mandatory prepayments shall be applied as set forth in SECTIONS 1.3(c) AND 1.3(d). All payments and prepayments applied to a particular Loan shall be applied ratably to the portion thereof held by each Lender as determined by its Pro Rata Share. As to each other payment, and as to all payments made when a Default or Event of Default shall have occurred and be continuing or following the Commitment Termination Date, each Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of such Borrower, and each Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the Obligations of Borrowers as Agent may deem advisable notwithstanding any previous entry by Agent in the Loan Account or any other books and records. In the absence of a specific determination by Agent with respect thereto, payments shall be applied to amounts then due and payable in the following order: (1) to Fees and Agent's expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on the other Loans, ratably in proportion to the interest accrued as to each Loan; (5) to principal payments on the other Loans and to provide cash collateral for Letter of Credit Obligations in the manner described in ANNEX B, ratably to the aggregate, combined principal balance of the other Loans and outstanding Letter of Credit Obligations; and (6) to all other Obligations including expenses of Lenders to the extent reimbursable under SECTION 11.3. 18 (b) Agent is authorized to, and at its sole election may, charge to the Revolving Loan balance on behalf of each Borrower and cause to be paid all Fees, expenses, Charges, costs (including insurance premiums in accordance with SECTION 5.4(a)) and interest and principal, other than principal of the Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan Documents if and to the extent Borrowers fail to promptly pay any such amounts as and when due, even if such charges would cause the balance of the aggregate Revolving Loan and the Swing Line Loan to exceed Borrowing Availability or would cause the balance of the Revolving Loan and the Swing Loan of any Borrower to exceed such Borrower's separate Revolving Borrowing Base. At Agent's option and to the extent permitted by law, any charges so made shall constitute part of the Revolving Loan hereunder. 1.12. LOAN ACCOUNT AND ACCOUNTING. Agent shall maintain a loan account (the "LOAN ACCOUNT") on its books to record: all Advances and the Term Loan, all payments made by Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with Agent's customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Agent's most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by each Borrower; PROVIDED that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower's duty to pay the Obligations. Agent shall render to Borrower Representative a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account as to each Borrower. Unless Borrower Representative notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within forty-five (45) days after the date thereof, each and every such accounting shall (absent manifest error) be deemed final, binding and conclusive upon Borrowers in all respects as to all matters reflected therein. Only those items expressly objected to in such notice shall be deemed to be disputed by Borrowers. Notwithstanding any provision herein contained to the contrary, any Lender may elect (which election may be revoked) to dispense with the issuance of Notes to that Lender and may rely on the Loan Account as evidence of the amount of Obligations from time to time owing to it. 1.13. INDEMNITY. (a) Each Credit Party that is a signatory hereto shall jointly and severally indemnify and hold harmless each of Agent, Lenders and their respective Affiliates, and each such Person's respective officers, directors, employees, attorneys, agents and representatives (each, an "INDEMNIFIED PERSON"), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) which may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, 19 and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among ANY PARTIES to any of the Loan Documents (collectively, "INDEMNIFIED LIABILITIES"); PROVIDED, that no such Credit Party shall be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from that Indemnified Person's gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. (b To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or is the result of acceleration, by operation of law or otherwise); (ii) any Borrower shall default in payment when due of the principal amount of any LIBOR Loan; (iii) any Borrower shall default in making any borrowing of, conversion into or continuation of LIBOR Loans after Borrower Representative has given notice requesting the same in accordance herewith; or (iv) any Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower Representative has given a notice thereof in accordance herewith, Borrowers shall jointly and severally indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this subsection, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant LIBOR Period; PROVIDED, HOWEVER, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower Representative with its written calculation of all amounts payable pursuant to this SECTION 1.13(b), and such calculation shall be binding on the parties hereto unless Borrower Representative shall object in writing within ten (10) Business Days of receipt thereof, specifying the basis for such objection in detail. 20 1.14. ACCESS. Each Credit Party which is a party hereto shall, during normal business hours, from time to time upon three (3) Business Days' prior notice as frequently as Agent determines to be appropriate: (a) provide Agent and any of its officers, employees and agents access to its properties, facilities, advisors and employees (including officers) of each Credit Party and to the Collateral, (b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts from any Credit Party's books and records, and (c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of any Credit Party. If a Default or Event of Default shall have occurred and be continuing or if access is necessary to preserve or protect the Collateral as determined by Agent, each such Credit Party shall provide such access to Agent and to each Lender at all times and without advance notice. Furthermore, so long as any Event of Default shall have occurred and be continuing, Borrowers shall provide Agent and each Lender with reasonable access to their suppliers and customers. Each Credit Party shall make available to Agent and its counsel, as quickly as is possible under the circumstances, originals or copies of all books and records which Agent may request. Each Credit Party shall deliver any document or instrument necessary for Agent, as it may from time to time request, to obtain records from any service bureau or other Person which maintains records for such Credit Party, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Credit Party. Agent will give Lenders at least ten (10) days' prior written notice of regularly scheduled audits. Representatives of other Lenders may accompany Agent's representatives on regularly scheduled audits at no charge to Borrowers. 1.15. TAXES. (a) Any and all payments by each Borrower hereunder (including any payments made pursuant to SECTION 12) or under the Notes shall be made, in accordance with this SECTION 1.15, free and clear of and without deduction for any and all present or future Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder (including any sum payable pursuant to SECTION 12) or under the Notes, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.15) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (ii) such Borrower shall make such deductions, and (iii) such Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Borrower Representative shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof. (b Each Credit Party that is a signatory hereto shall jointly and severally indemnify and, within ten (10) Business Days' of demand therefor, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this SECTION 1.15) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. 21 (c Each Lender organized under the laws of a jurisdiction outside the United States (a "FOREIGN LENDER") as to which payments to be made under this Agreement or under the Notes are exempt from United States withholding tax under an applicable statute or tax treaty shall provide to Borrower Representative and Agent a properly completed and executed IRS Form 4224 or Form 1001 or other applicable form, certificate or document prescribed by the IRS or the United States certifying as to such Foreign Lender's entitlement to such exemption (a "CERTIFICATE OF EXEMPTION"). Any foreign Person that seeks to become a Lender under this Agreement shall provide a Certificate of Exemption to Borrower Representative and Agent prior to becoming a Lender hereunder. No foreign Person may become a Lender hereunder if such Person is unable to deliver a Certificate of Exemption. 1.16. CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY; REPLACEMENT OF LENDER IN RESPECT TO INCREASED COSTS. (a) If any Lender shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each case, adopted after the Closing Date, from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by such Lender (with a copy of such demand to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower Representative and to Agent shall, absent manifest error, be final, conclusive and binding for all purposes. (b If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower Representative and to Agent by such Lender, shall be conclusive and binding on Borrowers for all purposes, absent manifest error. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this SECTION 1.16(b). 22 (c Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan at another branch or office of that Lender without, in that Lender's opinion, adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower Representative through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans shall terminate and (ii) each Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing by such Borrower to such Lender, together with interest accrued thereon, UNLESS Borrower Representative on behalf of such Borrower, within five (5) Business Days after the delivery of such notice and demand, converts all such Loans into a Loan bearing interest based on the Index Rate. (d Within fifteen (15) days after receipt by Borrower Representative of written notice and demand from any Lender (an "AFFECTED LENDER") for payment of additional amounts or increased costs as provided in SECTION 1.15(a), 1.16(a) or 1.16(b), Borrower Representative may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default shall have occurred and be continuing, Borrower Representative, with the consent of Agent, may obtain, at Borrowers' expense, a replacement Lender ("REPLACEMENT LENDER") for the Affected Lender, which Replacement Lender must be satisfactory to Agent. If Borrowers obtain a Replacement Lender within ninety (90) days following notice of their intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale, PROVIDED that Borrowers shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment. Notwithstanding the foregoing, Borrowers shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within fifteen (15) days following its receipt of Borrowers' notice of intention to replace such Affected Lender. Furthermore, if Borrowers give a notice of intention to replace and do not so replace such Affected Lender within ninety (90) days thereafter, Borrowers' rights under this SECTION 1.16(d) shall terminate and Borrowers shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to SECTIONS 1.15(a), 1.16(a) and 1.16(b). (e If any Lender shall fail to notify Borrower Representative of any event occurring after the date of this Agreement entitling such Lender to compensation under this Section within 180 days after the officer of such Lender responsible for the business relationship of such Lender with Borrowers obtains actual knowledge thereof, such Lender 23 shall, with respect to compensation payable pursuant to this Section in respect of any costs resulting from such event, only be entitled to payment under this Section for costs incurred from and after the date 180 days prior to the date that such Lender does give such notice. 1.17. SINGLE LOAN. All Loans to each Borrower and all of the other Obligations of each Borrower arising under this Agreement and the other Loan Documents shall constitute one general obligation of that Borrower secured, until the Termination Date, by all of its Collateral. 2. CONDITIONS PRECEDENT 2.1. CONDITIONS TO THE INITIAL LOANS. No Lender shall be obligated to make any Loan or incur any Letter of Credit Obligations on the Closing Date, or to take, fulfill, or perform any other action hereunder, until the following conditions have been satisfied or provided for in a manner satisfactory to Agent, or waived in writing by Agent and Lenders: (a CREDIT AGREEMENT; LOAN DOCUMENTS. This Agreement or counterparts hereof shall have been duly executed by, and delivered to, Borrowers, the other Credit Parties signatory hereto, Agent and Lenders; and Agent shall have received such documents, instruments, agreements and legal opinions as Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including all those listed in the Closing Checklist attached hereto as ANNEX D, each in form and substance satisfactory to Agent. (b APPROVALS. Agent shall have received (i) (x) satisfactory evidence that the Credit Parties have obtained all required consents and approvals of all Persons including all requisite Governmental Authorities (including in respect of the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 and, except as otherwise agreed to by Agent, in connection with the Lebanon IRBs and the transactions contemplated by the IRB Assignment Documents), to the execution, delivery and performance of this Agreement and the other Loan Documents and the consummation of the Related Transactions or (y) an officer's certificate in form and substance satisfactory to Agent affirming that no such consents or approvals are required, and (ii) (x) satisfactory evidence that Seller has obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of the Pledge Agreement to which it is to be party or (y) an officer's certificate in form and substance satisfactory to Agent affirming that no such consents or approvals are required. (c OPENING AVAILABILITY. The Eligible Accounts and Eligible Inventory of each Borrower supporting the initial Revolving Credit Advance and the initial Letter of Credit Obligations incurred and the amount of the Reserves to be established on the Closing Date shall be sufficient in value, as reasonably determined by Agent, to provide Borrowers, collectively, with Net Borrowing Availability, after giving effect to the initial Revolving Credit Advance made to each Borrower, the incurrence of any initial Letter of Credit 24 Obligations and the consummation of the Related Transactions (on a pro forma basis, with trade payables being paid currently, and expenses and liabilities being paid in the ordinary course of business and without acceleration of sales) of at least $7,000,000. (d PAYMENT OF FEES. Borrowers shall have paid the Fees required to be paid on the Closing Date in the respective amounts specified in SECTION 1.9 (including the Fees specified in the GE Capital Fee Letter), and shall have reimbursed Agent for all fees, costs and expenses of closing presented as of the Closing Date. (e CAPITAL STRUCTURE: OTHER INDEBTEDNESS. (i) The capital structure of each Credit Party and the terms and conditions of all Indebtedness (including, without limitation, in respect of the Lebanon IRBs, the IRB Lease Agreement and the IRB Indenture) of each Credit Party shall be acceptable to Agent in its sole discretion. (ii) After giving effect to the Worthington Acquisition, the aggregate amount of Indebtedness of MCP (including all Loans incurred on the day hereof but excluding any amounts relating to the Lebanon IRBs and the IRB Lease Agreement) shall not exceed $32,000,000. (f CONSUMMATION OF RELATED TRANSACTIONS. (i) Agent shall have received fully executed copies of the Worthington Acquisition Agreement and each of the other Related Transactions Documents, each of which shall be in form and substance satisfactory to Agent and its counsel. The Worthington Acquisition and the other Related Transactions shall have been consummated in accordance with the terms of the Worthington Acquisition Agreement and the other Related Transactions Documents but for the payment of the cash purchase price payable on the Closing Date pursuant to the Worthington Acquisition Agreement. (ii) The Preferred Stock Contribution shall have been consummated on terms and conditions satisfactory to Agent. (iii) The aggregate purchase price for the Worthington Acquisition shall not exceed $25,000,000 in cash PLUS 10,000 shares of MIG Preferred Stock acquired by MCP pursuant to the Preferred Stock Contribution, PLUS the Contingent Payment, PLUS MCP's assumption of certain liabilities (including, without limitation, obligations relating to the Lebanon IRBs including under the IRB Lease Agreement) as are satisfactory to Agent, PLUS aggregate fees and closing costs (including those payable to Agent and Lenders) not in excess of $1,500,000. 2.2. FURTHER CONDITIONS TO EACH LOAN. Except as otherwise expressly provided herein, no Lender shall be obligated to fund any Loan, convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if, as of the date thereof: 25 (a Any representation or warranty by any Credit Party contained herein or in any of the other Loan Documents shall be untrue or incorrect as of such date, except to the extent that such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted or expressly contemplated by this Agreement; or (b Any event or circumstance having a Material Adverse Effect with respect to the Credit Parties shall have occurred since the date hereof as reasonably determined by the Requisite Revolving Lenders; or (c (i) Any Event of Default shall have occurred and be continuing or would result after giving effect to any Loan (or the incurrence of any Letter of Credit Obligations), or (ii) a Default shall have occurred and be continuing or would result after giving effect to any Loan, and Agent or Requisite Revolving Lenders shall have determined not to make any Loan or incur any Letter of Credit Obligation so long as that Default is continuing; or (d After giving effect to any Advance (or the incurrence of any Letter of Credit Obligations), (i) the outstanding principal amount of the aggregate Revolving Loan would exceed the lesser of the Aggregate Revolving Borrowing Base and the Maximum Amount, LESS, in each case, the then outstanding principal amount of the Swing Line Loan, or (ii) the outstanding principal amount of the Revolving Loan of the applicable Borrower would exceed such Borrower's separate Revolving Borrowing Base LESS the outstanding principal amount of the Swing Line Loan to that Borrower; or (e After giving effect to any Swing Line Advance, (i) the outstanding principal amount of the Swing Line Loan would exceed Swing Line Availability, or (ii) the outstanding principal amount of the Swing Line Loan of the applicable Borrower would exceed such Borrower's separate Revolving Borrowing Base LESS the outstanding principal amount of the Revolving Loan to that Borrower. The request and acceptance by any Borrower of the proceeds of any Loan, the incurrence of any Letter of Credit Obligations or the conversion or continuation of any Loan into, or as, a LIBOR Loan, as the case may be, shall be deemed to constitute, as of the date of such request or acceptance, (i) a representation and warranty by Borrowers that the conditions in this SECTION 2.2 have been satisfied and (ii) a reaffirmation by Borrowers of the cross-guaranty provisions set forth in SECTION 12 and of the granting and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents. 2.3. ADDITIONAL BORROWERS. As of the Closing Date, notwithstanding anything to the contrary contained herein, MCP is the only Borrower and no other Borrower shall be permitted hereunder without the consent of each Lender (which consent shall be in each such Lender's sole discretion). Without limiting the foregoing, the parties acknowledge and agree that prior to any additional Person joining hereto as a Borrower, the Loan 26 Documents would be modified in a manner mutually acceptable to the Lenders and the Credit Parties. 3. REPRESENTATIONS AND WARRANTIES To induce Lenders to make the Loans and to incur Letter of Credit Obligations, the Credit Parties executing this Agreement, jointly and severally, make the following representations and warranties to Agent and each Lender with respect to all Credit Parties, each and all of which shall survive the execution and delivery of this Agreement. 3.1. CORPORATE OR LIMITED LIABILITY COMPANY EXISTENCE; COMPLIANCE WITH LAW. Each Credit Party (a) is a corporation or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses, damages or liabilities in excess of $100,000; (c) has the requisite organizational power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be conducted; (d) subject to specific representations regarding Environmental Laws, has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except when the failure to have or do so, individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect; (e) is in compliance with its charter and by-laws or equivalent organizational or charter or constituent documents; and (f) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 3.2. EXECUTIVE OFFICES; FEIN. As of the Closing Date, the current location of each Credit Party's chief executive office and principal place of business is set forth in Disclosure Schedule (3.2), and none of such locations have changed within the twelve (12) months preceding the Closing Date. In addition, DISCLOSURE SCHEDULE (3.2) lists the federal employer identification number of each Credit Party. 3.3. CORPORATE OR LIMITED LIABILITY COMPANY POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person's organizational power; (b) have been duly authorized by all necessary or proper organizational and shareholder or membership action; (c) do not contravene any provision of such Person's charter or bylaws or equivalent organizational or charter or other constituent documents; (d) do not violate any law or regulation, or any order or decree of any 27 court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture (including, without limitation, the IRB Indenture), mortgage, deed of trust, lease (including, without limitation, the IRB Lease Agreement), agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in SECTION 2.1(b), all of which will have been duly obtained, made or complied with prior to the Closing Date. On or prior to the Closing Date, each of the Loan Documents shall have been duly executed and delivered by each Credit Party thereto and each such Loan Document shall then constitute a legal, valid and binding obligation of such Credit Party enforceable against it in accordance with its terms. 3.4. FINANCIAL STATEMENTS AND PROJECTIONS. Except for the Projections, all Financial Statements concerning Holdings and its Subsidiaries which are referenced below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. (a The following Financial Statements attached hereto as DISCLOSURE SCHEDULE (3.4(A)) have been delivered on the date hereof: The audited consolidated balance sheet at May 31, 1998 and the related statements of income and cash flows of Worthington for the twelve month period then ended, certified by Ernst & Young LLP, and the unaudited consolidated balance sheet at December 31, 1998 and the related statements of income and cash flows of Worthington for the seven month period then ended, prepared by Ernst & Young LLP, and such December 31, 1998 Financial Statements support the Projections for the Fiscal Year 1999 previously delivered to Agent. (b PRO FORMA. The Pro Forma delivered on the date hereof and attached hereto as DISCLOSURE SCHEDULE (3.4(B)) was prepared by Holdings giving PRO FORMA effect to the Related Transactions, was based on the unaudited consolidated balance sheet of Worthington dated December 31, 1998, and was prepared on a basis consistent with such unaudited balance sheet, with only such adjustments thereto as would be required in accordance with GAAP; PROVIDED, that the income statement relating to the Pro Forma only reflects sales and EBITDA results of Holdings and its Subsidiaries after giving PRO FORMA effect to the Related Transactions; 28 (c PROJECTIONS. The Projections delivered on the date hereof and attached hereto as DISCLOSURE SCHEDULE (3.4(C)) have been prepared by Holdings and MCP in light of the past operations of Worthington's business, and reflect projections for the five year period beginning on January 1, 1999 on a month by month basis for the first year and on a year by year basis thereafter. The Projections are based upon estimates and assumptions stated therein, all of which Holdings and MCP believe as of the Closing Date to be reasonable and fair in light of current conditions and current facts known to Holdings and MCP and, as of the Closing Date, reflect Holdings' and MCP's good faith and reasonable estimates of the future financial performance of Holdings and its Subsidiaries and of the other information projected therein for the period set forth therein. The foregoing representations (and other references to the existing Projections herein) are qualified by the fact that the Projections reflect an earlier proposed financing structure for the Worthington Acquisition and not the financing structure contemplated hereby but this qualification does not affect the sales and EBITDA information contained in the Projections. 3.5. MATERIAL ADVERSE EFFECT. Between December 31, 1998 and the Closing Date, (a) neither Worthington nor any Credit Party has incurred any obligations, contingent or non-contingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments which are not reflected in the Pro Forma and which, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract, lease or other agreement or instrument has been entered into by Worthington or any Credit Party or has become binding upon Worthington's or any Credit Party's assets and no law or regulation applicable to Worthington or any Credit Party has been adopted which has had or could reasonably be expected to have a Material Adverse Effect, and (c) neither Worthington nor any Credit Party is in default and to the best of Borrowers' knowledge no third party is in default under any material contract, lease or other agreement or instrument, which alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Except as set forth on DISCLOSURE SCHEDULE (3.5), between December 31, 1998 and the Closing Date no event has occurred, which alone or together with other events, could reasonably be expected to have a Material Adverse Effect. 3.6. OWNERSHIP OF PROPERTY; LIENS. As of the Closing Date and after giving effect to the Worthington Acquisition, the real estate ("REAL ESTATE") listed on DISCLOSURE SCHEDULE (3.6) constitutes all of the real property owned, leased, subleased, or used by any Credit Party. Each Credit Party owns good and marketable fee simple title to all of its owned real estate, and valid and marketable leasehold interests in all of its leased Real Estate, all as described on DISCLOSURE SCHEDULE (3.6), and copies of all such leases or a summary of terms thereof satisfactory to Agent have been delivered to Agent. DISCLOSURE SCHEDULE (3.6) further describes any Real Estate with respect to which any Credit Party is a lessor, sublessor or assignor as of the Closing Date and after giving effect to the Worthington Acquisition. Each Credit Party also has good and marketable title to, or valid leasehold interests in, all of its personal properties and assets. As of the Closing Date and after giving effect to the Worthington Acquisition, none of the properties and assets of any Credit Party are subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or 29 conditions known to any Credit Party that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances. Each Credit Party has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Credit Party's right, title and interest in and to all such Real Estate and other properties and assets. DISCLOSURE SCHEDULE (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate. As of the Closing Date and after giving effect to the Worthington Acquisition, no portion of any Credit Party's Real Estate has suffered any material damage by fire or other casualty loss which has not heretofore been repaired and restored in all material respects to its original condition or otherwise remedied. As of the Closing Date and after giving effect to the Worthington Acquisition, all material permits required to have been issued or appropriate to enable the Real Estate to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect. 3.7. LABOR MATTERS. As of the Closing Date and after giving effect to the Worthington Acquisition (a) no strikes or other material labor disputes against any Credit Party are pending or, to any Credit Party's knowledge, threatened; (b) hours worked by and payment made to employees of each Credit Party comply with the Fair Labor Standards Act and each other federal, state, local or foreign law applicable to such matter; (c) all payments due from any Credit Party for employee health and welfare insurance have been paid or accrued as a liability on the books of such Credit Party; (d) except as set forth in DISCLOSURE SCHEDULE (3.7), no Credit Party is a party to or bound by any collective bargaining agreement, management agreement, consulting agreement or any employment agreement (and true and complete copies of any agreements described on DISCLOSURE SCHEDULE (3.7) have been delivered to Agent); (e) there is no organizing activity involving any Credit Party pending or, to any Credit Party's knowledge, threatened by any labor union or group of employees; (f) there are no representation proceedings pending or, to any Credit Party's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Credit Party has made a pending demand for recognition; and (g) except as set forth in DISCLOSURE SCHEDULE (3.7), there are no complaints or charges against any Credit Party pending or, to the knowledge of any Credit Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Credit Party of any individual. 3.8. VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND INDEBTEDNESS. Except as set forth in DISCLOSURE SCHEDULE (3.8), no Credit Party has any Subsidiaries or is engaged in any joint venture or partnership with any other Person. Except as set forth in DISCLOSURE SCHEDULE (3.8), as of the Closing Date no Credit Party is an Affiliate of any other Person. All of the issued and outstanding Stock of each Credit Party is owned by each of the stockholders and/or members and in the amounts set forth on DISCLOSURE SCHEDULE (3.8). There are no outstanding rights to purchase, options, warrants or similar rights or 30 agreements pursuant to which any Credit Party may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Indebtedness of each Credit Party as of the Closing Date is described in SECTION 6.3 (including DISCLOSURE SCHEDULE (6.3)). None of the Credit Parties other than Borrowers has any assets (except nominal cash, Stock of their Subsidiaries, in the case of the IRB Subsidiary, the Lebanon IRBs and the rights related thereto and, in the case of Holdings, (i) $5,000,000 of cash received from MPC and evidenced by the Holdings Note which cash shall immediately be conveyed to MIG as consideration for the MIG Preferred Stock and to pay to MIG certain fees and expenses related to the Related Transactions, (ii) capital contributions made to Holdings so long as immediately thereafter an equal amount is contributed to the capital of Borrowers and (iii) payments that Holdings receives to the extent permitted by SECTION 6.4 or SECTION 6.14) or any Indebtedness or Guaranteed Indebtedness (except the Obligations and the Holdings Note). 3.9. GOVERNMENT REGULATION. No Credit Party is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940 as amended. No Credit Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The making of the Loans by Lenders to Borrowers, the incurrence of the Letter of Credit Obligations on behalf of Borrowers, the application of the proceeds thereof and repayment thereof and the consummation of the Related Transactions will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission. 3.10. MARGIN REGULATIONS. No Credit Party is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin security" as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as "MARGIN STOCK"). No Credit Party owns any Margin Stock, and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry any Margin Stock or for any other purpose which might cause any of the Loans or other extensions of credit under this Agreement to be considered a "purpose credit" within the meaning of Regulation T, U or X of the Federal Reserve Board. No Credit Party will take or permit to be taken any action which might cause any Loan Document to violate any regulation of the Federal Reserve Board. 3.11. TAXES. All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Credit Party have been filed with the appropriate Governmental Authority and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment 31 thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding Charges or other amounts being contested in accordance with SECTION 5.2(b). Proper and accurate amounts have been withheld by each Credit Party from its respective employees for all periods in full and complete compliance with all applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. DISCLOSURE SCHEDULE (3.11) sets forth as of the Closing Date those taxable years for which any Credit Party's tax returns are currently being audited by the IRS or any other applicable Governmental Authority and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described on DISCLOSURE SCHEDULE (3.11), no Credit Party has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. None of the Credit Parties are liable for any Charges: (a) under any agreement (including any tax sharing agreements other than the Tax Sharing Agreement) or (b) to each Credit Party's knowledge, as a transferee. As of the Closing Date, no Credit Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which would have a Material Adverse Effect. 3.12. ERISA. (a) DISCLOSURE SCHEDULE (3.12) lists and separately identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare Plans. Copies of all such listed Plans, together with a copy of the latest form 5500 for each such Plan, have been delivered to Agent. Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred which would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance with the applicable provisions of ERISA and the IRC, including the filing of reports required under the IRC or ERISA. No Credit Party or ERISA Affiliate has failed to make any contribution or pay any amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No Credit Party or ERISA Affiliate has engaged in a prohibited transaction, as defined in Section 4975 of the IRC, in connection with any Plan, which would subject any Credit Party to a material tax on prohibited transactions imposed by Section 4975 of the IRC. (b Except as set forth in DISCLOSURE SCHEDULE (3.12): (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of any Credit Party, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any liability as a result of a complete or partial withdrawal from a Multiemployer Plan; (v) within the last five years no Title IV Plan with Unfunded Pension Liabilities has been transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA 32 Affiliate; and (vi) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by the Standard & Poor's Corporation or the equivalent by another nationally recognized rating agency. 3.13. NO LITIGATION. No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of any Credit Party, threatened against any Credit Party or Worthington, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively, "Litigation") which challenges Worthington's or any Credit Party's right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) which has a reasonable risk of being determined adversely to any Credit Party and which, if so determined, could have a Material Adverse Effect. Except as set forth on DISCLOSURE SCHEDULE (3.13), as of the Closing Date there is no Litigation pending or, to the knowledge of any Credit Party, threatened which seeks damages in excess of $100,000 or injunctive relief or alleges criminal misconduct of Worthington or any Credit Party. 3.14. BROKERS. No broker or finder acting on behalf of any Credit Party brought about the obtaining, making or closing of the Loans or the Related Transactions, and no Credit Party has any obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 3.15. INTELLECTUAL PROPERTY. As of the Closing Date, each Credit Party owns or has rights to use all Intellectual Property necessary to continue to conduct its business as now conducted by it or proposed to be conducted by it, and each Patent, Trademark, Copyright and License is listed, together with application or registration numbers, as applicable, in DISCLOSURE SCHEDULE (3.15) hereto. Each Credit Party conducts its business and affairs without any known infringement of or interference with any Intellectual Property of any other Person. 3.16. FULL DISCLOSURE. No information contained in this Agreement, any of the other Loan Documents, any Projections, Financial Statements or Collateral Reports or other reports from time to time delivered hereunder or any written statement furnished by or on behalf of any Credit Party to Agent or any Lender pursuant to the terms of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances with respect to the Collateral other than Accounts. 3.17. ENVIRONMENTAL MATTERS. (a) Except as described in the environmental reports listed on DISCLOSURE SCHEDULE (3.17) or as otherwise described on such Disclosure 33 Schedule, as of the Closing Date and after giving effect to the Worthington Acquisition: (i) the Real Estate is free of contamination from any Hazardous Material except for such contamination that would not materially adversely impact the value or marketability of such Real Estate and which would not result in Environmental Liabilities which could reasonably be expected to exceed $100,000; (ii) no Credit Party has caused or suffered to occur any Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate; (iii) the Credit Parties are and have been in compliance with all Environmental Laws, except for such noncompliance which would not result in Environmental Liabilities which could reasonably be expected to exceed $100,000; (iv) the Credit Parties have obtained, and are in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities which could reasonably be expected to exceed $100,000, and all such Environmental Permits are valid, uncontested and in good standing; (v) no Credit Party is involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of such Credit Party which could reasonably be expected to exceed $100,000, and no Credit Party has permitted any current or former tenant or occupant of the Real Estate to engage in any such operations; (vi) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material which seeks damages, penalties, fines, costs or expenses in excess of $100,000 or injunctive relief, or which alleges criminal misconduct by any Credit Party; (vii) no notice has been received by any Credit Prty identifying it as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the knowledge of the Credit Parties, there are no facts, circumstances or conditions that may result in any Credit Party being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (viii) the Credit Parties have provided to Agent copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to any Credit Party. (b Each Credit Party hereby acknowledges and agrees that Agent (i) is not now, and has not ever been, in control of any of the Real Estate or any Credit Party's affairs, and (ii) does not have the capacity through the provisions of the Loan Documents or otherwise to influence any Credit Party's conduct with respect to the ownership, operation or management of any of its Real Estate or compliance with Environmental Laws or Environmental Permits. 3.18. INSURANCE. DISCLOSURE SCHEDULE (3.18) lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Credit Party, as well as a summary of the terms of each such policy. 3.19. DEPOSIT AND DISBURSEMENT ACCOUNTS. DISCLOSURE SCHEDULE (3.19) lists all banks and other financial institutions at which any Credit Party maintains deposits and/or 34 other accounts as of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number. 3.20. GOVERNMENT CONTRACTS. Except as set forth in DISCLOSURE SCHEDULE (3.20), as of the Closing Date, no Credit Party is a party to any contract or agreement with any Governmental Authority and no Credit Party's Accounts are subject to the Federal Assignment of Claims Act, as amended (31 U.S.C. Section 3727) or any similar state or local law. 3.21. CUSTOMER AND TRADE RELATIONS. As of the Closing Date, there exists no actual or, to the knowledge of any Credit Party, threatened termination or cancellation of, or any material adverse modification or change in: the business relationship of any Credit Party with any customer or group of customers whose purchases during the preceding twelve (12) months caused them to be ranked among the ten largest customers of such Credit Party; or the business relationship of any Credit Party with any supplier or group of suppliers whose supplies during the preceding twelve (12) months caused them to be ranked among the ten largest suppliers of such Credit Party. 3.22. AGREEMENTS AND OTHER DOCUMENTS. As of the Closing Date, each Credit Party has provided to Agent or its counsel, on behalf of Lenders, accurate and complete copies (or summaries) of all of the following agreements or documents to which any it is subject and each of which are listed on DISCLOSURE SCHEDULE (3.22): supply agreements and purchase agreements not terminable by such Credit Party within sixty (60) days following written notice issued by such Credit Party and involving transactions in excess of $1,000,000 per annum; any lease of Equipment having a remaining term of one year or longer and requiring aggregate rental and other payments in excess of $500,000 per annum; licenses and permits held by the Credit Parties, the absence of which could be reasonably likely to have a Material Adverse Effect; instruments or documents evidencing Indebtedness of such Credit Party and any security interest granted by such Credit Party with respect thereto; and instruments and agreements evidencing the issuance of any equity securities, warrants, rights or options to purchase equity securities of such Credit Party. 3.23. SOLVENCY. Both before and after giving effect to (a) the Loans and Letter of Credit Obligations to be made or extended on the Closing Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or extended, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of Borrower Representative, (c) the Worthington Acquisition, the Preferred Stock Contribution (and the loan by MCP to Holdings of $5,000,000 in connection therewith evidenced by the Holdings Note), and the consummation of the other Related Transactions and (d) the payment and accrual of all transaction costs in connection with the foregoing, each Credit Party is Solvent. 35 3.24. WORTHINGTON ACQUISITION AGREEMENT. As of the Closing Date, Holdings and MCP have delivered to Agent a complete and correct copy of the Worthington Acquisition Agreement (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith). No Credit Party and, to MCP's knowledge, no other Person party thereto is in default in the performance or compliance with any provisions thereof. The Worthington Acquisition Agreement and each other document delivered pursuant thereto or in connection therewith complies with, and the Worthington Acquisition has been consummated in accordance with, all applicable laws. Each of the Worthington Acquisition Agreement and each other document delivered pursuant thereto or in connection therewith is in full force and effect as of the Closing Date, has not been terminated, rescinded or withdrawn. All requisite approvals by Governmental Authorities having jurisdiction over Worthington, any Credit Party and other Persons referenced therein, with respect to the transactions contemplated by the Worthington Acquisition Agreement, have been obtained, and no such approvals impose any conditions to the consummation of the transactions contemplated by the Worthington Acquisition Agreement or to the conduct by any Credit Party of its business thereafter. To the best of each Credit Party's knowledge, none of Seller's representations or warranties in the Worthington Acquisition Agreement and each other document delivered pursuant thereto or in connection therewith contain any untrue statement of a material fact or omit any fact necessary to make the statements therein not misleading. 3.25. STATUS OF HOLDINGS; IRB SUBSIDIARY. Prior to the Closing Date, Holdings and the IRB Subsidiary will not have engaged in any business or incurred any Indebtedness or any other liabilities (except in connection with its corporate or limited liability company formation, the Related Transactions Documents and this Agreement). 4. FINANCIAL STATEMENTS AND INFORMATION 4.1. REPORTS AND NOTICES. (a) Each Credit Party executing this Agreement hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent and/or Lenders, as required, the Financial Statements, notices, Projections and other information at the times, to the Persons and in the manner set forth in ANNEX E. (b) Each Credit Party executing this Agreement hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent and/or Lenders, as required, the various Collateral Reports (including Revolving Borrowing Base Certificates in the form of EXHIBIT 4.1(b)(i)) at the times, to the Persons and in the manner set forth in ANNEX F. 4.2. COMMUNICATION WITH ACCOUNTANTS. Each Credit Party executing this Agreement authorizes Agent and, so long as a Default or Event of Default shall have occurred and be continuing, each Lender, to communicate directly with its independent certified public accountants including KPMG LLP, and authorizes and shall instruct those accountants and 36 advisors to disclose and make available to Agent and each Lender any and all Financial Statements and other supporting financial documents, schedules and information relating to any Credit Party (including copies of any issued management letters) with respect to the business, financial condition and other affairs of any Credit Party. 5. AFFIRMATIVE COVENANTS Each Credit Party executing this Credit Agreement jointly and severally agrees as to all Credit Parties that from and after the date hereof and until the Termination Date: 5.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Credit Party shall: do or cause to be done all things necessary to preserve and keep in full force and effect its corporate or limited liability existence and its material rights and franchises; continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; at all times maintain, preserve and protect all of its material assets and properties used or useful in the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and transact business only in such limited liability company and trade names as are set forth in DISCLOSURE SCHEDULE (5.1). 5.2. PAYMENT OF OBLIGATIONS. (a) Subject to SECTION 5.2(b), each Credit Party shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it, including (A) Charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all Charges with respect to tax, social security and unemployment withholding with respect to its employees, and (B) lawful claims for labor, materials, supplies and services or otherwise, before any thereof shall become past due. (b) Each Credit Party may in good faith contest, by appropriate proceedings, the validity or amount of any Charges described in SECTION 5.2(a); PROVIDED, that (i) adequate reserves with respect to such contest are maintained on the books of such Credit Party, in accordance with GAAP, (ii) no Lien shall be imposed to secure payment of such Charges that is superior to any of the Liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges, (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest, (iv) such Credit Party shall promptly pay or discharge such contested Charges or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent evidence acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Credit Party or the conditions set forth in this SECTION 5.2(b) are no longer met, and (v) Agent has not advised Borrowers in writing that Agent reasonably believes that nonpayment or nondischarge thereof could have or result in a Material Adverse Effect. 37 5.3. BOOKS AND RECORDS. Each Credit Party shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements attached as DISCLOSURE SCHEDULE (3.4(A)). 5.4. INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL. (a) The Credit Parties shall, at their sole cost and expense, maintain the policies of insurance described on DISCLOSURE SCHEDULE (3.18) as in effect on the date hereof or otherwise in form and amounts and with insurers acceptable to Agent. If any Credit Party at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which Agent deems advisable. Agent shall have no obligation to obtain insurance for any Credit Party or pay any premiums therefor. By doing so, Agent shall not be deemed to have waived any Default or Event of Default arising from any Credit Party's failure to maintain such insurance or pay any premiums therefor. All sums so disbursed, including attorneys' fees, court costs and other charges related thereto, shall be payable on demand by Borrowers to Agent and shall be additional Obligations hereunder secured by the Collateral. (b) Agent reserves the right at any time upon any change in any Credit Party's risk profile (including any change in the product mix maintained by any Credit Party or any laws affecting the potential liability of such Credit Party) to require additional forms and limits of insurance to, in Agent's opinion, adequately protect both Agent's and Lender's interests in all or any portion of the Collateral and to ensure that each Credit Party is protected by insurance in amounts and with coverage customary for its industry. If Agent requires any such additional forms or limits of insurance, the applicable Credit Party shall have thirty (30) days to provide to Agent satisfactory evidence that it has obtained such additional forms and/or limits. If requested by Agent, each Credit Party shall deliver to Agent from time to time a report of a reputable insurance broker, reasonably satisfactory to Agent, with respect to its insurance policies. (c) Each Borrower shall deliver to Agent, in form and substance satisfactory to Agent, endorsements to (i) all "All Risk" and business interruption insurance naming Agent, on behalf of itself and Lenders, as loss payee, and (ii) all general liability and other liability policies naming Agent, on behalf of itself and Lenders, as additional insured. Each Borrower irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Default or Event of Default shall have occurred and be continuing or the anticipated insurance proceeds exceed $500,000, as such Borrower's true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such "All Risk" policies of insurance, endorsing the name of such Borrower on any check or other item of payment for the proceeds of such "All Risk" policies of insurance and for making all determinations and decisions with respect to such "All Risk" policies of insurance. Agent shall have no duty to exercise any rights or powers granted to it pursuant to 38 the foregoing power-of-attorney. Borrower Representative shall promptly notify Agent of any loss, damage, or destruction to the Collateral in the amount of $250,000 or more, whether or not covered by insurance. After deducting from such proceeds the expenses, if any, incurred by Agent in the collection or handling thereof, Agent may, at its option, apply such proceeds to the reduction of the Obligations in accordance with SECTION 1.3(d); provided that in the case of insurance proceeds pertaining to any Credit Party that is not a Borrower, such insurance proceeds shall be applied ratably to all of the Loans owing by each Borrower, or permit or require the applicable Borrower to use such money, or any part thereof, to replace, repair, restore or rebuild the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction. Notwithstanding the foregoing, if the casualty giving rise to such insurance proceeds would not reasonably be expected to have a Material Adverse Effect and such insurance proceeds do not exceed $500,000 in the aggregate, Agent shall permit the applicable Borrower to replace, restore, repair or rebuild the property; PROVIDED that if such Borrower shall not have completed or entered into binding agreements to complete such replacement, restoration, repair or rebuilding within 270 days of such casualty, Agent may apply such insurance proceeds to the Obligations in accordance with SECTION 1.3(d); provided further that in the case of insurance proceeds pertaining to any Credit Party that is not a Borrower, such insurance proceeds shall be applied ratably to all of the Loans owing by each Borrower. All insurance proceeds which are to be made available to any Borrower to replace, repair, restore or rebuild the Collateral shall be applied by Agent to reduce the outstanding principal balance of the Revolving Loan of such Borrower (which application shall not result in a permanent reduction of the Revolving Loan Commitment) and upon such application, Agent shall establish a Reserve against the separate Revolving Borrowing Base of the affected Borrower in an amount equal to the amount of such proceeds so applied. All insurance proceeds made available to any Credit Party that is not a Borrower to replace, repair, restore or rebuild Collateral shall be deposited in a cash collateral account. Thereafter, such funds shall be made available to that Borrower to provide funds to replace, repair, restore or rebuild the Collateral as follows: (i) Borrower Representative shall request a Revolving Credit Advance or a release from the cash collateral account be made to such Borrower in the amount requested to be released; (ii) so long as the conditions set forth in SECTION 2.2 have been met, Revolving Lenders shall make such Revolving Credit Advance or Agent shall release funds from the cash collateral account; and (iii) in the case of insurance proceeds applied against the Revolving Loan, the Reserve established with respect to such insurance proceeds shall be reduced by the amount of such Revolving Credit Advance. To the extent not used to replace, repair, restore or rebuild the Collateral, such insurance proceeds shall be applied in accordance with SECTION 1.3(d); provided that in the case of insurance proceeds pertaining to any Credit Party that is not a Borrower, such insurance proceeds shall be applied ratably to all of the Loans owing by each Borrower. 5.5. COMPLIANCE WITH LAWS. Each Credit Party shall comply with all federal, state, local and foreign laws (including, without limitation, the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976) and regulations applicable to it, including those relating to ERISA 39 and labor matters, and Environmental Laws and Environmental Permits, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.6. SUPPLEMENTAL DISCLOSURE. From time to time as may be requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of a Default or an Event of Default), the Credit Parties shall supplement each Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or which is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing; and (b) no supplement shall be required as to representations and warranties that relate solely to the Closing Date. 5.7. INTELLECTUAL PROPERTY. Each Credit Party will conduct its business and affairs without any known infringement of or interference with any Intellectual Property of any other Person in any material respect. 5.8. ENVIRONMENTAL MATTERS. Each Credit Party shall and shall cause each Person within its control to: (a) conduct its operations and keep and maintain its Real Estate in compliance with all Environmental Laws and Environmental Permits other than noncompliance which could not reasonably be expected to have a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions which are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of its Real Estate; (c) notify Agent promptly after such Credit Party becomes aware of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to, from or about any Real Estate which is reasonably likely to result in Environmental Liabilities in excess of $100,000; and (d) promptly forward to Agent a copy of any order, notice, request for information or any communication or report received by such Credit Party in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities in excess of $100,000, in each case whether or not the Environmental Protection Agency or any Governmental Authority has taken or threatened any action in connection with any such violation, Release or other matter. If Agent at any time has a reasonable basis to believe that there may be a violation of any 40 Environmental Laws or Environmental Permits by any Credit Party or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, which, in each case, could reasonably be expected to have a Material Adverse Effect, then each Credit Party shall, upon Agnt's written request (i) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrowers' expense, as Agent may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance acceptable to Agent, and (ii) permit Agent or its representatives to have access to all Real Estate for the purpose of conducting such environmental audits and testing as Agent deems appropriate, including subsurface sampling of soil and groundwater. Borrowers shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder. 5.9. LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE LETTERS. Each Credit Party shall obtain a landlord's agreement, mortgagee agreement or bailee letter, as applicable, from the lessor of each leased property or mortgagee of owned property or with respect to any warehouse, processor or converter facility or other location where Collateral is located, which agreement or letter shall contain a waiver or subordination of all Liens or claims that the landlord, mortgagee or bailee may assert against the Inventory or Collateral at that location, and shall otherwise be satisfactory in form and substance to Agent. With respect to such locations or warehouse space leased or owned as of the Closing Date and thereafter, if Agent has not received a landlord or mortgagee agreement or bailee letter as of the Closing Date (or, if later, as of the date such location is acquired or leased), any Borrower's Eligible Inventory at that location shall, in Agent's discretion, be excluded from the Revolving Borrowing Base or be subject to such Reserves as may be established by Agent in its reasonable credit judgment. After the Closing Date, no real property or warehouse space shall be leased or acquired by any Credit Party and no Inventory shall be shipped to a processor or converter under arrangements established after the Closing Date without the prior written consent of Agent (which consent, in Agent's discretion, may be conditioned upon the exclusion from the Revolving Borrowing Base of Eligible Inventory at that location or the establishment of Reserves acceptable to Agent) or, unless and until a satisfactory landlord or mortgagee agreement or bailee letter, as appropriate, shall first have been obtained with respect to such location. Each Credit Party shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located. 5.10. YEAR 2000 COMPLIANCE. On or prior to the Closing Date, each Credit Party shall complete and deliver to Agent a Year 2000 Assessment, and on prior to May 30, 1999, each Credit Party shall complete and deliver to Agent a Year 2000 Corrective Plan. On or prior to June 30, 1999, each Credit Party shall implement Year 2000 Corrective Actions. On or before July 31, 1999, each Credit Party shall complete Year 2000 Corrective Actions and Year 2000 Implementation Testing. On or before November 30, 1999, each Credit Party 41 shall eliminate all Year 2000 Problems, except where the failure to correct the same could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate. 5.11. FURTHER ASSURANCES. Each Credit Party executing this Agreement agrees that it shall and shall cause each other Credit Party to, at such Credit Party's expense and upon request of Agent, duly execute and deliver, or cause to be duly executed and delivered, to Agent such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent to carry out more effectively the provisions and purposes of this Agreement or any other Loan Document. 6. NEGATIVE COVENANTS Each Credit Party executing this Agreement jointly and severally agrees as to all Credit Parties that, without the prior written consent of Agent and the Requisite Lenders, from and after the date hereof until the Termination Date: 6.1. MERGERS, SUBSIDIARIES, ETC. No Credit Party shall directly or indirectly, by operation of law or otherwise, (a) form or acquire any Subsidiary, or (b) merge with, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with or acquire, any Person. 6.2. INVESTMENTS; LOANS AND ADVANCES. Except as otherwise expressly permitted by this SECTION 6, no Credit Party shall make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that (a) Borrowers may hold investments comprised of notes payable, or stock or other securities issued by Account Debtors to any Borrower pursuant to negotiated agreements with respect to settlement of such Account Debtor's Accounts in the ordinary course of business, so long as the aggregate amount of such Accounts so settled by Borrowers does not exceed $100,000; (b) each Credit Party may maintain its existing investments in its Subsidiaries as of the Closing Date; (c) MCP may hold the Holdings Note and make the $5,000,000 loan to Holdings evidenced thereby; and (d) other investments not exceeding $100,000 in the aggregate at any time outstanding. 6.3. INDEBTEDNESS. (a) No Credit Party shall create, incur, assume or permit to exist any Indebtedness, except (without duplication) (i) Indebtedness secured by purchase money security interests and Capitalized Leases permitted in clause (c) of Section 6.7, (ii) the Loans and the other Obligations, (iii) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law, (iv) in the case of Holdings, Indebtedness evidenced by the Holdings Note, and (v) existing Indebtedness described in DISCLOSURE SCHEDULE (6.3) and refinancings thereof or amendments or modifications thereto which do not have the effect of increasing the principal 42 amount thereof or changing the amortization thereof (other than to extend the same) and which are otherwise on terms and conditions no less favorable to any Credit Party, Agent or any Lender, as reasonably determined by Agent, than the terms of the Indebtedness being refinanced, amended or modified. (b) No Credit Party shall, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness, other than (i) the Obligations, (ii) Indebtedness evidenced by the Holdings Note, and (iii) Indebtedness secured by a Permitted Encumbrance if the asset securing such Indebtedness has been sold or otherwise disposed of in accordance with SECTIONS 6.8(b), (c) or (d). 6.4. EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS. (a) Except as otherwise expressly permitted in this Section 6 with respect to Affiliates, no Credit Party shall enter into or be a party to any transaction with any other Credit Party or any Affiliate thereof except in the ordinary course of and pursuant to the reasonable requirements of such Credit Party's business and upon fair and reasonable terms that are no less favorable to such Credit Party than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of such Credit Party; PROVIDED, that (i) so long as no Event of Default has occurred or would occur as a result thereof MCP and Holdings shall be permitted to reimburse MIG for out-of-pocket expenses and costs incurred by MIG on behalf of the Credit Parties to the extent required and contemplated by the Credit Parties' constituent documents as in effect on the date hereof but in no event in an amount exceeding $100,000 per annum, (ii) Holdings shall be permitted to enter into the Tax Sharing Agreement and, subject to SECTION 6.14, perform its obligations thereunder, (iii) the Credit Parties shall be permitted to enter into the transactions relating to the Lebanon IRBs, the IRB Assignment Documents, the IRB Indenture and the IRB Lease Agreement and (iv) MCP and Holdings shall be permitted to enter into Amendment No. 1 to the Worthington Acquisition Agreement and perform their obligations thereunder. In addition, if any such transaction or series of related transactions involves payments in excess of $500,000 in the aggregate, the terms of these transactions must be disclosed in advance to Agent and Lenders. All such transactions existing as of the date hereof are described on DISCLOSURE SCHEDULE (6.4(a)). (b) No Credit Party shall enter into any lending or borrowing transaction with any employees of any Credit Party, except loans to their respective employees on an arm's-length basis in the ordinary course of business consistent with past practices for travel expenses, relocation costs and similar purposes up to a maximum of $100,000 to any employee and up to a maximum of $300,000 in the aggregate at any one time outstanding. 6.5. CAPITAL STRUCTURE AND BUSINESS. No Credit Party shall (a) make any changes in any of its business objectives, purposes or operations which could reasonably be expected to adversely affect the repayment of the Loans or any of the other Obligations or could reasonably be expected to have or result in a Material Adverse Effect, (b) make any change in its capital structure as described on DISCLOSURE SCHEDULE (3.8), including the 43 issuance of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms of its outstanding Stock, or (c) amend its charter or bylaws, membership agreements, operating agreements or other constituent documents in a manner which would adversely affect Agent or Lenders or such Credit Party's duty or ability to repay the Obligations. No Credit Party shall engage in any business other than the businesses currently engaged in by it or businesses reasonably related thereto. 6.6. GUARANTEED INDEBTEDNESS. No Credit Party shall create, incur, assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement of instruments or items of payment for deposit to the general account of any Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of any other Credit Party if the primary obligation is expressly permitted by this Agreement. 6.7. LIENS. No Credit Party shall create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other properties or assets (whether now owned or hereafter acquired) except for (a) Permitted Encumbrances; (b) Liens in existence on the date hereof and summarized on DISCLOSURE SCHEDULE (6.7); (c) Liens created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money Indebtedness with respect to Equipment and Fixtures acquired by any Credit Party in the ordinary course of business, involving the incurrence of an aggregate amount of purchase money Indebtedness and Capital Lease Obligations of not more than $5,000,000 outstanding at any one time for all such Liens (provided that such Liens attach only to the assets subject to such purchase money debt and such Indebtedness is incurred within twenty (20) days following such purchase and does not exceed 100% of the purchase price of the subject assets); and (d) other Liens securing Indebtedness not exceeding $250,000 in the aggregate at any time outstanding, so long as such Liens do not attach to any Accounts or Inventory or any property included in the real property or Equipment appraisals previously delivered to Agent. In addition, no Credit Party shall become a party to any agreement, note, indenture or instrument, or take any other action, which would prohibit the creation of a Lien on any of its properties or other assets in favor of Agent, on behalf of itself and Lenders, as additional collateral for the Obligations, except operating leases, Capital Leases (including the IRB Lease Agreement), the IRB Indenture, or Licenses which prohibit Liens upon the assets that are subject thereto. 6.8. SALE OF STOCK AND ASSETS. No Credit Party shall sell, transfer, convey, assign or otherwise dispose of any of its properties or other assets, including the capital Stock of any of its Subsidiaries (whether in a public or a private offering or otherwise) or any of their Accounts, other than (a) the sale of Inventory in the ordinary course of business, (b) the sale, transfer, conveyance or other disposition by a Credit Party of assets that are obsolete or no longer used or useful in such Credit Party's business and having a value not exceeding $50,000 in any single transaction or $100,000 in the aggregate in any Fiscal Year, (c) other Equipment and Fixtures having a value not exceeding $50,000 in any single transaction or $100,000 in the aggregate in any Fiscal Year, and (d) so long as no Default or Event of 44 Default has occurred or would occur as a result thereof, Equipment having a value in the aggregate in any Fiscal Year not exceeding 10% of the value of such Credit Party's Equipment at the beginning of such Fiscal Year as reasonably determined by Agent. With respect to any disposition of assets or other properties permitted pursuant to CLAUSE (b), CLAUSE (c) and CLAUSE (d) above, Agent agrees on reasonable prior written notice to release its Lien on such assets or other properties in order to permit the applicable Credit Party to effect such disposition and shall execute and deliver to Borrowers, at Borrowers' expense, appropriate UCC-3 termination statements and other releases as reasonably requested by Borrowers. 6.9. ERISA. No Credit Party shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur an event which could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event could reasonably be expected to have a Material Adverse Effect. 6.10. FINANCIAL COVENANTS. Borrowers shall not breach or fail to comply with any of the Financial Covenants (the "FINANCIAL COVENANTS") set forth in ANNEX G. 6.11. HAZARDOUS MATERIALS. No Credit Party shall cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any of the Real Estate where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise adversely impact the value or marketability of any of the Real Estate or any of the Collateral, other than such violations or Environmental Liabilities which could not reasonably be expected to have a Material Adverse Effect. 6.12. SALE-LEASEBACKS. No Credit Party shall engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets. 6.13. CANCELLATION OF INDEBTEDNESS. No Credit Party shall cancel any claim or debt owing to it, except for reasonable consideration negotiated on an arm's-length basis and in the ordinary course of its business consistent with past practices. 6.14. RESTRICTED PAYMENTS. No Credit Party shall make any Restricted Payment, except (a) dividends and distributions by Subsidiaries of any Borrower paid to such Borrower, (b) employee loans permitted under SECTION 6.4(b) above, (c) the payments permitted by clauses (i) and (iv) of the proviso contained in SECTION 6.4(a), (d) distributions by MCP to its members so long as (i) the amount thereof does not exceed the amount payable by Holdings to MIG within two Business Days' after the date of such distribution pursuant to the terms of the Tax Sharing Agreement determined as if Holdings had no assets other than its equity interests in Borrowers and no other source of income other than in connection with such equity interests and (ii) no Default or Event of Default shall exist or would result as a result therefrom, PROVIDED that if Holdings receives any payment from MIG pursuant to the terms of 45 Paragraph 2(b) or Section 3 of the Tax Sharing Agreement Holdings shall immediately thereafter contribute to the capital of MCP an amount equal to any such payment, (e) payments by Holdings to MIG pursuant to the Tax Sharing Agreement out of amounts distributed to Holdings in accordance with SECTION 6.14(d), (f) Restricted Payments to the extent that both before and after giving effect thereto (i) the Term Overadvance has been paid in full, (ii) no less than $5,000,000 in Net Borrowing Availability exists, (iii) no Default or Event of Default shall exist or would result as a result thereof and (iv) the timing of the payments referred to in CLAUSE (f) shall be set at dates which permit the delivery of Financial Statements necessary to determine current compliance with the financial covenants set forth in ANNEX G prior to each payment, and (g) payments in connection with the Preferred Stock Contribution. 6.15. CHANGE OF CORPORATE OR LIMITED LIABILITY COMPANY NAME OR LOCATION; CHANGE OF FISCAL YEAR. No Credit Party shall (a) change its corporate or limited liability company name, or (b) change its chief executive office, principal place of business, corporate or limited liability company offices or warehouses or locations at which Collateral is held or stored, or the location of its records concerning the Collateral, in any case without at least thirty (30) days prior written notice to Agent and after Agent's written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken, and PROVIDED that any such new location shall be in the continental United States. Without limiting the foregoing, no Credit Party shall change its name, identity or corporate or limited liability company structure in any manner which might make any financing or continuation statement filed in connection herewith seriously misleading within the meaning of Section 9-402(7) of the Code or any other then applicable provision of the Code except upon prior written notice to Agent and Lenders and after Agent's written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken. No Credit Party shall change its Fiscal Year. 6.16. NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. No Credit Party shall directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) which could directly or indirectly restrict, prohibit or require the consent of any Person with respect to the payment of dividends or distributions or the making or repayment of intercompany loans by a Subsidiary of any Borrower to any Borrower or between Borrowers. 6.17. NO SPECULATIVE TRANSACTIONS. No Credit Party shall engage in any transaction involving commodity options, futures contracts or similar transactions, except solely to hedge against fluctuations in the prices of commodities owned or purchased by it and the values of foreign currencies receivable or payable by it and interest swaps, caps or collars. 46 6.18. LEASES. No Credit Party shall enter into any operating lease for Equipment or Real Estate, if the aggregate of all such operating lease payments payable in any year for Holdings and its Subsidiaries on a consolidated basis would exceed $5,000,000. 6.19. CREDIT PARTIES OTHER THAN BORROWERS. None of the Credit Parties other than Borrowers shall engage in any trade or business, or own any assets (other than Stock of their Subsidiaries) or incur any Indebtedness or Guaranteed Indebtedness (other than the Obligations and the Holdings Note); PROVIDED that the IRB Subsidiary shall be the holder of the Lebanon IRBs. 6.20. MODIFICATIONS OF CERTAIN DOCUMENTS. No Credit Party shall amend or change (or permit or consent to any amendment or change of) the terms of the Worthington Acquisition Agreement as amended by Amendment No. 1 thereto, the Tax Sharing Agreement or any documentation relating to the Lebanon IRBs, including, without limitation, the IRB Indenture or the IRB Lease Agreement. 7. TERM 7.1. TERMINATION. The financing arrangements contemplated hereby shall be in effect until the Commitment Termination Date, and the Loans and all other Obligations shall be automatically due and payable in full on such date. 7.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENTS. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the obligations, duties and liabilities of the Credit Parties or the rights of Agent and Lenders relating to any unpaid portion of the Loans or any other Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon the Credit Parties, and all rights of Agent and each Lender, all as contained in the Loan Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided however, that in all events the provisions of SECTION 11, the payment obligations under SECTIONS 1.15 and 1.16, and the indemnities contained in the Loan Documents shall survive the Termination Date. 8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES 8.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "EVENT OF DEFAULT" hereunder: 47 (a) Any Borrower (i) fails to make any payment of principal of, or interest on, or Fees owing in respect of, the Loans or any of the other Obligations when due and payable, or (ii) fails to pay or reimburse Agent or Lenders for any expense reimbursable hereunder or under any other Loan Document within ten (10) days following Agent's demand for such reimbursement or payment of expenses. (b) Any Credit Party shall fail or neglect to perform, keep or observe any of the provisions of SECTIONS 1.4, 1.8, 5.4 or 6, or any of the provisions set forth in ANNEXES C or G, respectively. (c) Any Borrower shall fail or neglect to perform, keep or observe any of the provisions of SECTION 4 or any provisions set forth in ANNEXES E or F, respectively, and the same shall remain unremedied for five (5) days or more after such Credit Party is aware or should have been aware of such failure or negligence. (d) Any Credit Party shall fail or neglect to perform, keep or observe any other provision of this Agreement or of any of the other Loan Documents (other than any provision embodied in or covered by any other clause of this SECTION 8.1) and the same shall remain unremedied for thirty (30) days or more after such Credit Party is aware or should have been aware of such failure or negligence. (e) A default or breach shall occur under any other agreement, document or instrument to which any Credit Party is a party which is not cured within any applicable grace period, and such default or breach (i) involves the failure to make any payment when due in respect of any Indebtedness (other than the Obligations) of any Credit Party in excess of $250,000 in the aggregate, or (ii) causes, or permits any holder of such Indebtedness or a trustee to cause, Indebtedness or a portion thereof in excess of $250,000 in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, regardless of whether such default is waived, or such right is exercised, by such holder or trustee. (f) Any information contained in any Revolving Borrowing Base Certificate is untrue or incorrect in any respect, or any representation or warranty herein or in any Loan Document or in any written statement, report, financial statement or certificate (other than a Revolving Borrowing Base Certificate) made or delivered to Agent or any Lender by any Credit Party is untrue or incorrect in any material respect as of the date when made or deemed made. (g) Assets of any Credit Party with a fair market value of $250,000 or more shall be attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of any Credit Party and such condition continues for forty-five (45) days or more. 48 (h) A case or proceeding shall have been commenced against any Credit Party seeking a decree or order in respect of any Credit Party (i) under Title 11 of the United States Code, as now constituted or hereafter amended or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any Credit Party or of any substantial part of any such Person's assets, or (iii) ordering the winding-up or liquidation of the affairs of any Credit Party, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or such court shall enter a decree or order granting the relief sought in such case or proceeding. (i) Any Credit Party (i) shall file a petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) shall fail to contest in a timely and appropriate manner or shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) of any Credit Party or of any substantial part of any such Person's assets, (iii) shall make an assignment for the benefit of creditors, (iv) shall take any corporate or limited liability company action in furtherance of any of the foregoing; or (v) shall admit in writing its inability to, or shall be generally unable to, pay its debts as such debts become due. (j) A final judgment or judgments for the payment of money in excess of $250,000 in the aggregate at any time outstanding shall be rendered against any Credit Party and the same shall not, within thirty (30) days after the entry thereof, have been discharged or execution thereof stayed or bonded pending appeal, or shall not have been discharged prior to the expiration of any such stay. (k) Any material provision of any Loan Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms (or any Credit Party or Worthington shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any security interest created under any Loan Document shall cease to be a valid and perfected first priority security interest or Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby. (l) Any Change of Control shall occur. (m) Any event shall occur as a result of which revenue-producing activities cease or are substantially curtailed at any facility of Borrowers generating more than 25% (or 40% if such facility is covered by insurance, including business interruption insurance acceptable to Agent) of Borrowers' consolidated revenues for the Fiscal Year preceding such event and such cessation or curtailment continues for more than twenty (20) days. 49 (n) Without limiting the provisions of clause (e) above, a default or breach shall occur under any of the documentation relating to the Lebanon IRBs, including, without limitation, the IRB Indenture or the IRB Lease Agreement, which is not cured within any applicable grace period, and such default or breach (i) involves the failure to make any payment when due in respect of any obligations under such documentation, or (ii) causes, or permits any holder of such obligation or a trustee to cause such obligation to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, regardless of whether such default is waived, or such right is exercised, by such holder or trustee. (o) Any Person other than the IRB Subsidiary (or its trustee pursuant to the terms of the IRB Indenture) or Agent, on behalf of Lenders, shall hold the Lebanon IRBs or have any rights related thereto. (p) Failure of MCP to deliver to Agent satisfactory evidence that Seller has complied with Section 7.1(c) of the IRB Lease Agreement. 8.2. REMEDIES. (a) If any Event of Default shall have occurred and be continuing or if a Default shall have occurred and be continuing and Agent or Requisite Revolving Lenders shall have determined not to make any Advances or incur any Letter of Credit Obligations so long as that specific Default is continuing, Agent may (and at the written request of the Requisite Revolving Lenders shall), without notice, suspend the Revolving Loan facility with respect to further Advances and/or the incurrence of further Letter of Credit Obligations whereupon any further Advances and Letter of Credit Obligations shall be made or extended in Agent's sole discretion (or in the sole discretion of the Requisite Revolving Lenders, if such suspension occurred at their direction) so long as such Default or Event of Default is continuing. If any Default or Event of Default shall have occurred and be continuing, Agent may (and at the written request of Requisite Lenders shall), without notice except as otherwise expressly provided herein, increase the rate of interest applicable to the Loans and the Letter of Credit Fees to the Default Rate. (b) If any Event of Default shall have occurred and be continuing, Agent may (and at the written request of the Requisite Lenders shall), without notice, (i) terminate the Revolving Loan facility with respect to further Advances or the incurrence of further Letter of Credit Obligations; (ii) declare all or any portion of the Obligations, including all or any portion of any Loan to be forthwith due and payable, and require that the Letter of Credit Obligations be cash collateralized as provided in ANNEX B, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrowers and each other Credit Party; and (iii) exercise any rights and remedies provided to Agent under the Loan Documents and/or at law or equity, including all remedies provided under the Code; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default specified in SECTIONS 8.1(g), (h) or (i), the Revolving Loan facility shall be immediately terminated and all of the 50 Obligations, including the aggregate Revolving Loan, shall become immediately due and payable without declaration, notice or demand by any Person. 8.3. WAIVERS BY CREDIT PARTIES. Except as otherwise provided for in this Agreement or by applicable law, each Credit Party waives (including for purposes of SECTION 12): (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent on which any Credit Party may in any way be liable, and hereby ratifies and confirms whatever Agent may do in this regard, (b) all rights to notice and a hearing prior to Agent's taking possession or control of, or to Agent's replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing Agent to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws. 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT 9.1. ASSIGNMENT AND PARTICIPATIONS. (a) The Credit Parties signatory hereto consent to any Lender's assignment of, and/or sale of participations in, at any time or times, the Loan Documents, Loans, Letter of Credit Obligations and any Commitment or of any portion thereof or interest therein, including any Lender's rights, title, interests, remedies, powers or duties thereunder, whether evidenced by a writing or not. Any assignment by a Lender shall (i) require the consent of Agent and (so long as no Default or Event of Default has occurred and is continuing) the Borrower Representative (which shall not be unreasonably withheld or delayed) and the execution of an assignment agreement (an "ASSIGNMENT AGREEMENT") substantially in the from attached hereto as EXHIBIT 9.1(a) and otherwise in form and substance satisfactory to, and acknowledged by, Agent; (ii) be conditioned on such assignee Lender representing to the assigning Lender and Agent that it is purchasing the applicable Loans to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof; (iii) if a partial assignment, be in an amount at least equal to $5,000,000 and, after giving effect to any such partial assignment, the assigning Lender shall have retained Commitments in an amount at least equal to $5,000,000; and (iv) include a payment to Agent of an assignment fee of $3,500. In the case of an assignment by a Lender under this SECTION 9.1, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would if it were a Lender hereunder. The assigning Lender shall be relieved of its obligations hereunder with respect to its Commitments or assigned portion thereof from and after the date of such assignment. Each Borrower hereby acknowledges and agrees that any assignment will give rise to a direct obligation of Borrowers to the assignee and that the assignee shall be considered to be a "Lender". In all instances, each Lender's liability to make Loans hereunder shall be several and not joint and shall be limited to such Lender's Pro Rata Share of the applicable Commitment. In the event Agent or any Lender assigns or otherwise transfers all or any part of the Obligations, Agent or any such 51 Lender shall so notify Borrowers and Borrowers shall, upon the request of Agent or such Lender, execute new Notes in exchange for the Notes, if any, being assigned. Notwithstanding the foregoing provisions of this SECTION 9.1(a), any Lender may at any time pledge the Obligations held by it and such Lender's rights under this Agreement and the other Loan Documents to a Federal Reserve Bank, and any Lender that is an investment fund may assign the Obligations held by it and such Lender's rights under this Agreement and the other Loan Documents to another investment fund managed by the same investment advisor; PROVIDED, HOWEVER, that no such pledge to a Federal Reserve Bank shall release such Lender from such Lender's obligations hereunder or under any other Loan Document. (b) Any participation by a Lender of all or any part of its Commitments shall be made with the understanding that all amounts payable by Borrowers hereunder shall be determined as if that Lender had not sold such participation, and that the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate or Fees payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents). Solely for purposes of SECTIONS 1.13, 1.15, 1.16 and 9.8, each Borrower acknowledges and agrees that a participation shall give rise to a direct obligation of Borrowers to the participant and the participant shall be considered to be a "Lender". Except as set forth in the preceding sentence no Borrower or Credit Party shall have any obligation or duty to any participant. Neither Agent nor any Lender (other than the Lender selling a participation) shall have any duty to any participant and may continue to deal solely with the Lender selling a participation as if no such sale had occurred. (c) Except as expressly provided in this SECTION 9.1, no Lender shall, as between Borrowers and that Lender, or Agent and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loans, the Notes or other Obligations owed to such Lender. (d) Each Credit Party executing this Agreement shall assist any Lender permitted to sell assignments or participations under this SECTION 9.1 as reasonably required to enable the assigning or selling Lender to effect any such assignment or participation, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and, if requested by Agent in connection with the primary syndication of the Commitments and/or the Loans, the preparation of informational materials for, and the participation of management in meetings with, potential assignees or participants. Each Credit Party executing this Agreement shall certify the correctness, completeness and accuracy of all descriptions of the Credit Parties and their affairs contained in any selling materials provided by them and all other information provided by them and included in such materials, except that any Projections delivered by Borrowers shall only be certified by 52 Borrowers as having been prepared by Borrowers in compliance with the representations contained in SECTION 3.4(c). (e) A Lender may furnish any information concerning Credit Parties in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants). Each Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in SECTION 11.8. (f) So long as no Event of Default shall have occurred and be continuing, no Lender shall assign or sell participations in any portion of its Loans or Commitments to a potential Lender or participant, if, as of the date of the proposed assignment or sale, the assignee Lender or participant would be subject to capital adequacy or similar requirements under SECTION 1.16(a), increased costs under SECTION 1.16(b), an inability to fund LIBOR Loans under SECTION1.16(c), or withholding taxes in accordance with SECTION 1.15(a). 9.2. APPOINTMENT OF AGENT. GE Capital is hereby appointed to act on behalf of all Lenders as Agent under this Agreement and the other Loan Documents. The provisions of this SECTION 9.2 are solely for the benefit of Agent and Lenders and no Credit Party nor any other Person shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the other Loan Documents, Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Credit Party or any other Person. Agent shall have no duties or responsibilities except for those expressly set forth in this Agreement and the other Loan Documents. The duties of Agent shall be mechanical and administrative in nature and Agent shall not have, or be deemed to have, by reason of this Agreement, any other Loan Document or otherwise a fiduciary relationship in respect of any Lender. Neither Agent nor any of its Affiliates nor any of their respective officers, directors, employees, agents or representatives shall be liable to any Lender for any action taken or omitted to be taken by it hereunder or under any other Loan Document, or in connection herewith or therewith, except for damages caused by its or their own gross negligence or willful misconduct. If Agent shall request instructions from Requisite Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Loan Document, then Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders, as the case may be, and Agent shall not incur liability to any Person by reason of so refraining. Agent shall be fully justified in failing or refusing to take any action hereunder or under any other Loan Document (a) if such action would, in the opinion of Agent, be contrary to law or the terms of this Agreement or any other Loan Document, (b) if such action would, in the opinion of Agent, 53 expose Agent to Environmental Liabilities or (c) if Agent shall not first be indemnified to its satisfaction against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of Requisite Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders, as applicable. 9.3. AGENT'S RELIANCE, ETC. Neither Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, Agent: (a) may treat the payee of any Note as the holder thereof until Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to Agent; (b) 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 in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Credit Party or to inspect the Collateral (including the books and records) of any Credit Party; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. 9.4. GE CAPITAL AND AFFILIATES. With respect to its Commitments hereunder, GE Capital shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender and may exercise the same as though it were not Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include GE Capital in its individual capacity. GE Capital and its Affiliates may lend money to, invest in, and generally engage in any kind of business with, any Credit Party, any of their Affiliates and any Person who may do business with or own securities of any Credit Party or any such Affiliate, all as if GE Capital were not Agent and without any duty to account therefor to Lenders. GE Capital and its Affiliates may accept fees and other consideration from any Credit Party for services in connection with this Agreement or otherwise without having to account for the same to Lenders. Each Lender acknowledges the potential conflict of interest 54 between GE Capital as a Lender holding disproportionate interests in the Loans and GE Capital as Agent. 9.5. LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender and based on the Financial Statements referred to in SECTION 3.4(a) and such other documents and information as it has deemed appropriate, made its own credit and financial analysis of the Credit Parties and its own decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Each Lender acknowledges the potential conflict of interest of each other Lender as a result of Lenders holding disproportionate interests in the Loans, and expressly consents to, and waives any claim based upon, such conflict of interest. 9.6. INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent not reimbursed by Credit Parties and without limiting the obligations of Credit Parties hereunder), ratably according to their respective Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by Agent in connection therewith; PROVIDED, HOWEVER, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and each other Loan Document, to the extent that Agent is not reimbursed for such expenses by Credit Parties. 9.7. SUCCESSOR AGENT. Agent may resign at any time by giving not less than thirty (30) days' prior written notice thereof to Lenders and Borrower Representative. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within 30 days after the resigning Agent's giving notice of resignation, then the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is willing to accept such appointment, or otherwise shall be a commercial bank or financial institution or a subsidiary of a commercial bank or financial institution if such commercial bank or financial institution is organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $300,000,000. If no successor Agent has been appointed pursuant to the foregoing, by 55 the 30th day after the date such notice of resignation was given by the resigning Agent, such resignation shall become effective and the Requisite Lenders shall thereafter perform all the duties of Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above. Any successor Agent appointed by Requisite Lenders hereunder shall be subject to the approval of Borrower Representative, such approval not to be unreasonably withheld or delayed; PROVIDED that such approval shall not be required if a Default or an Event of Default shall have occurred and be continuing. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the earlier of the acceptance of any appointment as Agent hereunder by a successor Agent or the effective date of the resigning Agent's resignation, the resigning Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents, except that any indemnity rights or other rights in favor of such resigning Agent shall continue. After any resigning Agent's resignation hereunder, the provisions of this SECTION 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. 9.8. SETOFF AND SHARING OF PAYMENTS. 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 continuance of any Event of Default, each Lender and each holder of any Note is hereby authorized at any time or from time to time, without notice to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all balances held by it at any of its offices for the account of any Borrower or Guarantor (regardless of whether such balances are then due to such Borrower or Guarantor) and any other properties or assets any time held or owing by that Lender or that holder to or for the credit or for the account of any Borrower or Guarantor against and on account of any of the Obligations which are not paid when due. Any Lender or holder of any Note exercising a right to set off or otherwise receiving any payment on account of the Obligations in excess of its Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders shall sell) such participations in each such other Lender's or holder's Pro Rata Share of the Obligations as would be necessary to cause such Lender to share the amount so set off or otherwise received with each other Lender or holder in accordance with their respective Pro Rata Shares. Each Lender's obligation under this SECTION 9.8 shall be in addition to and not limitation of its obligations to purchase a participation in an amount equal to its Pro Rata Share of the Swing Line Loans under SECTION 1.1. Each Credit Party that is a Borrower or Guarantor agrees, to the fullest extent permitted by law, that (a) any Lender or holder may exercise its right to set off with respect to amounts in excess of its Pro Rata Share of the Obligations and may sell participations in such amount so set off to other Lenders and holders and (b) any Lender or holders so purchasing a participation in the Loans made or other Obligations held by other Lenders or holders may exercise all rights of set-off, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such Lender or holder were a direct holder of the Loans and the other Obligations in the amount of such participation. Notwithstanding the foregoing, if all or any portion of the set-off amount or 56 payment otherwise received is thereafter recovered from the Lender that has exercised the right of set-off, the purchase of participations by that Lender shall be rescinded and the purchase price restored without interest. 9.9. ADVANCES; PAYMENTS; NON-FUNDING LENDERS; INFORMATION; ACTIONS IN CONCERT. (a) ADVANCES; PAYMENTS. (i) Revolving Lenders shall refund or participate in the Swing Line Loan in accordance with CLAUSES (iii) and (iv) of SECTION 1.1(c). If the Swing Line Lender declines to make a Swing Line Loan or if Swing Line Availability is zero, Agent shall notify Revolving Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00 p.m. (New York time) on the date such Notice of Revolving Advance is received, by telecopy, telephone or other similar form of transmission. Each Revolving Lender shall make the amount of such Lender's Pro Rata Share of such Revolving Credit Advance available to Agent in same day funds by wire transfer to Agent's account as set forth in ANNEX H not later than 3:00 p.m. (New York time) on the requested funding date, in the case of an Index Rate Loan and not later than 11:00 a.m. (New York time) on the requested funding date in the case of a LIBOR Loan. After receipt of such wire transfers (or, in the Agent's sole discretion, before receipt of such wire transfers), subject to the terms hereof, Agent shall make the requested Revolving Credit Advance to the Borrower designated by Borrower Representative in the Notice of Revolving Credit Advance. All payments by each Revolving Lender shall be made without setoff, counterclaim or deduction of any kind. (ii) On the second (2nd) Business Day of each calendar week or more frequently as aggregate cumulative payments in excess of $2,000,000 are received with respect to the Loans (other than the Swing Line Loan) (each, a "SETTLEMENT DATE"), Agent will advise each Lender by telephone, or telecopy of the amount of such Lender's Pro Rata Share of principal, interest and Fees paid for the benefit of Lenders with respect to each applicable Loan. Provided that such Lender has funded all payments or Advances required to be made by it and has purchased all participations required to be purchased by it under this Agreement and the other Loan Documents as of such Settlement Date, Agent will pay to each Lender such Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers since the previous Settlement Date for the benefit of that Lender on the Loans held by it. To the extent that any Lender (a "NON-FUNDING LENDER") has failed to fund all such payments and Advances or failed to fund the purchase of all such participations, Agent shall be entitled to set off the funding short-fall against that Non-Funding Lender's Pro Rata Share of all payments received from Borrowers. Such payments shall be made by wire transfer to such Lender's account (as specified by such Lender in ANNEX H or the applicable Assignment Agreement) not later than 2:00 p.m. (New York time) on the next Business Day following each Settlement Date. (b) AVAILABILITY OF LENDER'S PRO RATA SHARE. Agent may assume that each Revolving Lender will make its Pro Rata Share of each Revolving Credit Advance available to 57 Agent on each funding date. If such Pro Rata Share is not, in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled to recover such amount on demand from such Revolving Lender without set-off, counterclaim or deduction of any kind. If any Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify Borrower Representative and Borrowers shall immediately repay such amount to Agent. Nothing in this SECTION 9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to relieve any Revolving Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Borrowers may have against any Revolving Lender as a result of any default by such Revolving Lender hereunder. To the extent that Agent advances funds to any Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day as such Advance is made, Agent shall be entitled to retain for its account all interest accrued on such Advance until reimbursed by the applicable Revolving Lender. (c) RETURN OF PAYMENTS. (i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from Borrowers and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without set-off, counterclaim or deduction of any kind. (ii) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without set-off, counterclaim or deduction of any kind. (d) NON-FUNDING LENDERS. The failure of any Non-Funding Lender to make any Revolving Credit Advance or any payment required by it hereunder or to purchase any participation in any Swing Line Loan to be made or purchased by it on the date specified therefor shall not relieve any other Revolving Lender (each such other Revolving Lender, an "OTHER LENDER") of its obligations to make such Advance or purchase such participation on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make an Advance or to purchase a participation required hereunder. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a "Lender" or a "Revolving Lender" (or be included in the calculation of "Requisite Lenders", "Requisite Revolving Lenders" or "Supermajority Revolving Lenders" hereunder) for any voting or consent rights under or with respect to any Loan Document. 58 (e) DISSEMINATION OF INFORMATION. Agent will use reasonable efforts to provide Lenders with any notice of Default or Event of Default received by Agent from, or delivered by Agent to, any Credit Party, with notice of any Event of Default of which Agent has actually become aware and with notice of any action taken by Agent following any Event of Default; provided, however, that Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent's gross negligence or willful misconduct. (f) ACTIONS IN CONCERT. Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Notes (including exercising any rights of set-off) without first obtaining the prior written consent of Agent and Requisite Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Notes shall be taken in concert and at the direction or with the consent of Agent. 10. SUCCESSORS AND ASSIGNS 10.1. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of each Credit Party, Agent, Lenders and their respective successors and assigns (including, in the case of any Credit Party, a debtor-in-possession on behalf of such Credit Party), except as otherwise provided herein or therein. No Credit Party may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Agent and Lenders. Any such purported assignment, transfer, hypothecation or other conveyance by any Credit Party without the prior express written consent of Agent and Lenders shall be void. The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of each Credit Party, Agent and Lenders with respect to the transactions contemplated hereby and no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents. 11. MISCELLANEOUS 11.1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan Documents constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in SECTION 11.2 below. Any letter of interest, and/or fee letter (other than the GE Capital Fee Letter) between any Credit Party and Agent or any Lender or any of their respective affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement. 59 11.2. AMENDMENTS AND WAIVERS. (a) Except for actions expressly permitted to be taken by Agent, no amendment, modification, termination or waiver of any provision of this Agreement or any of the Notes, or any consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by Agent and Borrowers, and by Requisite Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders, as applicable. Except as set forth in CLAUSES (b) and (c) below, all such amendments, modifications, terminations or waivers requiring the consent of any Lenders shall require the written consent of Requisite Lenders. (b) No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement which increases the percentage advance rates set forth in the definition of the MCP Revolving Borrowing Base or the Second Borrower Revolving Borrowing Base (to the extent applicable), or which makes less restrictive the nondiscretionary criteria for exclusion from Eligible Accounts and Eligible Inventory set forth in SECTIONS 1.6 and 1.7 shall be effective unless the same shall be in writing and signed by Agent, Supermajority Revolving Lenders and Borrowers. No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement which waives compliance with the conditions precedent set forth in SECTION 2.2 to the making of any Loan or the incurrence of any Letter of Credit Obligations shall be effective unless the same shall be in writing and signed by Agent, Requisite Revolving Lenders and Borrowers. Notwithstanding anything contained in this Agreement to the contrary, no waiver or consent with respect to any Default (if in connection therewith Agent or Requisite Revolving Lenders, as the case may be, have exercised its or their right to suspend the making or incurrence of further Advances or Letter of Credit Obligations pursuant to SECTION 8.2(a)) or any Event of Default shall be effective for purposes of the conditions precedent to the making of Loans or the incurrence of Letter of Credit Obligations set forth in SECTION 2.2 unless the same shall be in writing and signed by Agent, Requisite Revolving Lenders and Borrowers. (c) No amendment, modification, termination or waiver shall, unless in writing and signed by Agent and each Lender directly affected thereby, do any of the following: (i) increase the principal amount of any Lender's Commitment (which action shall be deemed to directly affect all Lenders); (ii) reduce the principal of, rate of interest on or Fees payable with respect to any Loan or Letter of Credit Obligations of any affected Lender; (iii) extend any scheduled payment date or final maturity date of the principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest or Fees as to any affected Lender; (v) except as otherwise permitted herein or in the other Loan Documents, release, or permit any Credit Party to sell or otherwise dispose of, any Collateral with a value exceeding $5,000,000 in the aggregate (which action shall be deemed to directly affect all Lenders); (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for Lenders or any of them to take any action hereunder; and (vii) amend or waive this SECTION 11.2 or the definitions of the terms "Requisite Lenders", "Requisite Revolving Lenders" or "Supermajority Revolving Lenders" insofar as such definitions affect the substance of this 60 SECTION 11.2. Furthermore, no amendment, modification, termination or waiver affecting the rights or duties of Agent under this Agreement or any other Loan Document shall be effective unless in writing and signed by Agent, in addition to Lenders required hereinabove to take such action. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No amendment, modification, termination or waiver shall be required for Agent to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the holder of that Note. No notice to or demand on any Credit Party in any case shall entitle such Credit Party or any other Credit Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this SECTION 11.2 shall be binding upon each holder of the Notes at the time outstanding and each future holder of the Notes. (d) If, in connection with any proposed amendment, modification, waiver or termination (a "PROPOSED CHANGE"): (i) requiring the consent of all affected Lenders, the consent of Requisite Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described this CLAUSE (i) and in CLAUSES (ii), (iii) and (iv) below being referred to as a "NON-CONSENTING LENDER"), or (ii) requiring the consent of Supermajority Revolving Lenders, the consent of Requisite Revolving Lenders is obtained, but the consent of Supermajority Revolving Lenders is not obtained, or (iii) requiring the consent of Requisite Revolving Lenders, the consent of Revolving Lenders holding 51% or more of the aggregate Revolving Loan Commitments is obtained, but the consent of Requisite Revolving Lenders is not obtained, or (iv) requiring the consent of Requisite Lenders, the consent of Lenders holding 51% or more of the aggregate Commitments is obtained, but the consent of Requisite Lenders is not obtained, then, so long as Agent is not a Non-Consenting Lender, at Borrower Representative's request, Agent or a Person acceptable to Agent shall have the right with Agent's consent and in Agent's sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall, upon Agent's request, sell and assign to Agent or such Person, all of the Commitments of such Non-Consenting Lender for an amount equal to the principal balance of all Loans held by the Non-Consenting Lender and all accrued interest and Fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement. 61 (e) Upon indefeasible payment in full in cash and performance of all of the Obligations (other than indemnification Obligations under Section 1.13, termination of the Commitments and a release of all claims against Agent and Lenders, and so long as no suits, actions, proceedings, or claims are pending or threatened against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Agent shall deliver to Borrowers termination statements, mortgage releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations. 11.3. FEES AND EXPENSES. Borrowers shall reimburse Agent for all out-of-pocket expenses incurred in connection with the preparation of the Loan Documents (including the reasonable fees and expenses of all of its special loan counsel, advisors, consultants and auditors retained in connection with the Loan Documents and the Related Transactions and advice in connection therewith). Borrowers shall reimburse Agent (and, with respect to CLAUSES (c), (d) and (e) below, all Lenders) for all fees, costs and expenses, including the reasonable fees, costs and expenses of counsel or other advisors (including environmental and management consultants and appraisers) for advice, assistance, or other representation in connection with: (a) the forwarding to Borrowers or any other Person on behalf of Borrowers by Agent of the proceeds of the Loans; (b) any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents or Related Transactions Documents or advice in connection with the administration of the Loans made pursuant hereto or its rights hereunder or thereunder; (c) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, any Borrower or any other Person) in any way relating to the Collateral, any of the Loan Documents or any other agreement to be executed or delivered in connection therewith or herewith, whether as party, witness, or otherwise, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against any or all of the Borrowers or any other Person that may be obligated to Agent by virtue of the Loan Documents; including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Loans during the pendency of one or more Events of Default; PROVIDED that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders; (d) any attempt to enforce any remedies of Agent against any or all of the Credit Parties or any other Person that may be obligated to Agent or any Lender by virtue of any of the Loan Documents; including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the Loans during the pendency of one or more Events of Default; PROVIDED that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders; 62 (e) any work-out or restructuring of the Loans during the pendency of one or more Events of Default; or (f) efforts to (i) monitor the Loans or any of the other Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their respective affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral; including, as to each of clauses (a) through (f) above, all attorneys' and other professional and service providers' fees arising from such services, including those in connection with any appellate proceedings; and all expenses, costs, charges and other fees incurred by such counsel and others in any way or respect arising in connection with or relating to any of the events or actions described in this SECTION 11.3 shall be payable, on demand, by Borrowers to Agent. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. 11.4. NO WAIVER. Agent's or any Lender's failure, at any time or times, to require strict performance by the Credit Parties of any provision of this Agreement and any of the other Loan Documents shall not waive, affect or diminish any right of Agent or such Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type. Subject to the provisions of SECTION 11.2, none of the undertakings, agreements, warranties, covenants and representations of any Credit Party contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by any Credit Party shall be deemed to have been suspended or waived by Agent or any Lender, unless such waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of Agent and the applicable required Lenders, and directed to Borrowers specifying such suspension or waiver. 11.5. REMEDIES. Agent's and Lenders' rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies which Agent or any Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 11.6. SEVERABILITY. Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective and valid 63 under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.7. CONFLICT OF TERMS. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control. 11.8. CONFIDENTIALITY. Agent and each Lender agree to use commercially reasonable efforts and at least equivalent to the efforts Agent or such Lender applies to maintaining the confidentiality of its own confidential information to maintain as confidential all confidential information provided to them by the Credit Parties and designated as confidential for a period of two (2) years following receipt thereof, except that Agent and any Lender may disclose such information (a) to Persons employed or engaged by Agent or such Lender in evaluating, approving, structuring or administering the Loans and the Commitments; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this SECTION 11.8 (and any such bona fide assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in CLAUSE (a) above); (c) as required or requested by any Governmental Authority or reasonably believed by Agent or such Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Agent's or such Lender's counsel, required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any Litigation to which Agent or such Lender is a party; or (f) which ceases to be confidential through no fault of Agent or such Lender. 11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS 64 AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK AND, PROVIDED, FURTHER NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. 11.10. NOTICES. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this SECTION 11.10), (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated on ANNEX I or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any 65 Person (other than Borrower Representative or Agent) designated on ANNEX I to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 11.11. SECTION TITLES. The Section titles and Table of Contents contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 11.12. COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. 11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. 11.14. PRESS RELEASES. Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of GE Capital or its affiliates or referring to this Agreement, the other Loan Documents or the Related Transactions Documents without at least two (2) Business Days' prior notice to GE Capital and without the prior written consent of GE Capital unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then, in any event, such Credit Party or Affiliate will consult with GE Capital before issuing such press release or other public disclosure. Each Credit Party consents to the publication by Agent or any Lender of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement. Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements with Borrowers' consent which shall not be unreasonably withheld or delayed. 11.15. REINSTATEMENT. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Borrower for liquidation or reorganization, should any Borrower become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any 66 significant part of any Borrower's assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 11.16. ADVICE OF COUNSEL. Each of the parties represents to each other party hereto that it has discussed this Agreement and, specifically, the provisions of SECTIONS 11.9 and 11.13, with its counsel. 11.17. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. 67 IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above. MORTON CUSTOM PLASTICS, LLC By: Morton Holdings, LLC, its Manager By: Morton Industrial Group, Inc. its Manager By: ----------------------------------- Name: Title: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender By: ----------------------------------- Name: Title: The following Persons are signatories to this Agreement in their capacity as Credit Parties and not as Borrowers. MORTON HOLDINGS, LLC By: Morton Industrial Group, Inc. its Manager By: ----------------------------------- Name: Title: MORTON LEBANON KENTUCKY IBRB, LLC By: Morton Custom Plastics, LLC, its Manager By: Morton Holdings, LLC, its Manager By: Morton Industrial Group, Inc., its Manager By: ------------------------------ Name: Title: SCHEDULE 1.1 68 RESPONSIBLE INDIVIDUAL ---------------------- General Electric Capital Corporation 335 Madison Avenue, 12th Floor New York, New York 10017 Attention: Morton Custom Plastics Account Manager Telecopier No.: (212) 983-8767 Telephone No.: (212) 370-8000 69 ANNEX A (RECITALS) TO CREDIT AGREEMENT DEFINITIONS Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere in the Loan Documents) the following respective meanings and all section references in the following definitions shall refer to Sections of the Agreement: "ACCOUNT DEBTOR" shall mean any Person who may become obligated to any Credit Party under, with respect to, or on account of, an Account. "ACCOUNTS" shall mean all "accounts," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party and, in any event, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments) now owned or hereafter received or acquired by or belonging or owing to any Credit Party, whether arising out of goods sold or services rendered by it or from any other transaction (including any such obligations which may be characterized as an account or contract right under the Code), (b) all of each Credit Party's rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, (c) all of each Credit Party's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all monies due or to become due to any Credit Party, under all purchase orders and contracts for the sale of goods or the performance of services or both by such Credit Party or in connection with any other transaction (whether or not yet earned by performance on the part of such Credit Party) now or hereafter in existence, including the right to receive the proceeds of said purchase orders and contracts, and (e) all collateral security and guarantees of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing. "ADVANCE" shall mean any Revolving Credit Advance or Swing Line Advance, as the context may require. "AFFILIATE" shall mean, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock having ordinary voting power in the election of directors of such Persons, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, directors, joint venturers and partners and (d) in the case of Borrowers, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of any Borrower. For the purposes of this definition, "CONTROL" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; PROVIDED, HOWEVER, that the term "AFFILIATE" shall specifically exclude Agent and each Lender. A-1 "AGENT" shall mean GE Capital or its successor appointed pursuant to SECTION 9.7. "AGGREGATE REVOLVING BORROWING BASE" shall mean, as of any date of determination, an amount equal to the sum of the MCP Revolving Borrowing Base and the Second Borrower Revolving Borrowing Base (if any). "AGREEMENT" shall mean the Credit Agreement by and among Borrowers, the other Credit Parties named therein, GE Capital, as Agent and Lender and the other Lenders signatory from time to time to the Agreement. "APPENDICES" shall have the meaning assigned to it in the recitals to the Agreement. "APPLICABLE IN-FORMULA TERM LOAN INDEX MARGIN" shall mean the per annum interest rate from time to time in effect and payable in addition to the Index Rate applicable to the In-Formula Term Sub-Limit, as determined by reference to SECTION 1.5(a) of the Agreement. "APPLICABLE IN-FORMULA TERM LOAN LIBOR MARGIN" shall mean the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the In-Formula Term Sub-Limit, as determined by reference to SECTION 1.5(a) of the Agreement. "APPLICABLE MARGINS" means collectively the Applicable Revolver Index Margin, the Applicable In-Formula Term Loan Index Margin, the Applicable Overadvance Index Margin, the Applicable Revolver LIBOR Margin, the Applicable In-Formula Term Loan LIBOR Margin and the Applicable Overadvance LIBOR Margin. "APPLICABLE OVERADVANCE INDEX MARGIN" shall mean the per annum interest rate from time to time in effect and payable in addition to the Index Rate applicable to the Term Overadvance, as determined by reference to SECTION 1.5(a) of the Agreement. "APPLICABLE OVERADVANCE LIBOR MARGIN" shall mean the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Term Overadvance, as determined by reference to SECTION 1.5(a) of the Agreement. "APPLICABLE REVOLVER INDEX MARGIN" shall mean the per annum interest rate margin from time to time in effect and payable in addition to the Index Rate applicable to the Revolving Loan, as determined by reference to SECTION 1.5(a) of the Agreement. A-2 "APPLICABLE REVOLVER LIBOR MARGIN" shall mean the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Revolving Loan, as determined by reference to SECTION 1.5(a) of the Agreement. "ASSIGNMENT AGREEMENT" shall have the meaning assigned to it in SECTION 9.1(a). "BORROWERS" shall mean each of MCP and any other Person that becomes a Borrower hereunder pursuant to Section 2.3. "BORROWER ACCOUNTS" shall have the meaning assigned to it in ANNEX C. "BORROWER INTELLECTUAL PROPERTY AGREEMENT" shall mean the Intellectual Property Agreement of even date herewith entered into among Agent, on behalf of itself and Lenders, and each Borrower. "BORROWER PLEDGE AGREEMENT" shall mean the Pledge Agreement of even date herewith entered into among Agent, on behalf of itself and Lenders, and each Borrower. "BORROWER REPRESENTATIVE" shall mean MCP in its capacity as Borrower Representative pursuant to the provisions of SECTION 1.1(d). "BORROWER SECURITY AGREEMENT" shall mean the Security Agreement of even date herewith entered into among Agent, on behalf of itself and Lenders, and each Borrower. "BORROWING AVAILABILITY" shall have the meaning assigned to it in SECTION 1.1(a)(i). "BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York and in reference to LIBOR Loans shall mean any such day that is also a LIBOR Business Day. "CAPITAL EXPENDITURES" shall mean, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness, including without limitation in connection with Capital Leases) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP. "CAPITAL LEASE" shall mean, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person. A-3 "CAPITAL LEASE OBLIGATION" shall mean, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease. "CASH MANAGEMENT SYSTEMS" shall have the meaning assigned to it in SECTION 1.10. "CHANGE OF CONTROL" shall mean any event, transaction or occurrence as a result of which (a) MIG shall cease to own and control at least 80% of the economic and 35% of the voting rights associated with the outstanding capital Stock of all classes of Holdings on a fully diluted basis, (b) Holdings shall cease to own and control all of the economic and voting rights associated with at least 100% of the outstanding capital Stock of MCP, (c) MIG shall cease to be the Manager of Holdings and Holdings shall cease to be the Manager of MCP and MCP shall cease to be the Manager of the IRB Subsidiary or (d) MCP shall cease to own and control all of the economic and voting rights associated with all of the outstanding capital Stock of any of its Subsidiaries. "CHARGES" shall mean all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any Credit Party, (d) any Credit Party's ownership or use of any properties or other assets, or (e) any other aspect of any Credit Party's business. "CHATTEL PAPER" shall mean any "chattel paper," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located. "CLOSING DATE" shall mean April 15, 1999. "CLOSING CHECKLIST" shall mean the schedule, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Agreement, the other Loan Documents and the transactions contemplated thereunder, substantially in the form attached hereto as ANNEX D. "CODE" shall mean the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; PROVIDED, HOWEVER, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of Agent's or any Lender's security interest in any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term "CODE" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. A-4 "COLLATERAL" shall mean the property covered by the Security Agreements, the Mortgages, the Pledge Agreements and the other Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure the Obligations. "COLLATERAL DOCUMENTS" shall mean the Security Agreements, the Pledge Agreements, the Guaranties, the Mortgages, the Intellectual Property Security Agreements and all similar agreements entered into guaranteeing payment of, or granting a Lien upon property as security for payment of, the Obligations. "COLLATERAL REPORTS" shall mean the reports with respect to the Collateral referred to in ANNEX F. "COLLECTION ACCOUNT" shall mean that certain account of Agent, account number 502-328-54 in the name of Agent at Bankers Trust Company in New York, New York or such other account as Agent shall specify. "COMMITMENT TERMINATION DATE" shall mean the earliest of (a) October 15, 2003, (b) the date of termination of Lenders' obligations to make Advances and/or incur Letter of Credit Obligations or permit existing Loans to remain outstanding pursuant to SECTION 8.2(b), and (c) the date of indefeasible prepayment in full by Borrowers of the Loans and the cancellation and return (or stand-by guarantee) of all Letters of Credit or the cash collateralization of all Letter of Credit Obligations pursuant to ANNEX B, and the permanent reduction of the Revolving Loan Commitment and the Swing Line Commitment to zero dollars ($0). "COMMITMENTS" shall mean (a) as to any Lender, the aggregate of such Lender's Revolving Loan Commitment (including without duplication the Swing Line Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) and Term Loan Commitment as set forth on ANNEX J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders' Revolving Loan Commitments (including without duplication the Swing Line Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) and Term Loan Commitments, which aggregate commitment shall be $50,000,000 on the Closing Date, as to each of clauses (a) and (b), as such Commitments may be reduced, amortized or adjusted from time to time in accordance with the Agreement. "COMPLIANCE CERTIFICATE" shall have the meaning assigned to it in ANNEX E. "CONTINGENT PAYMENT" shall have the meaning assigned to such term in the Worthington Acquisition Agreement, as amended by Amendment No. 1 thereto. A-5 "CONTRACTS" shall mean all "contracts," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Credit Party may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account. "COPYRIGHT LICENSE" shall mean any and all rights now owned or hereafter acquired by any Credit Party under any written agreement granting any right to use any Copyright or Copyright registration. "COPYRIGHTS" shall mean all of the following now owned or hereafter acquired by any Credit Party: (a) all copyrights and general intangibles of like nature (whether registered or unregistered), now owned or existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof. "CREDIT PARTIES" shall mean Holdings, each Borrower, and each of their respective Subsidiaries. "CURRENT ASSETS" shall mean, with respect to any Person, all current assets of such Person as of any date of determination calculated in accordance with GAAP, but excluding cash, cash equivalents and debts due from Affiliates. "CURRENT LIABILITIES" shall mean, with respect to any Person, all liabilities which should, in accordance with GAAP, be classified as current liabilities, and in any event shall include all Indebtedness payable on demand or within one year from any date of determination without any option on the part of the obligor to extend or renew beyond such year, all accruals for federal or other taxes based on or measured by income and payable within such year, and the current portion of long-term debt required to be paid within one year, but excluding, in the case of Borrowers, the aggregate outstanding principal balances of the Revolving Loan and the Swing Line Loan. "DEFAULT" shall mean any event which, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default. "DEFAULT RATE" shall have the meaning assigned to it in SECTION 1.5(d). "DISBURSEMENT ACCOUNTS" shall have the meaning assigned to it on ANNEX C. A-6 "DISCLOSURE SCHEDULES" shall mean the Schedules prepared by Borrowers and denominated as Disclosure SCHEDULES 1.4 through 6.7 in the Index to the Agreement. "DOCUMENTS" shall mean any "documents," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located. "DOLLARS" or "$" shall mean lawful currency of the United States of America. "EBITDA" shall mean, with respect to any Person for any fiscal period, an amount equal to (a) consolidated net income of such Person for such period, MINUS (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), and (v) any other non-cash gains which have been added in determining consolidated net income, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication, PLUS (c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv) the amount of non-cash charges (including depreciation and amortization) for such period, (v) amortized debt discount for such period, and (vi) the amount of any deduction to consolidated net income as the result of any grant to any members of the management of such Person of any Stock, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication. For purposes of this definition, the following items shall be excluded in determining consolidated net income of a Person: (1) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, such Person or any of such Person's Subsidiaries; (2) the income (or deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership interest, except to the extent any such income has actually been received by such Person in the form of cash dividends or distributions; (3) the undistributed earnings of any Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (4) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; (5) any write-up of any asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor to such Person by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets, and (9) any deferred credit representing the excess of equity in any Subsidiary of such Person at the date of acquisition of such Subsidiary over the cost to such Person of the investment in such Subsidiary. A-7 "ELIGIBLE ACCOUNTS" shall have the meaning assigned to it in SECTION 1.6 of the Agreement. "ELIGIBLE INVENTORY" shall have the meaning assigned to it in SECTION 1.7 of the Agreement. "ENVIRONMENTAL LAWS" shall mean all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 ET SEQ.) ("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. Sections 5101 ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 ET SEQ.); the Solid Waste Disposal Act (42 U.S.C. Sections 6901 ET SEQ.); the Toxic Substance Control Act (15 U.S.C. Sections 2601 ET SEQ.); the Clean Air Act (42 U.S.C. Sections 7401 ET SEQ.); the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 ET SEQ.); the Occupational Safety and Health Act (29 U.S.C. Sections 651 ET SEQ.); and the Safe Drinking Water Act (42 U.S.C. Sections 300(f) ET SEQ.), each as from time to time amended, and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes. "ENVIRONMENTAL LIABILITIES" shall mean, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property. "ENVIRONMENTAL PERMITS" shall mean all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws. "EQUIPMENT" shall mean all "equipment," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located and, in any event, A-8 including all such Credit Party's machinery and equipment, including processing equipment, conveyors, machine tools, data processing and computer equipment with software and peripheral equipment (other than software constituting part of the Accounts), and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, all whether now owned or hereafter acquired, and wherever situated, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto. "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder. "ERISA AFFILIATE" shall mean, with respect to any Credit Party, any trade or business (whether or not incorporated) which, together with such Credit Party, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC. "ERISA EVENT" shall mean, with respect to any Credit Party or any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Credit Party or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party or ERISA Affiliate to make when due required contributions to a Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 of ERISA; or (i) the loss of a Qualified Plan's qualification or tax exempt status; or (j) the termination of a Plan described in Section 4064 of ERISA. "ESOP" shall mean a Plan which is intended to satisfy the requirements of Section 4975(e)(7) of the IRC. "EVENT OF DEFAULT" shall have the meaning assigned to it in SECTION 8.1. A-9 "EXCESS CASH FLOW" shall mean, without duplication, with respect to any Fiscal Year of Borrowers and their Subsidiaries, consolidated net income PLUS (a) depreciation, amortization and Interest Expense to the extent deducted in determining consolidated net income, PLUS decreases or MINUS increases (as the case may be) (b) in Working Capital, MINUS (c) Capital Expenditures during such Fiscal Year (excluding the financed portion thereof and excluding any Capital Expenditures in such Fiscal Year to the extent in excess of the amount permitted to be made in such Fiscal Year pursuant to CLAUSE (a) of Annex G), MINUS (d) Interest Expense paid or accrued (excluding any original issue discount, interest paid in kind or amortized debt discount, to the extent included in determining Interest Expense) and scheduled principal payments paid or payable in respect of Funded Debt, PLUS or MINUS (as the case may be), (e) extraordinary gains or losses which are cash items not included in the calculation of net income, MINUS (f) mandatory prepayments paid in cash pursuant to SECTION 1.3 other than mandatory prepayments made pursuant to SECTIONS 1.3(b)(i), 1.3(b)(iv) or 1.3(d), PLUS (g) taxes deducted in determining consolidated net income to the extent not paid for in cash. For purposes of this definition, "WORKING CAPITAL" means Current Assets LESS Current Liabilities. "FEDERAL FUNDS RATE" shall mean, for any day, a floating rate equal to the weighted average of the rates on overnight Federal funds transactions among members of the Federal Reserve System, as determined by Agent. "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve System, or any successor thereto. "FEES" shall mean any and all fees payable to Agent or any Lender pursuant to the Agreement or any of the other Loan Documents. "FINANCIAL STATEMENTS" shall mean the consolidated income statements, statements of cash flows and balance sheets of Borrowers delivered in accordance with SECTION 3.4 of the Agreement and ANNEX E to the Agreement. "FISCAL MONTH" shall mean any of the monthly accounting periods of Borrowers. "FISCAL QUARTER" shall mean any of the quarterly accounting periods of Borrowers, ending on March 31, June 30, September 30 and December 31 of each year. "FISCAL YEAR" shall mean any of the annual accounting periods of Borrowers ending on December 31 of each year. "FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any Person for any fiscal period, the ratio of EBITDA to Fixed Charges. A-10 "FIXED CHARGES" shall mean, with respect to any Person for any fiscal period, (a) the aggregate of all Interest Expense paid or accrued during such period, plus (b) scheduled payments of principal with respect to Indebtedness during such period, plus (c) Capital Expenditures during such period (excluding the financed portion thereof). "FIXTURES" shall mean any "fixtures" as such term is defined in the Code, now owned or hereafter acquired by any Credit Party. "FUNDED DEBT" shall mean, with respect to any Person, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness and which by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person's option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of other Persons. "GAAP" shall mean generally accepted accounting principles in the United States of America consistently applied, as such term is further defined in ANNEX G to the Agreement. "GE CAPITAL FEE LETTER" shall have the meaning assigned to it in SECTION 1.9. "GENERAL INTANGIBLES" shall mean any "general intangibles," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, and, in any event, including all right, title and interest which such Credit Party may now or hereafter have in or under any Contract, all customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Credit Party or any computer bureau or service company from time to time acting for such Credit Party. A-11 "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner, including any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is made and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness; or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof. "GUARANTIES" shall mean, collectively, the Holdings Guaranty, each Subsidiary Guaranty and any other guaranty executed by any Guarantor in favor of Agent and Lenders in respect of the Obligations. "GUARANTORS" shall mean Holdings, each Subsidiary of each Borrower, and each other Person, if any, which executes a guarantee or other similar agreement in favor of Agent in connection with the transactions contemplated by the Agreement and the other Loan Documents. "HAZARDOUS MATERIAL" shall mean any substance, material or waste which is regulated by or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance which is (a) defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," "contaminant," "hazardous constituent," "special waste," "toxic substance" or other similar term or phrase under any Environmental Laws, (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or any radioactive substance. "HOLDINGS" shall have the meaning ascribed thereto in the recitals to the Agreement. A-12 "HOLDINGS GUARANTY" shall mean the guaranty of even date herewith executed by Holdings in favor of Agent and Lenders. "HOLDINGS INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean the Intellectual Property Security Agreement of even date herewith entered into between Agent, on behalf of itself and Lenders, and Holdings. "HOLDINGS NOTE" shall mean the $5,000,000 promissory note from Holdings to MCP dated the Closing Date. "HOLDINGS PLEDGE AGREEMENT" shall mean the Pledge Agreement of even date herewith entered into between Agent, on behalf of itself and Lenders, and Holdings. "HOLDINGS SECURITY AGREEMENT" shall mean the Security Agreement of even date herewith entered into between Agent, on behalf of itself and Lenders, and Holdings. "INDEBTEDNESS" of any Person shall mean without duplication (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property payment for which is deferred six (6) months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are not overdue by more than six (6) months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations and the present value (discounted at the Index Rate as in effect on the Closing Date) of future rental payments under all synthetic leases, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Obligations; PROVIDED, that the obligation of MCP to make the Contingent Payment shall not constitute Indebtedness. "INDEMNIFIED LIABILITIES" shall have the meaning assigned to it in SECTION 1.13. "INDEX RATE" shall mean, for any day, a floating rate equal to the higher of (i) the rate publicly quoted from time to time by THE WALL STREET JOURNAL as the "base rate on A-13 corporate loans at large U.S. money center commercial banks" (or, if THE WALL STREET JOURNAL ceases quoting a base rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus fifty (50) basis points per annum. Each change in any interest rate provided for in the Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate. "INDEX RATE LOAN" shall mean a Loan or portion thereof bearing interest by reference to the Index Rate. "IN-FORMULA TERM SUB-LIMIT" shall have the meaning provided in SECTION 1.1(b)(i)(1). "INSTRUMENTS" shall mean any "instrument," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all notes and other, without limitation, evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "INTELLECTUAL PROPERTY" shall mean any and all Licenses, Patents, Copyrights, Trademarks, trade secrets and customer lists. "INTELLECTUAL PROPERTY SECURITY AGREEMENTS" shall mean, collectively, the Holdings Intellectual Property Security Agreement, Borrower Intellectual Property Security Agreement and Subsidiary Intellectual Property Security Agreement in each case made in favor of Agent, on behalf of itself and Lenders, by each applicable Credit Party. "INTEREST EXPENSE" shall mean, with respect to any Person for any fiscal period, interest expense (whether cash or non-cash) of such Person determined in accordance with GAAP for the relevant period ended on such date, including, in any event, interest expense with respect to any Funded Debt of such Person and interest expense for the relevant period that has been capitalized on the balance sheet of such Person. "INTEREST PAYMENT DATE" means (a) as to any Index Rate Loan, the first Business Day of each month to occur while such Loan is outstanding, (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period; PROVIDED that in the case of any LIBOR Period greater than three months in duration, interest shall be payable at three month intervals and on the last day of such LIBOR Period; and PROVIDED further that in addition to the foregoing, each of (x) the date upon which all of the Commitments have been terminated and the Loans have been paid in full and (y) the Commitment Termination Date shall be deemed to be an "Interest Payment Date" with respect to any interest which is then accrued under the Agreement. A-14 "INVENTORY" shall mean any "inventory," as such term is defined in the Code, now or hereafter owned or acquired by any Credit Party, wherever located, and in any event including inventory, merchandise, goods and other personal property which are held by or on behalf of any Credit Party for sale or lease or are furnished or are to be furnished under a contract of service, or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in such Credit Party's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including other supplies. "INVESTMENT PROPERTY" shall have the meaning ascribed thereto in Section 9-115 of the Code in those jurisdictions in which such definition has been adopted and shall include (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Credit Party, including the rights of any Credit Party to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts held by any Credit Party; (iv) all commodity contracts held by any Credit Party; and (v) all commodity accounts held by any Credit Party. "IRC" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto. "IRB ASSIGNMENT DOCUMENTS" shall mean the documentation pursuant to which (i) Seller assigns its rights and obligations under the IRB Lease Agreement to MCP and MCP assumes such rights and obligations and (ii) the Lebanon IRBs are transferred by an Affiliate of Seller to IRB Subsidiary. "IRB INDENTURE" shall mean the Trust Indenture dated as of December 1, 1994 by and among the City of Lebanon, Kentucky, a city and political subdivision of the Commonwealth of Kentucky, and Star Bank, N.A., Kentucky, Lebanon, Kentucky (acting through the Corporate Trust Department of Star Bank, National Association, in Cincinnati, Ohio), as Trustee, and as Paying Agent and Bond Register. "IRB LEASE AGREEMENT" shall mean the Lease Agreement dated as of December 1, 1994, between the City of Lebanon, Kentucky, a city and political subdivision of the Commonwealth of Kentucky, and MCP, as assignee of Seller thereunder pursuant to the terms of the IRB Assignment Documents. "IRB SUBSIDIARY" shall mean Morton Lebanon Kentucky IBRB, LLC, a Delaware limited liability company, and a wholly-owned domestic Subsidiary of MCP which shall be the holder of the Lebanon IRBs. "IRS" shall mean the Internal Revenue Service, or any successor thereto. A-15 "L/C ISSUER" shall have the meaning assigned to such term in ANNEX B. "LEBANON IRBs" shall mean the industrial revenue bonds issued in respect of MCP's Lebanon, Kentucky location and pursuant to the terms of the IRB Indenture. "LENDERS" shall mean GE Capital, the other Lenders named on the signature page of the Agreement, and, if any such Lender shall decide to assign all or any portion of the Obligations, such term shall include such assignee. "LETTER OF CREDIT FEE" has the meaning ascribed thereto in ANNEX B. "LETTER OF CREDIT OBLIGATIONS" shall mean all outstanding obligations incurred by Agent and Lenders at the request of Borrower Representative, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance of a reimbursement agreement or guaranty by Agent or purchase of a participation as set forth in ANNEX B with respect to any Letter of Credit. The amount of such Letter of Credit Obligations shall equal the maximum amount which may be payable by Agent or Lenders thereupon or pursuant thereto. "LETTERS OF CREDIT" shall mean commercial letters of credit issued for the account of any Borrower by any L/C Issuer for which Agent and Lenders have incurred Letter of Credit Obligations. "LIBOR BUSINESS DAY" shall mean a Business Day on which banks in the city of London are generally open for interbank or foreign exchange transactions. "LIBOR LOAN" shall mean a Loan or any portion thereof bearing interest by reference to the LIBOR Rate. "LIBOR PERIOD" shall mean, with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day selected by Borrower Representative pursuant to the Agreement and ending one, two, three or six months thereafter, as selected by Borrower Representative's irrevocable notice to Agent as set forth in SECTION 1.5(e); PROVIDED that the foregoing provision relating to LIBOR Periods is subject to the following: (a) if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such LIBOR Period into another calendar month in which event such LIBOR Period shall end on the immediately preceding LIBOR Business Day; (b) any LIBOR Period that would otherwise extend beyond the Commitment Termination Date shall end two (2) LIBOR Business Days prior to such date; A-16 (c) any LIBOR Period pertaining to a LIBOR Loan that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Period) shall end on the last LIBOR Business Day of a calendar month; (d) Borrower Representative shall select LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and (e) Borrower Representative shall select LIBOR Periods so that there shall be no more than eight (8) separate LIBOR Loans in existence at any one time. "LIBOR RATE" shall mean for each LIBOR Period, a rate of interest determined by Agent equal to: (a) the offered rate for deposits in United States Dollars for the applicable LIBOR Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the second full LIBOR Business Day next preceding the first day of each LIBOR Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); divided by (b) a number equal to 1.0 MINUS the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day which is two (2) LIBOR Business Days prior to the beginning of such LIBOR Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve system or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board which are required to be maintained by a member bank of the Federal Reserve System. If such interest rates shall cease to be available from Telerate News Service, the LIBOR Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to Agent and Borrower Representative. "LICENSE" shall mean any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by any Credit Party. "LIEN" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing A-17 lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). "LITIGATION" shall have the meaning assigned to it in SECTION 3.13. "LOAN ACCOUNT" shall have the meaning assigned to it in SECTION 1.12. "LOAN DOCUMENTS" shall mean the Agreement, the Notes, the Collateral Documents and all other agreements (including, without limitation, the GE Capital Fee Letter), instruments, documents and certificates identified in the Closing Checklist executed and delivered to, or in favor of, Agent and/or Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Credit Party, or any employee of any Credit Party, and delivered to Agent or any Lender in connection with the Agreement or the transactions contemplated hereby. Any reference in the Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to such Agreement as the same may be in effect at any and all times such reference becomes operative. "LOANS" shall mean the Revolving Loan, the Swing Line Loan and the Term Loan. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of the Credit Parties considered as a whole or, on or prior to the Closing Date, Worthington, as the case may be, (b) any Borrower's ability to pay any of the Loans or any of the other Obligations in accordance with the terms of the Agreement, (c) the Collateral or Agent's Liens, on behalf of itself and Lenders, on the Collateral or the priority of such Liens, or (d) Agent's or any Lender's rights and remedies under the Agreement and the other Loan Documents. Without limiting the foregoing, any event or occurrence adverse to one or more Credit Parties which results or could reasonably be expected to result in costs and/or liabilities and/or loss of revenues, individually or in the aggregate, to any Credit Party in any 30-day period in excess of the lesser of $3,000,000 and 10% of Borrowing Availability as of any date of determination shall be deemed to have had Material Adverse Effect. "MAXIMUM AMOUNT" shall mean, at any particular time, an amount equal to the Revolving Loan Commitment of all Lenders. "MCP" shall have the meaning assigned thereto in the recitals to this Agreement. A-18 "MCP PLEDGE AGREEMENT" shall mean the Pledge Agreement of even date herewith executed by MCP in favor of Agent, on behalf of itself and Lenders, pledging all Stock of its Subsidiaries and all instruments of Indebtedness, if any, owing to or held by it. "MCP REVOLVING BORROWING BASE" shall mean, as of any date of determination by Agent, from time to time, an amount equal to the sum at such time of: (a) up to eighty-five percent (85%) of the book value of MCP's Eligible Accounts, less any Reserves established by Agent at such time; (b) up to sixty percent (60%) of the book value of MCP's Eligible Inventory (other than work-in-process Inventory) valued on a first-in, first-out basis (at the lower of cost or market), less any Reserves established by Agent at such time; and (c) up to twenty percent (20%) of the book value of MCP's Eligible Inventory consisting of work-in-process Inventory valued on a first-in, first-out basis (at the lower of cost or market), less any Reserves established by Agent at such time. "MIG" shall mean Morton Industrial Group, Inc., a Georgia corporation. "MIG PREFERRED STOCK" shall mean non-voting shares of the Series 1999A Preferred Stock of MIG, no par value, having terms and conditions satisfactory to Agent. "MORTGAGED PROPERTIES" shall have the meaning assigned to it in ANNEX D. "MORTGAGES" shall mean each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents delivered by any Credit Party to Agent with respect to the Mortgaged Properties, all in form and substance satisfactory to Agent. "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "NET BORROWING AVAILABILITY" shall mean as of any date of determination (a) as to all Borrowers, the lesser of (i) the Maximum Amount and (ii) the Aggregate Revolving Borrowing Base, in each case LESS the sum of the aggregate Revolving Loan and Swing Line Loan then outstanding, or (b) as to an individual Borrower, the lesser of (i) the Maximum Amount LESS the sum of the Revolving Loan and Swing Line Loan outstanding to all other Borrowers and (ii) that Borrower's separate Revolving Borrowing Base, LESS the sum of the Revolving Loan and Swing Line Loan outstanding to that Borrower. A-19 "NET WORTH" shall mean, with respect to any Person as of any date of determination, the book value of the assets of such Person, MINUS (a) reserves applicable thereto, and MINUS (b) all of such Person's liabilities on a consolidated basis (including accrued and deferred income taxes), all as determined in accordance with GAAP. "NON-FUNDING LENDER" shall have the meaning assigned to it in Section 9.9(a)(ii). "NOTES" shall mean the Revolving Notes, the Swing Line Notes and the Term Notes, collectively. "NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned to it in SECTION 1.5(e). "NOTICE OF REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in SECTION 1.1(a). "OBLIGATIONS" shall mean all loans, advances, debts, liabilities and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the Agreement or any of the other Loan Documents. This term includes all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of any Credit Party, whether or not allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any Credit Party under the Agreement or any of the other Loan Documents. "PATENT LICENSE" shall mean rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right with respect to any invention on which a Patent is in existence. "PATENTS" shall mean all of the following in which any Credit Party now holds or hereafter acquires any interest: (a) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State or Territory thereof, or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto. A-20 "PERMITTED ENCUMBRANCES" shall mean the following encumbrances: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable; (b) pledges or deposits of money securing statutory obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of money securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Credit Party is a party as lessee made in the ordinary course of business; (d) inchoate and unperfected workers', mechanics' or similar liens arising in the ordinary course of business, so long as such Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers', warehousemen's, suppliers' or other similar possessory liens arising in the ordinary course of business and securing liabilities in an outstanding aggregate amount not in excess of $100,000 at any time, so long as such Liens attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (g) any attachment or judgment lien not constituting an Event of Default under SECTION 8.1(j); (h) zoning restrictions, easements, licenses, or other restrictions on the use of any Real Estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such Real Estate; (i) presently existing or hereinafter created Liens in favor of Agent, on behalf of Lenders; and (j) Liens expressly permitted under CLAUSES (b) and (c) of SECTION 6.7 of the Agreement. "PERMITTED FOREIGN ACCOUNT DEBTORS" shall mean Compaq Computer Corporation, International Business Machine Corporation, BE Aerospace, Inc., CTS Corporation and any of their respective foreign Affiliates reasonably acceptable to Agent. "PERSON" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof). "PLAN" shall mean, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which any Credit Party maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any Credit Party. "PLEDGE AGREEMENTS" shall mean, collectively, the Holdings Pledge Agreement, the Borrower Pledge Agreement, the Subsidiary Pledge Agreement, and any pledge agreements entered into after the Closing Date by any Credit Party (as required by the Agreement or any other Loan Document). "PREFERRED STOCK CONTRIBUTION" shall mean, collectively, (i) the loan of $5,000,000 by MCP to Holdings evidenced by the Holdings Note, (ii) the purchase with a portion of such loan proceeds by Holdings from MIG, and the related issuance by MIG, of A-21 10,000 shares of MIG Preferred Stock, having an aggregate liquidation value of $10,000,000, (iii) the payment by Holdings to MIG of the remaining portion of such loan proceeds as a management fee, (iv) the contribution by Holdings to the common equity of MCP of all of such MIG Preferred Stock, and (v) the transfer by MCP to Seller of such MIG Preferred Stock as partial consideration for the Worthington Acquisition in accordance with the terms of the Worthington Acquisition Agreement. "PROCEEDS" shall mean "proceeds," as such term is defined in the Code and, in any event, shall include (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Credit Party from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of any Credit Party against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by any Credit Party against third parties with respect to any litigation or dispute concerning any of the Collateral, and (e) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral, upon disposition or otherwise. "PRO FORMA" means the unaudited consolidated balance sheet of Holdings and its Subsidiaries as of December 31, 1998 after giving PRO FORMA effect to the Related Transactions. "PROJECTIONS" means Borrowers' forecasted consolidated: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared on a Subsidiary by Subsidiary or division by division basis, if applicable, and otherwise consistent with the historical Financial Statements of Worthington, together with appropriate supporting details and a statement of underlying assumptions. "PRO RATA SHARE" shall mean with respect to all matters relating to any Lender (a) with respect to the Revolving Loan (including the Swing Line Loan as a subset of the Swing Line Lender's Revolving Loan), the percentage obtained by dividing (i) the Revolving Loan Commitment (including the Swing Line Commitment as a subset of the Swing Line Lender's Revolving Loan Commitment) by (ii) the aggregate Revolving Loan Commitments, (b) with respect to the Term Loan(s), the percentage obtained by dividing (i) the Term Loan Commitment of that Lender by (ii) the aggregate Term Loan Commitments of all Lenders, as any such percentages may be adjusted by assignments permitted pursuant to SECTION 9.1, (c) with respect to all Loans, the percentage obtained by dividing (i) the aggregate Commitments of that Lender by (ii) the aggregate Commitments of all Lenders, and (d) with respect to all Loans on and after the Commitment Termination Date, the percentage obtained by dividing (i) the A-22 aggregate outstanding principal balance of the Loans held by that Lender, by (ii) the outstanding principal balance of the Loans held by all Lenders. "QUALIFIED PLAN" shall mean a Plan which is intended to be tax-qualified under Section 401(a) of the IRC. "REAL ESTATE" shall have the meaning assigned to it in SECTION 3.6. "REFUNDED SWING LINE LOAN" shall have the meaning assigned to it in SECTION 1.1(c)(iii). "RELATED TRANSACTIONS" means each borrowing under the Revolving Loan and the Term Loan on the Closing Date, the Worthington Acquisition, the Preferred Stock Contribution, the assignments and other transactions relating to the IRB Assignment Documents, the payment of all fees, costs and expenses associated with all of the foregoing and the execution and delivery of all of the Related Transactions Documents. "RELATED TRANSACTIONS DOCUMENTS" shall mean the Loan Documents, the Worthington Acquisition Agreement and the IRB Assignment Documents and, in each case, all other documents executed in connection therewith. "RELEASE" shall mean any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property. "REQUISITE LENDERS" shall mean (a) Lenders having more than sixty-six and two-thirds percent (66 2/3%) of the Commitments of all Lenders, or (b) if the Commitments have been terminated, more than sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding amount of all Loans. "REQUISITE REVOLVING LENDERS" shall mean (a) Lenders having more than sixty-six and two-thirds percent (66 2/3%) of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been terminated, more than sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding amount of the Revolving Loan. "RESERVES" shall mean, with respect to the Revolving Borrowing Base of any Borrower (a) reserves established by Agent from time to time against Eligible Inventory pursuant to SECTION 5.9, (b) reserves established pursuant to SECTION 5.4(c), and (c) such other reserves against Eligible Accounts, Eligible Inventory or Borrowing Availability of any Borrower which Agent may, in its reasonable credit judgment, establish from time to time. Without limiting the generality of the foregoing, Reserves established (i) to ensure the payment A-23 of accrued Interest Expenses or Indebtedness or (ii) because Agent is not satisfied with its Collateral position, as determined in its sole discretion, with respect to MCP's assets, including, without limitation, MCP's interest in Equipment and Real Estate, located at MCP's Lebanon Kentucky facility shall in each case be deemed to be a reasonable exercise of Agent's credit judgment. "RESTRICTED PAYMENT" shall mean (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of a Person's Stock, (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of a Person's Stock or any other payment or distribution made in respect thereof, either directly or indirectly, (c) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock of such Person now or hereafter outstanding; (d) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of such Person's Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; (e) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Person other than payment of compensation in the ordinary course to stockholders who are employees of such Person; and (f) any payment of management fees (or other fees of a similar nature) by such Person to any Stockholder of such Person or their Affiliates. "RETIREE WELFARE PLAN" shall mean, at any time, a Plan that is a "welfare plan" as defined in Section 3(2) of ERISA, that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC and at the sole expense of the participant or the beneficiary of the participant. "REVOLVING BORROWING BASE" shall mean, as the context may require, the MCP Revolving Borrowing Base and the Second Borrower Revolving Borrowing Base or any such Borrowing Base. "REVOLVING BORROWING BASE CERTIFICATE" shall mean a certificate to be executed and delivered from time to time by each Borrower in the form attached to the Agreement as EXHIBIT 4.1(b). "REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in SECTION 1.1(a)(i). "REVOLVING LENDERS" shall mean, as of any date of determination, Lenders having a Revolving Loan Commitment. A-24 "REVOLVING LOAN" shall mean, at any time, the sum of (i) the aggregate amount of Revolving Credit Advances outstanding to any Borrower or to all Borrowers PLUS (ii) the aggregate Letter of Credit Obligations incurred on behalf of any Borrower or all Borrowers. Unless the context otherwise requires, references to the outstanding principal balance of the Revolving Loan shall include the outstanding balance of Letter of Credit Obligations. "REVOLVING LOAN COMMITMENT" shall mean (a) as to any Lender, the aggregate commitment of such Lender to make Revolving Credit Advances (including without duplication Swing Line Advances as a subset of the Swing Line Lender's Revolving Loan Commitment) and/or incur Letter of Credit Obligations as set forth on ANNEX J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving Credit Advances (including without duplication Swing Line Advances as a subset of the Swing Line Lender's Revolving Loan Commitment) and/or incur Letter of Credit Obligations, which aggregate commitment shall be $24,000,000 on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with the Agreement. "REVOLVING NOTE" shall have the meaning assigned to it in SECTION 1.1(a)(ii). "REVOLVING OVERADVANCE" shall have the meaning assigned to it in SECTION 1.1(a)(iii). "SECOND BORROWER REVOLVING BORROWING BASE" shall mean, until otherwise agreed to by each of the Lenders, zero. "SECURITY AGREEMENTS" shall mean, collectively, the Holdings Security Agreement, Borrower Security Agreement and Subsidiary Security Agreement, in each case of even date herewith entered into among Agent, on behalf of itself and Lenders, and each Credit Party that is a signatory thereto. "SELLER" shall mean Worthington Custom Plastics, Inc., an Ohio corporation. "SOLVENT" shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probably liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guarantees and pension plan liabilities) at any time shall be computed as the amount which, in light of all the facts and circumstances existing at the time, A-25 represents the amount which can be reasonably be expected to become an actual or matured liability. "STOCK" shall mean all shares, options, warrants, membership interests, general or limited partnership interests or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended). "SUBSIDIARY" shall mean, with respect to any Person, (a) any corporation of which an aggregate of more than fifty percent (50%) of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of fifty percent (50%) or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner. "SUBSIDIARY GUARANTY" shall mean the Subsidiary Guaranty of even date herewith executed by each Subsidiary of each Borrower in favor of Agent, on behalf of itself and Lenders. "SUBSIDIARY INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean the Intellectual Property Security Agreement of even date herewith entered into among Agent, on behalf of itself and Lenders, the IRB Subsidiary and each other Credit Party party thereto. "SUBSIDIARY PLEDGE AGREEMENT" shall mean the Subsidiary Pledge Agreement of even date herewith entered into by Agent, on behalf of itself and Lenders, and the IRB Subsidiary. "SUBSIDIARY SECURITY AGREEMENT" shall mean the Security Agreement of even date herewith entered into among Agent, on behalf of itself and Lenders, the IRB Subsidiary and each other Credit Party party thereto. "SUPERMAJORITY REVOLVING LENDERS" shall mean (a) Lenders having eighty percent (80%) or more of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been terminated, eighty percent (80%) or more of the A-26 aggregate outstanding amount of the Revolving Loan (with the Swing Line Loan being attributed to the Lender making such Loan) and Letter of Credit Obligations. "SWING LINE ADVANCE" has the meaning assigned to it in SECTION 1.1(c)(i). "SWING LINE AVAILABILITY" has the meaning assigned to it in SECTION 1.1(c)(i). "SWING LINE COMMITMENT" shall mean, as to the Swing Line Lender, the commitment of the Swing Line Lender to make Swing Line Loans as set forth on ANNEX J to the Agreement, which commitment constitutes a subfacility of the Revolving Loan Commitment of the Swing Line Lender. "SWING LINE LENDER" shall mean GE Capital. "SWING LINE LOAN" shall mean, as the context may require, at any time, the aggregate amount of Swing Line Advances outstanding to any Borrower or to all Borrowers. "SWING LINE NOTE" has the meaning assigned to it in SECTION 1.1(c)(ii). "TANGIBLE NET WORTH" shall mean, with respect to any Person at any date, the Net Worth of such Person at such date, EXCLUDING, HOWEVER, from the determination of the total assets at such date, (a) all goodwill, capitalized organizational expenses, capitalized research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other intangible items, (b) all unamortized debt discount and expense, (c) treasury Stock, and (d) any write-up in the book value of any asset resulting from a revaluation thereof. "TAX SHARING AGREEMENT" shall mean the Tax Sharing Agreement dated as of the date hereof by and between MIG and Holdings. "TAXES" shall mean taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Agent or a Lender by the jurisdictions under the laws of which Agent and Lenders are organized or any political subdivision thereof or by the jurisdiction of any lending office of any Lender used to make Loans hereunder unless the connection with such lending office jurisdiction arises solely from any Lender having executed, delivered or performed its obligations or receive a payment under, or enforced the Agreement or the Notes. "TERM LENDERS" shall mean those Lenders having Term Loan Commitments. "TERM LOAN" shall have the meaning assigned to it in SECTION 1.1(b)(i). "TERM LOAN COMMITMENT" shall mean (a) as to any Lender with a Term Loan Commitment, the commitment of such Lender to make its Pro Rata Share of the Term Loan as A-27 set forth on ANNEX J to the Agreement or in the most recent Assignment Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan Commitment, the aggregate commitment of all Lenders to make the Term Loan, which aggregate commitment shall be $26,000, 000 on the Closing Date, as to each of clauses (a) and (b), as such Term Loan Commitments may be reduced, amortized or adjusted from time to time in accordance with the Agreement. "TERM OVERADVANCE" shall have the meaning assigned to it in SECTION 1.1(b)(i)(2). "TERM NOTE" shall have the meaning assigned to it in SECTION 1.1(b)(i). "TERMINATION DATE" shall mean the date on which the Loans have been indefeasibly repaid in full and all other Obligations under the Agreement and the other Loan Documents have been completely discharged and Letter of Credit Obligations have been cash collateralized, canceled or backed by stand-by letters of credit in accordance with ANNEX B, and none of Borrowers shall have any further right to borrow any monies under the Agreement. "THIRD PARTY INTERACTIVES" shall mean all Persons with whom any Credit Party exchanges data electronically in the ordinary course of business, including, without limitation, customers, suppliers, third-party vendors, subcontractors, processors-converters, shippers and warehousemen. "TITLE IV PLAN" shall mean an employee pension benefit plan, as defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which is covered by Title IV of ERISA, and which any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "TRADEMARK LICENSE" shall mean rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right to use any Trademark. "TRADEMARKS" shall mean all of the following now owned or hereafter acquired by any Credit Party: (a) all trademarks, trade names, corporate or limited liability company names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), now owned or existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing. A-28 "UNFUNDED PENSION LIABILITY" shall mean, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of five (5) years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by any Credit Party or any ERISA Affiliate as a result of such transaction. "WORTHINGTON" shall mean the portion of the Seller's business consisting of substantially all of the assets of Seller's non-automotive plastics operations located at Seller's Harrisburg and Concord, North Carolina, St. Matthews, South Carolina and Lebanon, Kentucky facilities "WORTHINGTON ACQUISITION" shall mean the acquisition of all or substantially all of the assets of Worthington pursuant to the Worthington Acquisition Agreement. "WORTHINGTON ACQUISITION AGREEMENT" shall mean the Asset Purchase Agreement, dated February 26, 1999, originally by and among Seller, MIG and MCP (as in effect on the Closing Date and after giving effect to Amendment No. 1 to such agreement dated as of the date hereof. "YEAR 2000 ASSESSMENT" shall mean a comprehensive written assessment of the nature and extent of each Credit Party's Year 2000 Problems and Year 2000 Date-Sensitive Systems/Components, including, without limitation, Year 2000 Problems regarding data exchanges with Third Party Interactives. "YEAR 2000 CORRECTIVE ACTIONS" shall mean, as to each Credit Party, all actions necessary to eliminate such Person's Year 2000 Problems, including, without limitation, computer code enhancements and revisions, upgrades and replacements of Year 2000 Date-Sensitive Systems/Components, and coordination of such enhancements, revisions, upgrades and replacements with Third Party Interactives. "YEAR 2000 CORRECTIVE PLAN" shall mean, with respect to each Credit Party, a comprehensive plan to eliminate all of its Year 2000 Problems on or before November 30, 1999, including without limitation (i) computer code enhancements or revisions, (ii) upgrades or replacements of Year 2000 Date-Sensitive Systems/Components, (iii) test and validation procedures, (iv) an implementation time line and budget and (v) designation of specific employees who will be responsible for planning, coordinating and implementing each phase or subpart of the Year 2000 Corrective Plan. A-29 "YEAR 2000 DATE-SENSITIVE SYSTEM/COMPONENT" shall mean, as to any Person, any system software, network software, applications software, data base, computer file, embedded microchip, firmware or hardware that accepts, creates, manipulates, sorts, sequences, calculates, compares or outputs calendar-related data accurately; such systems and components shall include, without limitation, mainframe computers, file server/client systems, computer workstations, routers, hubs, other network-related hardware, and other computer-related software, firmware or hardware and information processing and delivery systems of any kind and telecommunications systems and other communications processors, security systems, alarms, elevators and HVAC systems. "YEAR 2000 IMPLEMENTATION TESTING" shall mean, as to each Credit Party, (i) the performance of test and validation procedures regarding Year 2000 Corrective Actions on a unit basis and on a systemwide basis; (ii) the performance of test and validation procedures regarding data exchanges among the Credit Parties' Year 2000 Date-Sensitive Systems/Components and data exchanges with Third Party Interactives, and (iii) the design and implementation of additional Corrective Actions, the need for which has been demonstrated by test and validation procedures. "YEAR 2000 PROBLEMS" shall mean, with respect to each Credit Party, limitations on the capacity or readiness of any such Credit Party's Year 2000 Date-Sensitive Systems/Components to accurately accept, create, manipulate, sort, sequence, calculate, compare or output calendar date information with respect to calendar year 1999 or any subsequent calendar year beginning on or after January 1, 2000 (including leap year computations), including, without limitation, exchanges of information among Year 2000 Date-Sensitive Systems/Components of the Credit Parties and exchanges of information among the Credit Parties and Year 2000 Date-Sensitive Systems/Components of Third Party Interactives and functionality of peripheral interfaces, firmware and embedded microchips. All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code as in effect in the State of New York to the extent the same are used or defined therein. Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement. The words "herein," "hereof" and "hereunder" and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including", "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to Persons include their respective successors and assigns (to A-30 the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of any Credit Party, such words are intended to signify that such Credit Party has actual knowledge or awareness of a particular fact or circumstance or that such Credit Party, if it had exercised reasonable diligence, would have known or been aware of such fact or circumstance. A-31 ANNEX B (SECTION 1.2) TO CREDIT AGREEMENT LETTERS OF CREDIT (a) ISSUANCE. Subject to the terms and conditions of the Agreement, Agent and Revolving Lenders agree to incur, from time to time prior to the Commitment Termination Date, upon the request of Borrower Representative on behalf of the applicable Borrower and for such Borrower's account, Letter of Credit Obligations by causing Letters of Credit to be issued (by a bank or other legally authorized Person selected by or acceptable to Agent in its sole discretion (each, an "L/C ISSUER")) for such Borrower's account and guaranteed by Agent; PROVIDED, HOWEVER, that if the L/C Issuer is a Revolving Lender, then such Letters of Credit shall not be guaranteed by Agent but rather each Revolving Lender shall, subject to the terms and conditions hereinafter set forth, purchase (or be deemed to have purchased) risk participations in all such Letters of Credit issued with the written consent of Agent, as more fully described in paragraph (b)(ii) below. The aggregate amount of all such Letter of Credit Obligations shall not at any time exceed the least of (i) $1,500,000 (the "L/C SUBLIMIT"), and (ii) the Maximum Amount LESS the aggregate outstanding principal balance of the Revolving Credit Advances and the Swing Line Loan, and (iii) the Aggregate Revolving Borrowing Base LESS the aggregate outstanding principal balance of the Revolving Credit Advances and the Swing Line Loan. Furthermore, the aggregate amount of any Letter of Credit Obligations incurred on behalf of any Borrower shall not at any time exceed such Borrower's separate Revolving Borrowing Base LESS the aggregate principal balance of the Revolving Credit Advances and the Swing Line Loan to such Borrower. No such Letter of Credit shall have an expiry date which is more than one year following the date of issuance thereof, and neither Agent nor Revolving Lenders shall be under any obligation to incur Letter of Credit Obligations in respect of, or purchase risk participations in, any Letter of Credit having an expiry date which is later than the Commitment Termination Date. (b) (i) ADVANCES AUTOMATIC; PARTICIPATIONS. In the event that Agent or any Revolving Lender shall make any payment on or pursuant to any Letter of Credit Obligation, such payment shall then be deemed automatically to constitute a Revolving Credit Advance (which would extinguish the corresponding Letter of Credit Obligations) to the applicable Borrower under SECTION 1.1(a) of the Agreement regardless of whether a Default or Event of Default shall have occurred and be continuing and notwithstanding any Borrower's failure to satisfy the conditions precedent set forth in SECTION 2, and each Revolving Lender shall be obligated to pay its Pro Rata Share thereof in accordance with the Agreement. The failure of any Revolving Lender to make available to Agent for Agent's own account its Pro Rata Share of any such Revolving Credit Advance or payment by Agent under or in respect of a Letter of Credit shall not relieve any other Revolving Lender of its obligation hereunder to make available to Agent its Pro Rata Share thereof, but no Revolving Lender shall be responsible for B-1 the failure of any other Revolving Lender to make available such other Revolving Lender's Pro Rata Share of any such payment. (ii) If it shall be illegal or unlawful for any Borrower to incur Revolving Credit Advances as contemplated by paragraph (b)(i) above because of an Event of Default described in SECTION 8.1(h) or (i) or otherwise or if it shall be illegal or unlawful for any Revolving Lender to be deemed to have assumed a ratable share of the reimbursement obligations owed to an L/C Issuer, or if the L/C Issuer is a Revolving Lender, then (i) immediately and without further action whatsoever, each Revolving Lender shall be deemed to have irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an undivided interest and participation equal to such Revolving Lender's Pro Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit Obligations in respect of all Letters of Credit then outstanding and (ii) thereafter, immediately upon issuance of any Letter of Credit, each Revolving Lender shall be deemed to have irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an undivided interest and participation in such Revolving Lender's Pro Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit Obligations with respect to such Letter of Credit on the date of such issuance. Each Revolving Lender shall fund its participation in all payments or disbursements made under the Letters of Credit in the same manner as provided in the Agreement with respect to Revolving Credit Advances. (c) CASH COLLATERAL. If Borrowers are required to provide cash collateral for any Letter of Credit Obligations pursuant to the Agreement prior to the Commitment Termination Date, each Borrower will pay to Agent for the benefit of Revolving Lenders cash or cash equivalents acceptable to Agent ("CASH EQUIVALENTS") in an amount equal to 105% of the maximum amount then available to be drawn under each applicable Letter of Credit outstanding for the benefit of such Borrower. Such funds or Cash Equivalents shall be held by Agent in a cash collateral account (the "CASH COLLATERAL ACCOUNT") maintained at a bank or financial institution acceptable to Agent. The Cash Collateral Account shall be in the name of the applicable Borrower and shall be pledged to, and subject to the control of, Agent, for the benefit of Agent and Lenders, in a manner satisfactory to Agent. Each Borrower hereby pledges and grants to Agent, on behalf of Lenders, a security interest in all such funds and Cash Equivalents held in the Cash Collateral Account from time to time and all proceeds thereof, as security for the payment of all amounts due in respect of the Letter of Credit Obligations and other Obligations, whether or not then due. The Agreement, including this ANNEX B, shall constitute a security agreement under applicable law. If any Letter of Credit Obligations, whether or not then due and payable, shall for any reason be outstanding on the Commitment Termination Date, Borrowers shall either (i) provide cash collateral therefor in the manner described above, or (ii) cause all such Letters of Credit and guaranties thereof to be canceled and returned, or (iii) deliver a stand-by letter (or letters) of credit in guaranty of such Letter of Credit Obligations, which stand-by letter (or letters) of credit shall be of like tenor and duration (plus thirty (30) additional days) as, and in an amount equal to 105% of, the aggregate maximum amount then available to be drawn under, the Letters of Credit to which such outstanding Letter of Credit Obligations relate and shall be B-2 issued by a Person, and shall be subject to such terms and conditions, as are be satisfactory to Agent in its sole discretion. From time to time after funds are deposited in the Cash Collateral Account by any Borrower, whether before or after the Commitment Termination Date, Agent may apply such funds or Cash Equivalents then held in the Cash Collateral Account to the payment of any amounts, in such order as Agent may elect, as shall be or shall become due and payable by such Borrower to Lenders with respect to such Letter of Credit Obligations of such Borrower and, upon the satisfaction in full of all Letter of Credit Obligations of such Borrower, to any other Obligations of any Borrower then due and payable. No Borrower nor any Person claiming on behalf of or through any Borrower shall have any right to withdraw any of the funds or Cash Equivalents held in the Cash Collateral Account, except that upon the termination of all Letter of Credit Obligations and the payment of all amounts payable by Borrowers to Lenders in respect thereof, any funds remaining in the Cash Collateral Account shall be applied to other Obligations when due and owing and upon payment in full of such Obligations, any remaining amount shall be paid to Borrowers or as otherwise required by law. (d) FEES AND EXPENSES. Borrowers agree to pay to Agent for the benefit of Revolving Lenders, as compensation to such Lenders for Letter of Credit Obligations incurred hereunder, (x) all costs and expenses incurred by Agent or any Lender on account of such Letter of Credit Obligations, and (y) for each month during which any Letter of Credit Obligation shall remain outstanding, a fee (the "LETTER OF CREDIT FEE") in an amount equal to 1.5% per annum multiplied by the maximum amount available from time to time to be drawn under the applicable Letter of Credit. Such fee shall be paid to Agent for the benefit of the Revolving Lenders in arrears, on the first day of each month. In addition, Borrowers shall pay to any L/C Issuer, on demand, such fees (including all per annum fees), charges and expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is issued. (e) REQUEST FOR INCURRENCE OF LETTER OF CREDIT OBLIGATIONS. Borrower Representative shall give Agent at least two (2) Business Days prior written notice requesting the incurrence of any Letter of Credit Obligation, specifying the date such Letter of Credit Obligation is to be incurred, identifying the beneficiary and the Borrower to which such Letter of Credit Obligation relates and describing the nature of the transactions proposed to be supported thereby. The notice shall be accompanied by the form of the Letter of Credit (which shall be acceptable to the L/C Issuer) to be guarantied and, to the extent not previously delivered to Agent, copies of all agreements between any Borrower and the L/C Issuer pertaining to the issuance of Letters of Credit. Notwithstanding anything contained herein to the contrary, Letter of Credit applications by Borrower Representative and approvals by Agent and the L/C Issuer may be made and transmitted pursuant to electronic codes and security measures mutually agreed upon and established by and among Borrower Representative, Agent and the L/C Issuer. B-3 (f) OBLIGATION ABSOLUTE. The obligation of Borrowers to reimburse Agent and Revolving Lenders for payments made with respect to any Letter of Credit Obligation shall be absolute, unconditional and irrevocable, without necessity of presentment, demand, protest or other formalities, and the obligations of each Revolving Lender to make payments to Agent with respect to Letters of Credit shall be unconditional and irrevocable. Such obligations of Borrowers and Revolving Lenders shall be paid strictly in accordance with the terms hereof under all circumstances including the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit or the Agreement or the other Loan Documents or any other agreement; (ii) the existence of any claim, set-off, defense or other right which any Borrower or any of their respective Affiliates or any Lender may at any time have against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such transferee may be acting), Agent, any Lender, or any other Person, whether in connection with the Agreement, the Letter of Credit, the transactions contemplated herein or therein or any unrelated transaction (including any underlying transaction between any Borrower or any of their respective Affiliates and the beneficiary for which the Letter of Credit was procured); (iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by Agent (except as otherwise expressly provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or guaranty thereof against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit or such guaranty; (v) any other circumstance or happening whatsoever, which is similar to any of the foregoing; or (vi) the fact that a Default or an Event of Default shall have occurred and be continuing. (g) INDEMNIFICATION; NATURE OF LENDERS' DUTIES. (i) In addition to amounts payable as elsewhere provided in the Agreement, Borrowers hereby agree to pay and to protect, indemnify, and save harmless Agent and each Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including attorneys' fees and allocated costs of internal counsel) which Agent or any Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or guaranty thereof, or (B) the failure of Agent or any Lender seeking indemnification or of any L/C Issuer to honor a demand for payment under any Letter of Credit or guaranty thereof as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto B-4 government or Governmental Authority, in each case other than to the extent solely as a result of the gross negligence or willful misconduct of Agent or such Lender (as finally determined by a court of competent jurisdiction). (ii) As between Agent and any Lender and Borrowers, Borrowers assume all risks of the acts and omissions of, or misuse of any Letter of Credit by beneficiaries of any Letter of Credit. In furtherance and not in limitation of the foregoing, to the fullest extent permitted by law neither Agent nor any Lender shall be responsible: (A) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document issued by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (C) for failure of the beneficiary of any Letter of Credit to comply fully with conditions required in order to demand payment under such Letter of Credit; PROVIDED that, in the case of any payment by Agent under any Letter of Credit or guaranty thereof, Agent shall be liable to the extent such payment was made solely as a result of its gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction) in determining that the demand for payment under such Letter of Credit or guaranty thereof complies on its face with any applicable requirements for a demand for payment under such Letter of Credit or guaranty thereof; (D) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) for errors in interpretation of technical terms; (F) for any loss or delay in the transmission or otherwise of any document required in order to make a payment under any Letter of Credit or guaranty thereof or of the proceeds thereof; (G) for the credit of the proceeds of any drawing under any Letter of Credit or guaranty thereof; and (H) for any consequences arising from causes beyond the control of Agent or any Lender. None of the above shall affect, impair, or prevent the vesting of any of Agent's or any Lender's rights or powers hereunder or under the Agreement. (iii) Nothing contained herein shall be deemed to limit or to expand any waivers, covenants or indemnities made by Borrowers in favor of any L/C Issuer in any letter of credit application, reimbursement agreement or similar document, instrument or agreement between or among Borrowers and such L/C Issuer. B-5 ANNEX C (SECTION 1.8) TO CREDIT AGREEMENT CASH MANAGEMENT SYSTEMS Each Borrower shall, and shall cause its Subsidiaries to, establish and maintain the Cash Management Systems described below: (a) On or before the Closing Date (or such later date as Agent shall consent to in writing) and until the Termination Date, each Borrower shall (i) establish lock boxes ("LOCK BOXES") at one or more of the banks set forth on DISCLOSURE SCHEDULE (3.19), and shall request in writing and otherwise take such reasonable steps to ensure that all Account Debtors forward payment directly to such Lock Boxes, and (ii) deposit and cause its Subsidiaries to deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all Collateral, including, without limitation, payments, if any, in respect of the Lebanon IRBs (whether or not otherwise delivered to a Lock Box) into bank accounts in such Borrower's name or any such Subsidiary's name (collectively, the "BORROWER ACCOUNTS") at banks set forth on DISCLOSURE SCHEDULE (3.19) (each, a "RELATIONSHIP BANK"). (b) On or before the Closing Date (or such later date as Agent shall consent to in writing), each Relationship Banks, shall have entered into tri-party blocked account agreements with Agent, for the benefit of itself and Lenders, and the applicable Borrower and Subsidiaries thereof, as applicable, in form and substance acceptable to Agent, which shall become operative on or prior to the Closing Date. Each such blocked account agreement shall provide, among other things, that (i) all items of payment deposited in such account and proceeds thereof deposited in the Collection Account are held by such bank as agent or bailee-in-possession for Agent, on behalf of Lenders, (ii) the bank executing such agreement has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such account and for returned checks or other items of payment, and (iii) from and after the Closing Date with respect to banks at which a Borrower Account is located, such bank agrees to forward immediately all amounts in each Borrower Account to the Collection Account and to commence the process of daily sweeps from such Borrower Account into the Collection Account. Each Borrower shall not, and shall not cause or permit any Subsidiary thereof to, accumulate or maintain cash in disbursement or payroll accounts as of any date of determination in excess of checks outstanding against such accounts as of that date and amounts necessary to meet minimum balance requirements. (c) So long as no Default or Event of Default has occurred and is continuing, Borrowers may amend DISCLOSURE SCHEDULE (3.19) to add or replace a Relationship Bank, Lock Box or Borrower Account or to replace any Disbursement Account; PROVIDED, HOWEVER, THAT (i) Agent shall have consented in writing in advance to the opening of such account or Lock Box C-1 with the relevant bank and (ii) prior to the time of the opening of such account or Lock Box, the applicable Borrower and/or the Subsidiaries thereof, as applicable, and such bank shall have executed and delivered to Agent a tri-party blocked account agreement, in form and substance satisfactory to Agent. Borrowers shall close any of their accounts (and establish replacement accounts in accordance with the foregoing sentence) promptly and in any event within thirty (30) days of notice from Agent that the creditworthiness of any bank holding an account is no longer acceptable in Agent's reasonable judgment, or as promptly as practicable and in any event within sixty (60) days of notice from Agent that the operating performance, funds transfer and/or availability procedures or performance with respect to accounts or lockboxes of the bank holding such accounts or Agent's liability under any tri-party blocked account agreement with such bank is no longer acceptable in Agent's reasonable judgment. (d) The Lock Boxes, Borrower Accounts and Disbursement Accounts (other than any payroll account) shall be cash collateral accounts, with all cash, checks and other similar items of payment in such accounts securing payment of the Loans and all other Obligations, and in which each Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the Security Agreements. (e) All amounts deposited in the Collection Account shall be deemed received by Agent in accordance with Section 1.10 of the Agreement and shall be applied (and allocated) by Agent in accordance with SECTION 1.11 of the Agreement. In no event shall any amount be so applied unless and until such amount shall have been credited in immediately available funds to the Collection Account. (f) Each Borrower may maintain, in its name, an account (each a "DISBURSEMENT ACCOUNT" and collectively, the "DISBURSEMENT ACCOUNTS") at a bank acceptable to Agent into which Agent shall, from time to time, deposit proceeds of Revolving Credit Advances and Swing Line Advances made to such Borrower pursuant to SECTION 1.1 for use by such Borrower solely in accordance with the provisions of SECTION 1.4. (g) Each Borrower shall and shall cause its Affiliates, officers, employees, agents, directors or other Persons acting for or in concert with such Borrower (each a "RELATED PERSON") to (i) hold in trust for Agent, for the benefit of itself and Lenders, all checks, cash and other items of payment in respect of amounts owing to such Borrower or any of its Subsidiaries received by such Borrower or any such Related Person, and (ii) within one (1) Business Day after receipt by such Borrower or any such Related Person of any such checks, cash or other items or payment, deposit the same into a Borrower Account of such Borrower or Subsidiary, as applicable. Each Borrower and each other Credit Party acknowledges and agrees that all cash, checks or items of payment constituting proceeds of Collateral are the property of Agent and Lenders. All proceeds of the sale or other disposition of any Collateral, shall be deposited directly into the applicable Borrower Accounts C-2 ANNEX D (SECTION 2.1(a)) TO CREDIT AGREEMENT SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS In addition to, and not in limitation of, the conditions described in SECTION 2.1 of the Agreement, pursuant to SECTION 2.1(a), the following items must be received by Agent in form and substance satisfactory to Agent on or prior to the Closing Date (each capitalized term used but not otherwise defined herein shall have the meaning ascribed thereto in ANNEX A to the Agreement): 1. APPENDICES. All Appendices to the Agreement, in form and substance satisfactory to Agent. 2. REVOLVING NOTES, SWING LINE NOTES AND TERM NOTES. Duly executed originals of the Revolving Notes, Swing Line Notes and Term Notes for each applicable Lender, dated the Closing Date. 3. SECURITY AGREEMENTS. Duly executed originals of each of the Security Agreements, dated the Closing Date, and all instruments, documents and agreements executed pursuant thereto. 4. INSURANCE. Satisfactory evidence that the insurance policies required by SECTION 5.4 are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements, as requested by Agent, in favor of Agent, on behalf of Lenders. 5. SECURITY INTERESTS AND CODE FILINGS. (a) Evidence satisfactory to Agent that Agent (for the benefit of itself and Lenders) has (or upon the filing of documents delivered to Agent on or prior to the Closing Date will have) a valid and perfected first priority security interest in the Collateral, including (i) such documents duly executed by each Credit Party (including financing statements under the Code and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens) as Agent may request in order to perfect its security interests in the Collateral and (ii) copies of Code search reports in such jurisdictions as Agent reasonably determines listing all effective financing statements that name any Credit Party as debtor, together with copies of such financing statements, none of which shall cover the Collateral. (b) Evidence satisfactory to Agent, including copies, of all UCC-1 and other financing statements filed in favor of any Credit Party with respect to each location, if any, at which Inventory may be consigned. D-1 6. INTELLECTUAL PROPERTY SECURITY AGREEMENTS. Duly executed originals of the Intellectual Property Security Agreements, each dated the Closing Date and signed by each Credit Party which owns Trademarks, Copyrights and/or Patents, as applicable, all in form and substance satisfactory to Agent, together with all instruments, documents and agreements executed pursuant thereto. 7. HOLDINGS GUARANTY. Duly executed originals of the Holdings Guaranty, dated the Closing Date, executed by Holdings in favor of Agent, for the benefit of Lenders, and all documents, instruments and agreements executed pursuant thereto. 8. SUBSIDIARY GUARANTIES. Duly executed originals of the Subsidiaries Guaranty, dated the Closing Date, executed by and each direct and indirect Subsidiary of Holdings that is not a Borrower in favor of Agent, for the benefit of Lenders, and all documents, instruments and agreements executed pursuant thereto. 9. INITIAL REVOLVING BORROWING BASE CERTIFICATE. Duly executed originals of an initial Borrowing Base Certificate from each Borrower, dated the Closing Date, reflecting information concerning Eligible Accounts and Eligible Inventory of such Borrower as of a date not more than seven (7) days prior to the Closing Date. 10. INITIAL NOTICE OF REVOLVING CREDIT ADVANCE. Duly executed originals of a Notice of Revolving Credit Advance, dated the Closing Date, with respect to the initial Revolving Credit Advance to be requested by Borrower Representative on the Closing Date. 11. LETTER OF DIRECTION. Duly executed originals of a letter of direction from Borrower Representative addressed to Agent, on behalf of itself and Lenders, with respect to the disbursement on the Closing Date of the proceeds of the Term Loan and the initial Revolving Credit Advance. 12. CASH MANAGEMENT SYSTEM; BLOCKED ACCOUNT AGREEMENTS. Evidence satisfactory to Agent that, as of the Closing Date, Cash Management Systems complying with ANNEX C to the Agreement have been established and are currently being maintained in the manner set forth in such ANNEX C, together with copies of duly executed tri-party blocked account and lock box agreements, satisfactory to Agent, with the banks as required by ANNEX C. 13. CHARTER (OR EQUIVALENT DOCUMENTATION) AND GOOD STANDING. For each of Seller and each Credit Party, such Person's (a) charter (or equivalent organizational documents) and all amendments thereto, (b) good standing certificates (including verification of tax status) in its state of incorporation and (c) good standing certificates (including verification of tax status) and certificates of qualification to conduct business in each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, each dated a recent date prior to the Closing Date and certified by the applicable Secretary of State or other authorized Governmental Authority. D-2 14. BYLAWS (OR EQUIVALENT DOCUMENTATION) AND RESOLUTIONS. For each of Seller, and each Credit Party, (a) such Person's bylaws (or other equivalent constituent documentation), together with all amendments thereto and (b) resolutions of such Person's Board of Directors (or equivalent governing body) and equityholders, approving and authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and the transactions to be consummated in connection therewith, each certified as of the Closing Date by such Person's secretary or an assistant secretary as being in full force and effect without any modification or amendment. 15. INCUMBENCY CERTIFICATES. For each of Seller and each Credit Party, signature and incumbency certificates of the officers of each such Person executing any of the Loan Documents, certified as of the Closing Date by such Person's secretary or an assistant secretary as being true, accurate, correct and complete. 16. OPINIONS OF COUNSEL. Duly executed originals of opinions of Winston & Strawn, counsel for the Credit Parties, together with any local counsel opinions requested by Agent, each in form and substance satisfactory to Agent and its counsel, dated the Closing Date, and each accompanied by a letter addressed to such counsel from the Credit Parties, authorizing and directing such counsel to address its opinion to Agent, on behalf of Lenders, and to include in such opinion an express statement to the effect that Agent and Lenders are authorized to rely on such opinion. 17. RELIANCE LETTERS. Duly executed originals of reliance letters, dated the Closing Date and addressed to Agent and Lenders with respect to any opinions delivered (i) in connection with the Worthington Acquisition and (ii) by bond counsel in connection with the transactions contemplated by the IRB Assignment Documents, and Agent shall be satisfied with each such opinion. 18. PLEDGE AGREEMENTS. Duly executed originals of each of the Pledge Agreements accompanied by (as applicable) (a) certificates representing all of the outstanding Stock being pledged pursuant to such Pledge Agreement and stock powers (or similar transfer instruments) for such certificates executed in blank and (b) any instruments evidencing Indebtedness, including, without limitation in respect of the Holdings Note and the Lebanon IRBs, being pledged pursuant to such Pledge Agreement, duly endorsed in blank. 19. ACCOUNTANTS' LETTERS. A letter from the Credit Parties to their independent auditors authorizing the independent certified public accountants of the Credit Parties to communicate with Agent and Lenders in accordance with SECTION 4.2. 20. APPOINTMENT OF AGENT FOR SERVICE. An appointment of CT Corporation as each Credit Party's agent for service of process. 21. FEE LETTER. Duly executed originals of the GE Capital Fee Letter. D-3 22. OFFICER'S CERTIFICATE. Agent shall have received duly executed originals of a certificate of the Chief Executive Officer and Chief Financial Officer of each Borrower or any other appropriate Person as determined by Agent, dated the Closing Date, stating that, since December 31, 1998 (a) no event or condition has occurred or is existing which could reasonably be expected to have a Material Adverse Effect; (b) no Litigation has been commenced which, if successful, would have a Material Adverse Effect or could challenge any of the transactions contemplated by the Agreement and the other Loan Documents; (d) there have been no Restricted Payments made by any Credit Party; and (e) there has been no material increase in liabilities, liquidated or contingent, and no material decrease in assets of Worthington or any Borrower or any of its Subsidiaries. 23. WAIVERS. Agent, on behalf of Lenders, shall have received landlord waivers and consents, bailee letters and mortgagee agreements in form and substance satisfactory to Agent, in each case as required pursuant to SECTION 5.9. 24. MORTGAGES. Mortgages covering all of the Real Estate (the "MORTGAGED PROPERTIES") together with: (a) title insurance policies, current as-built surveys, zoning letters and certificates of occupancy, in each case satisfactory in form and substance to Agent, in its sole discretion; (b) evidence that counterparts of the Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of Agent, to create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on each Mortgaged Property in favor of Agent for the benefit of itself and Lenders (or in favor of such other trustee as may be required or desired under local law); and (c) an opinion of counsel in each state in which any Mortgaged Property is located in form and substance and from counsel satisfactory to Agent. 25. ENVIRONMENTAL REPORTS. Agent shall have received Phase I Environmental Site Assessment Reports, consistent with American Society for Testing and Materials (ASTM) Standard E 1527-94 and applicable state requirements, on all of the Real Estate, dated no more than 6 months prior to the Closing Date, prepared by environmental engineers satisfactory to Agent, all in form and substance satisfactory to Agent, in its sole discretion. D-4 26. AUDITED FINANCIALS; FINANCIAL CONDITION. Agent shall have received Worthington's (x) audited Financial Statements for the twelve month period ended May 31, 1998 which have been certified by Ernst & Young LLP, and (y) Financial Statements for the seven month period ended December 31, 1998 prepared by Ernst & Young LLP. Each Borrower shall have provided Agent with its current operating statements, a consolidated balance sheet and statement of cash flows, the Pro Forma, Projections and a Revolving Borrowing Base Certificate with respect to such Borrower certified by its Chief Financial Officer, in each case in form and substance satisfactory to Agent, and Agent shall be satisfied, in its sole discretion, with all of the foregoing. Agent shall have further received a certificate of the Chief Executive Officer and/or the Chief Financial Officer of each Borrower or any other appropriate Person as determined by Agent, based on such Pro Forma and Projections, to the effect that (a) such Borrower will be Solvent upon the consummation of the transactions contemplated herein; (b) the Pro Forma fairly presents the financial condition of such Borrower as of the date thereof after giving effect to the transactions contemplated by the Loan Documents; (c) the Projections are based upon estimates and assumptions stated therein, all of which such Borrower believes to be reasonable and fair in light of current conditions and current facts known to such Borrower and, as of the Closing Date, reflect such Borrower's good faith and reasonable estimates of its future financial performance and of the other information projected therein for the period set forth therein; and (d) containing such other statements with respect to the solvency of such Borrower and matters related thereto as Agent shall request. 27. ASSIGNMENT OF REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES AND RIGHTS. Agent shall have received a duly executed copy of an Assignment of Representations, Warranties, Covenants, Indemnities and Rights in respect of MCP's and Holdings rights under the Worthington Acquisition Agreement, which assignment shall be expressly permitted under the Worthington Acquisition Agreement or shall have been consented to by Seller in writing. 28. IRB DOCUMENTS; TAX SHARING AGREEMENT. True and correct copies, certified by an officer of MCP, of (x) all documents executed in connection with the Lebanon IRB (including, without limitation, the IRB Indenture, the IRB Lease Agreement and the IRB Assignment Documents and related consents to the extent required by Agent with respect thereto) and (y) the Tax Sharing Agreement. 29. OTHER DOCUMENTS. Such other certificates, documents and agreements respecting any Credit Party as Agent may, in its sole discretion, request. D-5 ANNEX E (SECTION 4.1(a)) TO CREDIT AGREEMENT FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING Borrowers shall deliver or cause to be delivered to Agent or to Agent and Lenders, as indicated, the following: (a) MONTHLY FINANCIALS. To Agent, within thirty (30) days after the end of each Fiscal Month, financial information regarding Borrowers and their Subsidiaries, certified by the Chief Financial Officer of Borrower Representative, consisting of consolidated (i) unaudited balance sheets as of the close of such Fiscal Month and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Month; and (ii) unaudited statements of income and cash flows for such Fiscal Month, setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments). Such financial information shall be accompanied by the certification of the Chief Financial Officer of Borrower Representative that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position and results of operations of Borrowers and their Subsidiaries, on a consolidated basis, in each case as at the end of such month and for the period then ended and (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default shall have occurred and be continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default; (b) QUARTERLY FINANCIALS. To Agent, within forty-five (45) days after the end of each Fiscal Quarter, consolidated financial information regarding Borrowers and their Subsidiaries, certified by the Chief Financial Officer of Borrower Representative, including (i) unaudited balance sheets as of the close of such Fiscal Quarter and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter and (ii) unaudited statements of income and cash flows for such Fiscal Quarter, in each case setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments). Such financial information shall be accompanied by (A) a statement in reasonable detail (each, a "COMPLIANCE CERTIFICATE" showing the calculations used in determining compliance with each of the financial covenants set forth on ANNEX G which is tested on a quarterly basis and (B) the certification of the Chief Financial Officer of Borrower Representative that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position, results of operations and statements of cash flows of Borrowers and their Subsidiaries, on both a consolidated basis, as at the end of such Fiscal Quarter and for the period then ended, (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default E-1 shall have occurred and be continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. In addition, Borrowers shall deliver to Agent and Lenders, within forty-five (45) days after the end of each Fiscal Quarter, a management discussion and analysis which includes a comparison to budget for that Fiscal Quarter and a comparison of performance for that Fiscal Quarter to the corresponding period in the prior year; (c) OPERATING PLAN. To Agent, as soon as available, but not later than thirty (30) days after the end of each Fiscal Year, an annual operating plan for each Borrower, approved by the Board of Directors of such Borrower, for the subsequent five-year period, which will include a statement of all of the material assumptions on which such plan is based, will include monthly balance sheets and a monthly budget for the first year of such five-year period and will integrate sales, gross profits, operating expenses, operating profit, cash flow projections and Borrowing Availability projections all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management's good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities; (d) ANNUAL AUDITED FINANCIALS. To Agent, within ninety (90) days after the end of each Fiscal Year, audited Financial Statements for Borrowers and their Subsidiaries on a consolidated basis, consisting of balance sheets and statements of income and retained earnings and cash flows, setting forth in comparative form in each case the figures for the previous Fiscal Year, which Financial Statements shall be prepared in accordance with GAAP, certified without qualification, by an independent certified public accounting firm of national standing or otherwise acceptable to Agent. Such Financial Statements shall be accompanied by (i) a statement prepared in reasonable detail showing the calculations used in determining compliance with each of the financial covenants set forth on ANNEX G, (ii) a report from such accounting firm to the effect that, in connection with their audit examination, nothing has come to their attention to cause them to believe that a Default or Event of Default has occurred (or specifying those Defaults and Events of Default that they became aware of), it being understood that such audit examination extended only to accounting matters and that no special investigation was made with respect to the existence of Defaults or Events of Default, (iii) a letter addressed to Agent, on behalf of itself and Lenders, in form and substance reasonably satisfactory to Agent and subject to standard qualifications taken by nationally recognized accounting firms, signed by such accounting firm acknowledging that Agent and Lenders are entitled to rely upon such accounting firm's certification of such audited Financial Statements, (iv) the annual letters to such accountants in connection with their audit examination detailing contingent liabilities and material litigation matters, and (v) the certification of the Chief Executive Officer or Chief Financial Officer of Borrowers that all such Financial Statements present fairly in accordance with GAAP the financial position, results of operations and statements of cash flows of Borrowers and their Subsidiaries on a consolidated basis, as at the end of such year and for the period then ended, and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default shall have occurred and be continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default; E-2 (e) MANAGEMENT LETTERS. To Agent, within five (5) Business Days after receipt thereof by any Credit Party, copies of all management letters, exception reports or similar letters or reports received by such Credit Party from its independent certified public accountants; (f) DEFAULT NOTICES. To Agent, as soon as practicable, and in any event within five (5) Business Days after an executive officer of any Borrower has actual knowledge of the existence of any Default, Event of Default or other event which has had a Material Adverse Effect, telephonic or telecopied notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day; (g) SEC FILINGS AND PRESS RELEASES. To Agent, promptly upon their becoming available, copies of: (i) all Financial Statements, reports, notices and proxy statements made publicly available by any Credit Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Credit Party to the public concerning material changes or developments in the business of any such Person; (h) EQUITY NOTICES. To Agent, as soon as practicable, copies of all material written notices given or received by any Credit Party with respect to any Stock of such Person. (i) SUPPLEMENTAL SCHEDULES. To Agent, supplemental disclosures, if any, required by SECTION 5.6 of the Agreement; (j) LITIGATION. To Agent in writing, promptly upon learning thereof, notice of any Litigation commenced or threatened against any Credit Party that (i) seeks damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets or against any Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities or (vi) involves any product recall; (k) INSURANCE NOTICES. To Agent, disclosure of losses or casualties required by SECTION 5.4 of the Agreement; (l) DEFAULT NOTICES. To Agent, copies of (i) (x) any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located, and (y) such other notices or documents as Agent may request in its reasonable discretion and (ii) any and all default notices received under or with respect to the Lebanon IRBs, including, without limitation, under or with respect to the IRB Indenture or the IRB Lease Agreement; E-3 (m) LEASE AMENDMENTS. To Agent, copies of all material amendments to real estate leases with respect to all Real Estate; and (n) OTHER DOCUMENTS. To Agent and Lenders, such other financial and other information respecting any Credit Party's business or financial condition as Agent or any Lender shall, from time to time, reasonably request. E-4 ANNEX F (SECTION 4.1(b)) TO CREDIT AGREEMENT COLLATERAL REPORTS Borrowers shall deliver or cause to be delivered the following: (a) To Agent, upon its request, and in no event less frequently than five (5) Business Days after the end of each Fiscal Month (together with a copy of all or any part of such delivery requested by any Lender in writing after the Closing Date), each of the following: (i) a Revolving Borrowing Base Certificate with respect to each Borrower accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; (ii) with respect to each Borrower, a summary of Inventory by location and type with a supporting perpetual Inventory report, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion, provided that until the first Fiscal Month that ends 60 or more days after the Closing Date, MCP shall not be required to provide a perpetual Inventory report with respect to Inventory located at its St. Mathews, South Carolina facility; and (iii) with respect to each Borrower, a monthly trial balance showing Accounts outstanding aged from invoice due date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; (b) To Agent, on a weekly basis or at such more frequent intervals as Agent may request from time to time (together with a copy of all or any part of such delivery requested by any Lender in writing after the Closing Date), collateral reports with respect to each Borrower, including all additions and reductions (cash and non-cash) with respect to Accounts of such Borrower, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; (c) To Agent, at the time of delivery of each of the monthly Financial Statements delivered pursuant to ANNEX E, a reconciliation of the Accounts trial balance and month-end Inventory reports of each Borrower to such Borrower's general ledger and monthly Financial Statements delivered pursuant to such ANNEX E, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; (d) To Agent, at the time of delivery of each of the annual Financial Statements delivered pursuant to ANNEX E, (i) a listing of government contracts of each Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a list of any applications for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark F-1 Office, the United States Copyright Office or any similar office or agency which any Credit Party thereof has filed in the prior Fiscal Quarter; (e) Each Borrower, at its own expense, shall deliver to Agent the results of each physical verification, if any, which such Borrower or any of its Subsidiaries may in their discretion have made, or caused any other Person to have made on their behalf, of all or any portion of their Inventory (and, if a Default or an Event of Default shall have occurred and be continuing, each Borrower shall, upon the request of Agent, conduct, and deliver the results of, such physical verifications as Agent may require); (f) Each Borrower, at its own expense, shall deliver to Agent such appraisals of Equipment and Real Estate as Agent may request from time to time (provided that so long as no Default or Event of Default has occurred and is continuing, such appraisals shall be required no more frequently than once every two (2) years) and such appraisals shall be prepared by an appraiser satisfactory to Agent, and which shall otherwise be in form and substance satisfactory to Agent (it being understood that any such appraisal in respect of Real Estate shall be an MAI appraisal); and (g) Such other reports, statements and reconciliations with respect to the Revolving Borrowing Base or the Collateral of any or all Credit Parties as Agent shall from time to time request in its reasonable discretion. F-2 ANNEX G (SECTION 6.10) TO CREDIT AGREEMENT FINANCIAL COVENANTS Borrowers shall not breach or fail to comply with any of the following financial covenants, each of which shall be calculated in accordance with GAAP consistently applied: (a) MAXIMUM CAPITAL EXPENDITURES. Holdings and its Subsidiaries on a consolidated basis shall not make Capital Expenditures during the following periods that exceed in the aggregate the amounts set forth opposite each of such periods:
PERIOD MAXIMUM CAPITAL EXPENDITURES PER PERIOD - ------ --------------------------------------- Fiscal Year 1999 $3,700,000 Fiscal Year 2000 $3,800,000 Fiscal Year 2001 $3,400,000 Fiscal Year 2002 $3,500,000 Fiscal Year 2003 $1,800,000
(b) MINIMUM FIXED CHARGE COVERAGE RATIO. Holdings and its and their Subsidiaries shall have on a consolidated basis at the end of each Fiscal Quarter set forth below, a Fixed Charge Coverage Ratio for the four-quarter period then ended (or with respect to the Fiscal Quarters ending on or before March 31, 2000, the period commencing on the Closing Date and ending on the last day of such Fiscal Quarter) of not less than the following:
PERIOD ENDED RATIO ------------ ----- 9/30/99 0.80 to 1.00 12/31/99 0.80 to 1.00 3/31/00 0.50 to 1.00 6/30/00 0.50 to 1.00 9/30/00 0.50 to 1.00 12/31/00 0.50 to 1.00 3/31/01 0.70 to 1.00 6/30/01 0.70 to 1.00 9/30/01 0.70 to 1.00 12/31/01 0.70 to 1.00 3/31/02 0.70 to 1.00 6/30/02 0.70 to 1.00 9/30/02 0.70 to 1.00 12/31/02 0.60 to 1.00 3/31/03 0.60 to 1.00 6/30/03 0.40 to 1.00 9/30/03 0.30 to 1.00
G-1 (c) MINIMUM EBITDA. Holdings and its Subsidiaries on a consolidated basis shall have, at the end of each Fiscal Quarter set forth below, EBITDA for the 12-month period then ended (or with respect to the Fiscal Quarters ending on or before March 31, 2000, the period commencing on the Closing Date and ending on the last day of such Fiscal Quarter) of not less than the following:
PERIOD ENDED EBITDA ------------ ------ 9/30/99 $ 1,200,000 12/31/99 $ 2,800,000 3/31/00 $ 4,600,000 6/30/00 $ 6,700,000 9/30/00 $ 7,500,000 12/31/00 $ 7,800,000 3/31/01 $ 8,200,000 6/30/01 $ 8,300,000 9/30/01 $ 8,600,000 12/31/01 $ 8,800,000 3/31/02 $ 9,100,000 6/30/02 $ 9,300,000 9/30/02 $ 9,600,000 12/31/02 $ 9,800,000 3/31/03 $10,100,000 6/30/03 $10,400,000 9/30/03 $10,700,000
(d) MINIMUM TANGIBLE NET WORTH. Holdings and its Subsidiaries on a consolidated basis shall maintain at all times Tangible Net Worth equal to or greater than $4,250,000. Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. If any "Accounting Changes" (as defined below) occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in the Agreement or any other Loan Document, then Borrowers, Agent and Lenders agree to enter into negotiations in order to amend such provisions of the Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating Borrowers' and their Subsidiaries' financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made; provided, however, that the agreement of Requisite Lenders to G-2 any required amendments of such provisions shall be sufficient to bind all Lenders. "ACCOUNTING CHANGES" means (a) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions), (b) changes in accounting principles concurred in by any Borrower's certified public accountants; (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and EITF 88-16, and the application of the accounting principles set forth in FASB 109, including the establishment of reserves pursuant thereto and any subsequent reversal (in whole or in part) of such reserves; and (d) the reversal of any reserves established as a result of purchase accounting adjustments. All such adjustments resulting from expenditures made subsequent to the Closing Date (including capitalization of costs and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period the expenditures are made and deducted as part of the calculation of EBITDA in such period. If Agent, Borrowers and Requisite Lenders agree upon the required amendments, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting Change, refer to GAAP, consistently applied after giving effect to the implementation of such Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree upon the required amendments within thirty (30) days following the date of implementation of any Accounting Change, then all Financial Statements delivered and all calculations of financial covenants and other standards and terms in accordance with the Agreement and the other Loan Documents shall be prepared, delivered and made without regard to the underlying Accounting Change. G-3 ANNEX H (SECTION 9.9(a)) TO CREDIT AGREEMENT WIRE TRANSFER INFORMATION AGENT'S AND GE CAPITAL'S ACCOUNT: Bank Name: Bankers Trust Company Location: New York, New York ABA Routing No.: 021001033 Credit Account No.: 50-232-854 Account Name: Morton H-1 ANNEX I (SECTION 11.10) to CREDIT AGREEMENT NOTICE ADDRESSES (A) If to Agent or GE Capital, at General Electric Capital Corporation 335 Madison Avenue, 12th Floor New York, New York 10017 Attention: Morton Customs Account Manager Telecopier No.: (212) 983-8767 Telephone No.: (212) 370-8000 with copies to: Paul, Hastings, Janofsky & Walker LLP 1055 Washington Boulevard Stamford, Connecticut 06901 Attention: Christopher H. Craig, Esq. Telecopier No.: (203) 359-3031 Telephone No.: (203) 961-7400 AND General Electric Capital Corporation 201 High Ridge Road Stamford, Connecticut 06927-5100 Attention: Corporate Counsel - Commercial Finance Telecopier No.: (203) 316-7889 Telephone No.: (203) 316-7552 (B) If to any Borrower, to Borrower Representative, at Morton Custom Plastics, LLC 1021 West Birchwood Morton, Illinois 61550 Attention: William D. Morton Telecopier No.: (309) 263-1841 Telephone No.: (309) 263-1748 I-1 with copies to: Winston & Strawn 35 W. Wacker Drive Chicago, Illinois 60601-9703 Attention: Gregory S. Murray, Esq. Telecopier No.: (312) 558-5700 Telephone No.: (312) 558-5600 I-2 ANNEX J (from ANNEX A - COMMITMENTS DEFINITION) to CREDIT AGREEMENT LENDER(S) --------- Revolving Loan Commitment General Electric Capital Corporation (including a Swing Line Commitment of $5,000,000) $24,000,000 Term Loan Commitment: General Electric Capital Corporation $26,000,000 J-1 EX-99.1 5 EXHIBIT 99.1 [LETTERHEAD] CONTACT: Thomas D. Lauerman Van Negris / Philip J. Denning Morton Industrial Group, Inc. Kehoe, White, Van Negris & Company, Inc. (309) 263-3300 (212) 396-0606 FOR IMMEDIATE RELEASE MORTON INDUSTRIAL GROUP ANNOUNCES 1998 FOURTH QUARTER AND YEAR-END RESULTS; ANNOUNCES TWO ADDITIONAL ACQUISITIONS MORTON, IL - MARCH 2, 1999 - Morton Industrial Group, Inc. (Nasdaq: MGRP), a leading contract manufacturing supplier to large industrial original equipment manufacturers (OEMs), today announced its financial results for 1998 which is the Company's first year of operations as a public company. Morton Industrial Group, Inc. was formed by the merger of MLX Corp. with Morton Metalcraft Holding Co. on January 20, 1998. Revenues for the Company's 1998 fourth quarter increased by 50 percent to $39.8 million from $26.4 million in the 1997 fourth quarter. Operating income for the fourth quarter of 1998 was $149 thousand compared to an operating loss of $8.3 million in the year ago quarter. The net loss for the 1998 fourth quarter was $1.3 million compared to a net loss of $5.6 million in the comparable period. The basic and diluted net losses per share for the 1998 fourth quarter were $0.33 and $0.33 respectively, based on 4,066,944 and 4,417,743 weighted average shares outstanding. In the 1997 fourth quarter, the basic and diluted net losses per share were $2.87 and $2.87 respectively, based on 1,944,444 and 3,325,973 weighted average shares. For the twelve months ended December 31, 1998, sales increased by 60 percent to $151.2 million from $94.4 million a year ago. 1998 operating income and net income were $6.3 million and $1.7 million, respectively, compared to an operating loss of $4.8 million and a net loss of $4.9 million in 1997. Basic and diluted net earnings per share in 1998 were $0.41 and $0.36 respectively, based on 4,023,373 and 4,582,614 weighted average shares outstanding. In 1997, the basic and diluted net losses per share were $2.52 and $2.52 respectively, on 1,944,444 and 3,340,651 weighted average shares. The results for the 1998 fourth quarter and full year reflect the impact of an industry-wide softening of demand for agricultural products and normal seasonal trends. Prior year results reflect expenses relating to the MLX Corp. merger. - M O R E - MORTON INDUSTRIAL GROUP, INC. March 2, 1999 Page Two William D. Morton, Chairman, President and Chief Executive Officer of Morton Industrial Group, Inc., stated: "We are pleased with our achievements in 1998 - our first full year of operations as a public company. Throughout the past year, we continued to enhance our relationships with our principal customers, and supplied them with an increasing number of additional metal and plastic components and subassemblies. Sales for both the 1998 fourth quarter and full year increased substantially, despite the impact of an industry-wide softening of demand for agricultural products and normal seasonal trends. "Our focus is on meeting the rigorous demands of our customers. In an effort to do so, we have undertaken a targeted acquisition strategy to expand our manufacturing capabilities and consequent ability to offer our customers an expanded array of products and services. In 1998, we acquired B&W Metal Fabricators and SMP Steel to strengthen our Contract Fabrication Division, which expands our presence in the increasingly important southeastern part of the country. We established our Contract Plastics Division in 1998 through the acquisitions of Carroll George and Mid-Central Plastics, which gave us thermoforming and injection molding plastics manufacturing capabilities. "Our strategy to acquire companies that further diversify our product offerings and customer base is continuing. Today, we announced two additional acquisitions, in addition to the four acquisitions we completed in 1998. "We completed a definitive agreement to acquire three facilities of Worthington Custom Plastics, a division of Worthington Industries (Nasdaq: WTHG). This acquisition will be known as Morton Custom Plastics and become part of our Contract Plastics Division. Morton's new Morton Custom Plastics subsidiary, which had sales of over $100 million in 1998 and has 1,200 employees, provides plastic components for the business equipment, appliances, aircraft, medical and recreational vehicle industries including thermoplastic injection molding, vacuum and pressure thermoforming, painting and assembly. We believe that the acquisition materially strengthens Morton's Contract Plastics Division and significantly diversifies our existing customer base through the new subsidiary's major customer relationships in specific industries. "We also established our new Contract Machining Division by acquiring the Illinois Machine & Tool Works and MC Products divisions of Midland Partners, Inc. Morton's new Contract Machining Division, which had revenues of approximately $17 million in 1998 and 150 employees, manufactures finished machine parts for the heavy equipment, pump, valve and controls and electronic industries and is QS 9000 and ISO 9002 certified. "Looking ahead, we believe that 1999 will continue to be a year of change and growth as Morton capitalizes on its niche in the marketplace. Our reputation for high quality products and customer service, together with our expanded range of metal and plastic fabrication and machining capabilities, is enhancing our relationships with our principal customers. We are beginning to see our strategy bear fruit, as we have already been selected to manufacture a significant number of additional components for new industrial products for Deere and Caterpillar." - M O R E - MORTON INDUSTRIAL GROUP, INC. March 2, 1999 Page Three Morton Industrial Group, Inc. is a supplier of high-quality metal fabrications, plastic, and machined component parts and subassemblies for large industrial original equipment manufacturers (OEMs). Its annualized revenues are approaching $300 million and over 3,000 employees in its facilities in the Midwest and Southeast. The Company provides large original equipment manufacturers with a wide range of services including design, prototype development, precision tool making and production of metal fabrications, plastic, and machined component parts. Additional services provided by Morton include painting, subassembly, packaging, warehousing and just-in-time delivery to customers' production lines. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This press release contains forward looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934), including, but not limited to, statements related to Morton's beliefs, expectations, or intentions. These statements involve risk and uncertainties that may cause Morton's actual results to differ significantly from those expected, suggested, or projected. Factors that could contribute to such differences include, but are not limited to, competition with other fabricators; the risks associated with Morton's acquisition strategy, including unanticipated problems, difficulties in integrating acquired businesses, diversion of management's attention from daily operations, possible increased interest costs, and possible adverse effects on earnings resulting from increased goodwill amortization; introduction of new technologies that require significant capital expenditures; and general economic and business conditions. - M O R E - - STATISTICAL TABLE FOLLOWS - MORTON INDUSTRIAL GROUP, INC. March 2, 1999 Page Four MORTON INDUSTRIAL GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED TWELVE MONTHS ENDED 12/31/98 12/31/97 12/31/98 12/31/97 -------- -------- -------- -------- Net sales $39,783 $26,376 $151,196 $94,402 Cost of sales 35,693 25,084 129,740 83,267 -------- -------- -------- -------- Gross profit 4,090 1,292 21,456 11,135 Operating expenses Selling expenses 1,177 634 4,311 2,231 Administrative expenses 2,764 9,000 10,864 13,746 -------- -------- -------- -------- Total Operating Expenses 3,941 9,634 15,175 15,977 -------- -------- -------- -------- Operating Income 149 (8,342) 6,281 (4,842) -------- -------- -------- -------- Other Income (expense) Interest expenses (1,635) (890) (4,720) (3,375) Miscellaneous 69 15 261 84 -------- -------- -------- -------- Total other income (expenses) (1,566) (875) (4,459) (3,291) -------- -------- -------- -------- Earnings before income taxes (1,417) (9,217) 1,822 (8,133) Income Taxes (84) (3,629) 158 (3,224) -------- -------- -------- -------- Net Income (loss) (1,333) (5,588) 1,664 (4,909) -------- -------- -------- -------- -------- -------- -------- -------- Earnings per Share Basic $ (0.33) $ (2.87) $ 0.41 $ (2.52) -------- -------- -------- -------- -------- -------- -------- -------- Diluted $ (0.33) $ (2.87) $ 0.36 $ (2.52) -------- -------- -------- -------- -------- -------- -------- -------- Weighted average number of shares Basic 4,066,944 1,944,444 4,023,373 1,944,444 Dilluted 4,417,743 3,325,973 4,582,614 3,340,651
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