LOAN AND SECURITY AGREEMENT

 

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                                                                    Exhibit 99.1

 

 

 

                           LOAN AND SECURITY AGREEMENT

 

 

     This LOAN AND SECURITY AGREEMENT dated as of March 29, 2005 (the

"Agreement"), is executed by and between ROCKWELL MEDICAL TECHNOLOGIES, INC., a

Michigan corporation (the "Borrower"), which has its chief executive office

located at 30142 Wixom Road, Wixom, Michigan 48393, and STANDARD FEDERAL BANK

NATIONAL ASSOCIATION, a national banking association (the "Bank"), whose address

is 2600 West Big Beaver Road, Troy, Michigan 48084.

 

 

                                R E C I T A L S:

 

     A. The Borrower desires to borrow funds and obtain other financial

accommodations from the Bank.

 

     B. Pursuant to the Borrower's request, the Bank is willing to extend such

financial accommodations to the Borrower under the terms and conditions set

forth herein.

 

     NOW THEREFORE, in consideration of the premises, and the mutual covenants

and agreements set forth herein, the Borrower agrees to borrow from the Bank,

and the Bank agrees to lend to the Borrower, subject to and upon the following

terms and conditions:

 

 

                              A G R E E M E N T S:

 

SECTION 1 DEFINITIONS.

 

     1.1 Defined Terms. For the purposes of this Agreement, the following

capitalized words and phrases shall have the meanings set forth below.

 

     "Affiliate" of any Person shall mean (a) any other Person which, directly

or indirectly, controls or is controlled by or is under common control with such

Person, (b) any officer or director of such Person, and (c) with respect to the

Bank, any entity administered or managed by the Bank, or an Affiliate or

investment advisor thereof and which is engaged in making, purchasing, holding

or otherwise investing in commercial loans. A Person shall be deemed to be

"controlled by" any other Person if such Person possesses, directly or

indirectly, power to direct or cause the direction of the management and

policies of such Person whether by contract, ownership of voting securities,

membership interests or otherwise. An Affiliate shall not include a director of

the Borrower or an entity for which such person is also an equity holder,

officer or director provided that any dealings between the Borrower and such

director or entity are made on an independent arms-length basis in the normal

course of business.

 

     "Applicable Margin" shall mean the rate per annum added to the Prime Rate

to determine the Revolving Interest Rate. The applicable Margin is seventy-five

basis points (0.75%) for Prime Loans.

 

     "Asset Disposition" shall mean the sale, lease, assignment or other

transfer for value (each a "Disposition") by the Borrower or any Subsidiary to

any Person (other than the

 

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Borrower or any Subsidiary) of any asset or right of the Borrower or any

Subsidiary (including, the loss, destruction or damage of any thereof or any

actual or threatened (in writing to the Borrower or such Subsidiary)

condemnation, confiscation, requisition, seizure or taking thereof), other than

(a) the Disposition of any asset which is to be replaced, and is in fact

replaced, within thirty (30) days with another asset performing the same or a

similar function, (b) the sale or lease of inventory in the ordinary course of

business, or (c) the Disposition of damaged or obsolete equipment that is not

replaced.

 

     "Bank Product Agreements" shall mean those certain agreements entered into

from time to time by the Borrower or any Subsidiary with the Bank or any

Affiliate of the Bank concerning Bank Products.

 

     "Bank Product Obligations" shall mean all obligations, liabilities,

contingent reimbursement obligations, fees, and expenses owing by the Borrower

or any Subsidiary to the Bank or any Affiliate of the Bank pursuant to or

evidenced by the Bank Product Agreements and irrespective of whether for the

payment of money, whether direct or indirect, absolute or contingent, due or to

become due, now existing or hereafter arising.

 

     "Bank Products" shall mean any service or facility extended to the Borrower

or any Subsidiary by the Bank or any Affiliate of the Bank, including: (a)

credit cards, (b) credit card processing services, (c) debit cards, (d) purchase

cards, (e) ACH Transactions, (f) cash management, including controlled

disbursement, accounts or services, or (g) Hedging Agreements.

 

     "Bankruptcy Code" shall mean the United States Bankruptcy Code, as now

existing or hereafter amended.

 

     "Borrowing Base Amount" shall mean:

 

          (a) an amount equal to eighty percent (80%) of the net amount (after

     deduction of such reasonable reserves and allowances as the Bank deems

     proper and necessary) of all Eligible Accounts, plus

 

          (b) the lesser of (i) an amount equal to forty percent (40%) of the

     lower of cost or market value (after deduction of such reasonable reserves

     and allowances as the Bank deems proper and necessary) of all Eligible

     Inventory, and (ii) Six Hundred Thousand and 00/100 Dollars ($600,000.00),

     minus

 

          (c) an availability reserve equal to twenty percent (20%) of all

     outstanding lease obligations between the Bank and the Borrower when the

     Company, at any time, does not exhibit a Fixed Charge Coverage Ratio (as

     defined in Section 10.5 hereof) of greater than 1.50 to 1.00 for two (2)

     consecutive quarters (based on a trailing twelve- (12-) month calculation).

 

     "Borrowing Base Certificate" shall mean a certificate to be signed by the

Borrower certifying to the accuracy of the Borrowing Base Amount in form and

substance satisfactory to the Bank.

 

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     "Business Day" shall mean any day other than a Saturday, Sunday or a legal

holiday on which banks are authorized or required to be closed for the conduct

of commercial banking business in Troy, Michigan.

 

     "Capital Expenditures" shall mean all expenditures (including Capitalized

Lease Obligations) which, in accordance with GAAP, would be required to be

capitalized and shown on the consolidated balance sheet of the Borrower, but

excluding expenditures made in connection with the replacement, substitution or

restoration of assets to the extent financed (i) from insurance proceeds (or

other similar recoveries) paid on account of the loss of or damage to the assets

being replaced or restored or (ii) with awards of compensation arising from the

taking by eminent domain or condemnation of the assets being replaced.

 

     "Capital Lease" shall mean, as to any Person, a lease of any interest in

any kind of property or asset, whether real, personal or mixed, or tangible or

intangible, by such Person, as lessee, that is, or should be, in accordance with

Financial Accounting Standards Board Statement No. 13, as amended from time to

time, or, if such statement is not then in effect, such statement of GAAP as may

be applicable, recorded as a "capital lease" on the financial statements of such

Person prepared in accordance with GAAP.

 

     "Capital Securities" shall mean, with respect to any Person, all shares,

interests, participations or other equivalents (however designated, whether

voting or non-voting) of such Person's capital, whether now outstanding or

issued or acquired after the date hereof, including common shares, preferred

shares, membership interests in a limited liability company, limited or general

partnership interests in a partnership or any other equivalent of such ownership

interest.

 

     "Capitalized Lease Obligations" shall mean, as to any Person, all rental

obligations of such Person, as lessee under a Capital Lease which are or will be

required to be capitalized on the books of such Person.

 

     "Cash Equivalent Investment" shall mean, at any time, (a) any evidence of

Debt, maturing not more than one year after such time, issued or guaranteed by

the United States government or any agency thereof, (b) commercial paper,

maturing not more than one year from the date of issue, or corporate demand

notes, in each case (unless issued by the Bank or its holding company) rated at

least A-l by Standard & Poor's Ratings Services, a division of The McGraw-Hill

Companies, Inc. or P-l by Moody's Investors Service, Inc., (c) any certificate

of deposit, time deposit or banker's acceptance, maturing not more than one year

after such time, or any overnight Federal Funds transaction that is issued or

sold by the Bank or its holding company (or by a commercial banking institution

that is a member of the Federal Reserve System and has a combined capital and

surplus and undivided profits of not less than $500,000,000), (d) any repurchase

agreement entered into with the Bank, or other commercial banking institution of

the nature referred to in clause (c), which (i) is secured by a fully perfected

security interest in any obligation of the type described in any of clauses (a)

through (c) above, and (ii) has a market value at the time such repurchase

agreement is entered into of not less than one hundred percent (100%) of the

repurchase obligation of the Bank, or other commercial banking institution,

thereunder, (e) money market accounts or mutual funds which invest exclusively

in assets satisfying

 

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the foregoing requirements, and (f) other short term liquid investments approved

in writing by the Bank.

 

     "Collateral" shall have the meaning set forth in Section 6.1 hereof.

 

     "Collateral Access Agreement" shall mean an agreement in form and substance

reasonably satisfactory to the Bank pursuant to which a mortgagee or lessor of

real property on which Collateral is stored or otherwise located, or a

warehouseman, processor or other bailee of Inventory or other property owned by

the Borrower of any Subsidiary, acknowledges the Liens of the Bank and waives

any Liens held by such Person on such property, and, in the case of any such

agreement with a mortgagee or lessor, permits the Bank reasonable access to and

use of such real property following the occurrence and during the continuance of

an Event of Default to assemble, complete and sell any collateral stored or

otherwise located thereon.

 

     "Contingent Liability" and "Contingent Liabilities" shall mean,

respectively, each obligation and liability of the Borrower and all such

obligations and liabilities of the Borrower incurred pursuant to any agreement,

undertaking or arrangement by which the Borrower: (a) guarantees, endorses or

otherwise becomes or is contingently liable upon (by direct or indirect

agreement, contingent or otherwise, to provide funds for payment, to supply

funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor

against loss) the indebtedness, dividend, obligation or other liability of any

other Person in any manner (other than by endorsement of instruments in the

course of collection), including without limitation, any indebtedness, dividend

or other obligation which may be issued or incurred at some future time; (b)

guarantees the payment of dividends or other distributions upon the shares or

ownership interest of any other Person; (c) undertakes or agrees (whether

contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire

any indebtedness, obligation or liability of any other Person or any property or

assets constituting security therefor, (ii) to advance or provide funds for the

payment or discharge of any indebtedness, obligation or liability of any other

Person (whether in the form of loans, advances, stock purchases, capital

contributions or otherwise), or to maintain solvency, assets, level of income,

working capital or other financial condition of any other Person, or (iii) to

make payment to any other Person other than for value received; (d) agrees to

lease property or to purchase securities, property or services from such other

Person with the purpose or intent of assuring the owner of such indebtedness or

obligation of the ability of such other Person to make payment of the

indebtedness or obligation; (e) to induce the issuance of, or in connection with

the issuance of, any letter of credit for the benefit of such other Person; or

(f) undertakes or agrees otherwise to assure a creditor against loss. The amount

of any Contingent Liability shall (subject to any limitation set forth herein)

be deemed to be the outstanding principal amount (or maximum permitted principal

amount, if larger) of the indebtedness, obligation or other liability guaranteed

or supported thereby.

 

     "Daily Rate" shall mean an interest rate equal to LIBOR for a one month

Interest Period, as determined by the Bank for each calendar day. The Daily Rate

for any day that is not a Business Day will be the Daily Rate for the most

recent preceding Business Day.

 

     "Debt" shall mean, as to any Person, without duplication, (a) all

indebtedness of such Person; (b) all borrowed money of such Person (including

principal, interest, fees and

 

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charges), whether or not evidenced by bonds, debentures, notes or similar

instruments; (c) all obligations to pay the deferred purchase price of property

or services; (d) all obligations, contingent or otherwise, with respect to the

maximum face amount of all letters of credit (whether or not drawn), bankers'

acceptances and similar obligations issued for the account of such Person

(including the Letters of Credit), and all unpaid drawings in respect of such

letters of credit, bankers' acceptances and similar obligations; (e) all

indebtedness secured by any Lien on any property owned by such Person, whether

or not such indebtedness has been assumed by such Person (provided, however, if

such Person has not assumed or otherwise become liable in respect of such

indebtedness, such indebtedness shall be deemed to be in an amount equal to the

fair market value of the property subject to such Lien at the time of

determination); (f) the aggregate amount of all Capitalized Lease Obligations of

such Person; (g) all Contingent Liabilities of such Person, whether or not

reflected on its balance sheet; (h) all Hedging Obligations of such Person; (i)

all Debt of any partnership of which such Person is a general partner; and (j)

all monetary obligations of such Person under (i) a so-called synthetic,

off-balance sheet or tax retention lease, or (ii) an agreement for the use or

possession of property creating obligations that do not appear on the balance

sheet of such Person but which, upon the insolvency or bankruptcy of such

Person, would be characterized as the indebtedness of such Person (without

regard to accounting treatment). Notwithstanding the foregoing, Debt shall not

include trade payables and accrued expenses incurred by such Person in

accordance with customary practices and in the ordinary course of business of

such Person.

 

     "Default Rate" shall mean a per annum rate of interest equal to the Prime

Rate plus Two and Three-Quarters percent (2.75%).

 

     "Depreciation" shall mean the total amounts added to depreciation,

amortization, obsolescence, valuation and other proper reserves, as reflected on

the Borrower's financial statements and determined in accordance with GAAP.

 

     "EBITDA" shall mean, for any period, (a) the sum for such period of: (i)

Net Income, plus (ii) Interest Charges, plus (iii) federal and state income

taxes, plus (iv) Depreciation, plus (v) Amortization, plus (vi) research and

development costs that has been financed by the issuance of equity interests,

minus (b) income or loss attributable to equity in any Affiliate or Subsidiary),

in each case to the extent included in determining Net Income for such period.

All such amounts may be verified by the Bank at its discretion and shall be

determined acceptable to Bank.

 

     "Eligible Account" and "Eligible Accounts" shall mean each Account and all

such Accounts (exclusive of sales, excise or other similar taxes) owing to the

Borrower which meets each of the following requirements:

 

          (a) it is genuine in all respects and has arisen in the ordinary

     course of the Borrower's business from (i) the performance of services by

     the Borrower, which services have been fully performed, acknowledged and

     accepted by the Account Debtor or (ii) the sale or lease of Goods by the

     Borrower, including C.O.D. sales, which Goods have been completed in

     accordance with the Account Debtor's specifications (if any) and delivered

     to and accepted by the Account Debtor, and the Borrower has possession of,

     or has

 

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     delivered to the Bank at the Bank's request, shipping and delivery receipts

     evidencing such delivery;

 

          (b) it is subject to a perfected, first priority Lien in favor of the

     Bank and is not subject to any other assignment, claim or Lien;

 

          (c) it is the valid, legally enforceable and unconditional obligation

     of the Account Debtor with respect thereto, and is not subject to the

     fulfillment of any condition whatsoever or any counterclaim, credit (except

     as provided in subsection (h) of this definition), trade or volume

     discount, allowance, discount, rebate or adjustment by the Account Debtor

     with respect thereto, or to any claim by such Account Debtor denying

     liability thereunder in whole or in part and the Account Debtor has not

     refused to accept and/or has not returned or offered to return any of the

     Goods or services which are the subject of such Account;

 

          (d) the Account Debtor with respect thereto is a resident or citizen

     of, and is located within, the United States, unless the sale of goods or

     services giving rise to such Account is on letter of credit, banker's

     acceptance or other credit support terms reasonably satisfactory to the

     Bank;

 

          (e) it is not an Account arising from a "sale on approval," "sale or

     return," "consignment," "guaranteed sale" or "bill and hold", or are

     subject to any other repurchase or return agreement;

 

          (f) it is not an Account with respect to which possession and/or

     control of the goods sold giving rise thereto is held, maintained or

     retained by the Borrower or any Subsidiary (or by any agent or custodian of

     the Borrower or any Subsidiary) for the account of, or subject to, further

     and/or future direction from the Account Debtor with respect thereto;

 

          (g) it has not arisen out of contracts with the United States or any

     department, agency or instrumentality thereof, unless the Borrower has

     assigned its right to payment of such Account to the Bank pursuant to the

     Assignment of Claims Act of 1940, and evidence (satisfactory to the Bank)

      of such assignment has been delivered to the Bank, or any state, county,

     city or other governmental body, or any department, agency or

     instrumentality thereof;

 

          (h) Intentionally omitted;

 

          (i) if the Account is evidenced by chattel paper or an instrument, the

     originals of such chattel paper or instrument shall have been endorsed

     and/or assigned and delivered to the Bank or, in the case of electronic

     chattel paper, shall be in the control of the Bank, in each case in a

     manner satisfactory to the Bank;

 

          (j) such Account is evidenced by an invoice delivered to the related

     Account Debtor and is not more than (i) sixty (60) days past the due date

     thereof, or (ii) ninety (90)

 

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     days past the original invoice date thereof, in each case according to the

     original terms of sale;

 

          (k) it is not an Account with respect to an Account Debtor that is

     located in any jurisdiction which has adopted a statute or other

     requirement with respect to which any Person that obtains business from

     within such jurisdiction must file a notice of business activities report

     or make any other required filings in a timely manner in order to enforce

     its claims in such jurisdiction's courts unless (i) such notice of business

     activities report has been duly and timely filed or the Borrower is exempt

     from filing such report and has provided the Bank with satisfactory

     evidence of such exemption or (ii) the failure to make such filings may be

     cured retroactively by the Borrower for a nominal fee;

 

          (l) the Account Debtor with respect thereto is not an Affiliate of the

     Borrower;

 

          (m) such Account does not arise out of a contract or order which, by

     its terms, forbids or makes void or unenforceable the assignment thereof by

     the Borrower to the Bank and is not unassignable to the Bank for any other

     reason;

 

          (n) there is no bankruptcy, insolvency or liquidation proceeding

     pending by or against the Account Debtor with respect thereto, nor has the

     Account Debtor suspended business, made a general assignment for the

     benefit of creditors or failed to pay its debts generally as they come due,

     and/or no condition or event has occurred having a Material Adverse Effect

     on the Account Debtor which would require the Accounts of such Account

     Debtor to be deemed uncollectible in accordance with GAAP;

 

           (o) it is not owed by an Account Debtor with respect to which

     twenty-five percent (25.00%) or more of the aggregate amount of outstanding

     Accounts owed at such time by such Account Debtor is classified as

     ineligible under clause (j) of this definition;

 

          (p) Intentionally omitted; and

 

          (q) it does not violate the negative covenants and does satisfy the

     affirmative covenants of the Borrower contained in this Agreement.

 

An Account which is at any time an Eligible Account, but which subsequently

fails to meet any of the foregoing requirements, shall forthwith cease to be an

Eligible Account. Further, with respect to any Account, if the Bank at any time

hereafter determines in its reasonable discretion that the prospect of payment

or performance by the Account Debtor with respect thereto is materially impaired

for any reason whatsoever, such Account shall cease to be an Eligible Account

after notice of such determination is given to the Borrower.

 

     "Eligible Inventory" shall mean all Inventory of the Borrower which meets

each of the following requirements:

 

          (a) it is subject to a perfected, first priority Lien in favor of the

     Bank and is not subject to any other assignment, claim or Lien;

 

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          (b) it is salable and not slow-moving, obsolete or discontinued, as

     reasonably determined by the Bank;

 

          (c) it is in the possession and control of the Borrower and it is

     stored and held in facilities owned by the Borrower or, if such facilities

     are not so owned by the Borrower, the Bank is in possession of a Collateral

     Access Agreement with respect thereto;

 

          (d) it is not Inventory produced in violation of the Fair Labor

      Standards Act and subject to the "hot goods" provisions contained in Title

     29 U.S.C. Section 215;

 

          (e) it is not subject to any agreement or license which would restrict

     the Bank's ability to sell or otherwise dispose of such Inventory;

 

          (f) it is located in the United States or in any territory or

     possession of the United States that has adopted Article 9 of the Uniform

     Commercial Code;

 

          (g) it is not "in transit" to the Borrower or held by the Borrower on

     consignment;

 

          (h) it is not "work-in-progress" Inventory;

 

          (i) it is not supply items, packaging or any other similar materials;

 

          (j) it is not identified to any purchase order or contract to the

     extent progress or advance payments are received with respect to such

     Inventory;

 

          (k) it does not breach any of the representations, warranties or

     covenants pertaining to Inventory set forth in the Loan Documents; and

 

          (l) the Bank shall not have determined in its reasonable discretion

     that it is unacceptable due to age, type, category, quality, quantity

     and/or any other reason whatsoever.

 

Inventory which is at any time Eligible Inventory but which subsequently fails

to meet any of the foregoing requirements shall forthwith cease to be Eligible

Inventory.

 

     "Employee Plan" includes any pension, stock bonus, employee stock ownership

plan, retirement, profit sharing, deferred compensation, stock option, bonus or

other incentive plan, whether qualified or nonqualified, or any disability,

medical, dental or other health plan, life insurance or other death benefit

plan, vacation benefit plan, severance plan or other employee benefit plan or

arrangement, including, without limitation, those pension, profit-sharing and

retirement plans of the Borrower described from time to time in the financial

statements of the Borrower and any pension plan, welfare plan, Defined Benefit

Pension Plans (as defined in ERISA) or any multi-employer plan, maintained or

administered by the Borrower or to which the Borrower is a party or may have any

liability or by which the Borrower is bound.

 

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     "Environmental Laws" shall mean all present or future federal, state or

local laws, statutes, common law duties, rules, regulations, ordinances and

codes, together with all administrative or judicial orders, consent agreements,

directed duties, requests, licenses, authorizations and permits of, and

agreements with, any governmental authority, in each case relating to any matter

arising out of or relating to public health and safety, or pollution or

protection of the environment or workplace, including any of the foregoing

relating to the presence, use, production, generation, handling, transport,

treatment, storage, disposal, distribution, discharge, emission, release,

threatened release, control or cleanup of any Hazardous Substance.

 

     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as

amended from time to time.

 

     "Event of Default" shall mean any of the events or conditions which are set

forth in Section 11 hereof.

 

     "Federal Funds Rate" shall mean, for any day, a fluctuating interest rate

equal for each day during such period to the weighted average of the rates on

overnight Federal funds transactions with members of the Federal Reserve System

arranged by Federal funds brokers, as published for such day (or, if such day is

not a Business Day, for the next preceding Business Day) by the Federal Reserve

Bank of New York, or, if such rate is not so published for any day which is a

Business Day, the average of the quotations for such day on such transactions

received by the Bank from three Federal funds brokers of recognized standing

selected by the Bank. The Bank's determination of such rate shall be binding and

conclusive absent manifest error.

 

     "Funded Debt" shall mean, as to any Person, all Debt of such Person that

matures more than one year from the date of its creation (or is renewable or

extendible, at the option of such Person, to a date more than one year from such

date).

 

     "GAAP" shall mean generally accepted accounting principles set forth from

time to time in the opinions and pronouncements of the Accounting Principles

Board and the American Institute of Certified Public Accountants and statements

and pronouncements of the Financial Accounting Standards Board (or agencies with

similar functions of comparable stature and authority within the U.S. accounting

profession), which are applicable to the circumstances as of the date of

determination, provided, however, that interim financial statements or reports

shall be deemed in compliance with GAAP despite the absence of footnotes and

fiscal year-end adjustments as required by GAAP.

 

     "Guarantor" and "Guarantors" shall mean, respectively, each of and

collectively, the following Person: Rockwell Transportation, Inc.

 

     "Guaranty" shall have the meaning set forth in Section 3.1 hereof.

 

     "Hazardous Substances" shall mean (a) any petroleum or petroleum products,

radioactive materials, asbestos in any form that is or could become friable,

urea formaldehyde foam insulation, dielectric fluid containing levels of

polychlorinated biphenyls, radon gas and mold; (b) any chemicals, materials,

pollutant or substances defined as or included in the defini-

 

                                      -9-

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tion of "hazardous substances", "hazardous waste", "hazardous materials",

"extremely hazardous substances", "restricted hazardous waste", "toxic

substances", "toxic pollutants", "contaminants", "pollutants" or words of

similar import, under any applicable Environmental Law; and (c) any other

chemical, material or substance, the exposure to, or release of which is

prohibited, limited or regulated by any governmental authority or for which any

duty or standard of care is imposed pursuant to, any Environmental Law.

 

     "Hedging Agreements" shall mean any interest rate, currency or commodity

swap agreement, cap agreement or collar agreement, and any other agreement or

arrangement designed to protect a Person against fluctuations in interest rates,

currency exchange rates or commodity prices.

 

     "Hedging Obligation" shall mean, with respect to any Person, any liability

of such Person under any Hedging Agreement.

 

     "Indemnified Party" and "Indemnified Parties" shall mean, respectively,

each of the Bank and any parent corporations, Affiliate or Subsidiary of the

Bank, and each of their respective officers, directors, employees, attorneys and

agents, and all of such parties and entities.

 

     "Intellectual Property" shall mean the collective reference to all rights,

priorities and privileges relating to intellectual property, whether arising

under United States, multinational or foreign laws or otherwise, including

copyrights, patents, service marks and trademarks, and all registrations and

applications for registration therefor and all licensees thereof, trade names,

domain names, technology, know-how and processes, and all rights to sue at law

or in equity for any infringement or other impairment thereof, including the

right to receive all proceeds and damages therefrom.

 

     "Interest Charges" shall mean, for any period, the sum of: (a) all

interest, charges and related expenses payable with respect to that fiscal

period to a lender in connection with borrowed money or the deferred purchase

price of assets that are treated as interest in accordance with GAAP, plus (b)

the portion of Capitalized Lease Obligations with respect to that fiscal period

that should be treated as interest in accordance with GAAP, plus (c) all charges

paid or payable (without duplication) during that period with respect to any

Hedging Agreements.

 

     "Interest Period" shall mean successive one, two, three or six month

periods, beginning and ending as provided in this Agreement.

 

     "Investment" shall mean, with respect to any Person, any investment in

another Person, whether by acquisition of any debt or equity security, by making

any loan or advance, by becoming obligated with respect to a Contingent

Liability in respect of obligations of such other Person (other than travel and

similar advances to employees in the ordinary course of business).

 

     "Letter of Credit" and "Letters of Credit" shall mean, respectively, a

letter of credit and all such letters of credit issued by the Bank, in its sole

discretion, upon the execution and delivery by the Borrower and the acceptance

by the Bank of a Master Letter of Credit Agreement and a Letter of Credit

Application, as set forth in Section 2.7 of this Agreement.

 

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     "Letter of Credit Application" shall mean, with respect to any request for

the issuance of a Letter of Credit, a letter of credit application in the form

being used by the Bank at the time of such request for the type of Letter of

Credit requested.

 

     "Letter of Credit Commitment" shall mean, at any time, an amount equal to

One Million and 00/100 Dollars ($1,000,000.00).

 

     "Letter of Credit Maturity Date" shall mean the date twelve (12) months

after the issue date, and in any case March 30, 2007.

 

     "Letter of Credit Obligations" shall mean, at any time, an amount equal to

the aggregate of the original face amounts of all Letters of Credit minus the

sum of (i) the amount of any reductions in the original face amount of any

Letter of Credit which did not result from a draw thereunder, (ii) the amount of

any payments made by the Bank with respect to any draws made under a Letter of

Credit for which the Borrower has reimbursed the Bank, (iii) the amount of any

payments made by the Bank with respect to any draws made under a Letter of

Credit which have been converted to a Revolving Loan as set forth in Section

2.7, and (iv) the portion of any issued but expired Letter of Credit which has

not been drawn by the beneficiary thereunder. For purposes of determining the

outstanding Letter of Credit Obligations at any time, the Bank's acceptance of a

draft drawn on the Bank pursuant to a Letter of Credit shall constitute a draw

on the applicable Letter of Credit at the time of such acceptance.

 

     "Liabilities" shall mean at all times all liabilities of the Borrower that

would be shown as such on a balance sheet of the Borrower prepared in accordance

with GAAP.

 

     "Lien" shall mean, with respect to any Person, any interest granted by such

Person in any real or personal property, asset or other right owned or being

purchased or acquired by such Person (including, without limitation, an interest

in respect of a Capital Lease) which secures payment or performance of any

obligation and shall include any mortgage, lien, encumbrance, title retention

lien, charge or other security interest of any kind, whether arising by

contract, as a matter of law, by judicial process or otherwise.

 

     "Loans" shall mean, collectively, all Revolving Loans made by the Bank to

the Borrower and all Letter of Credit Obligations, under and pursuant to this

Agreement.

 

     "Loan Documents" shall mean each of the agreements, documents, instruments

and certificates set forth in Section 3.1 hereof, and any and all such other

instruments, documents, certificates and agreements from time to time executed

and delivered by the Borrower, the Guarantor or any of their Subsidiaries for

the benefit of the Bank pursuant to any of the foregoing, and all amendments,

restatements, supplements and other modifications thereto.

 

     "Master Letter of Credit Agreement" shall mean, at any time, with respect

to the issuance of Letters of Credit, a Master Letter of Credit Agreement in the

form being used by the Bank at such time.

 

     "Material Adverse Effect" shall mean (a) a material adverse change in, or a

material adverse effect upon, the assets, business, properties, condition

(financial or otherwise) or

 

                                      -11-

<PAGE>

results of operations of the Borrower and its Subsidiaries taken as a whole, (b)

a material impairment of the ability of the Borrower and its Subsidiaries to

perform any of the Obligations under any of the Loan Documents, or (c) a

material adverse effect on (i) any substantial portion of the Collateral, (ii)

the legality, validity, binding effect or enforceability against the Borrower

and its Subsidiaries of any of the Loan Documents, (iii) the perfection or

priority of any Lien granted to the Bank under any Loan Document, or (iv) the

rights or remedies of the Bank under any Loan Document.

 

     "Net Cash Proceeds" shall mean:

 

          (a) with respect to any Asset Disposition, the aggregate cash proceeds

     (including cash proceeds received pursuant to policies of insurance or by

     way of deferred payment of principal pursuant to a note, installment

     receivable or otherwise, but only as and when received) received by the

     Borrower pursuant to such Asset Disposition net of (i) the direct costs

     relating to such sale, transfer or other disposition (including sales

     commissions and legal, accounting and investment banking fees), (ii) taxes

     paid or reasonably estimated by the Borrower to be payable as a result

     thereof (after taking into account any available tax credits or deductions

     and any tax sharing arrangements), and (iii) amounts required to be applied

     to the repayment of any Debt secured by a Lien on the asset subject to such

     Asset Disposition (other than the Loans);

 

          (b) with respect to any issuance of Capital Securities, the aggregate

     cash proceeds received by the Borrower pursuant to such issuance, net of

     the direct costs relating to such issuance (including sales and

     underwriters' commissions; and

 

          (c) with respect to any issuance of Debt, the aggregate cash proceeds

     received by the Borrower pursuant to such issuance, net of the direct costs

     of such issuance (including up-front, underwriters' and placement fees).

 

     "Net Income" shall mean, with respect to the Borrower and its Subsidiaries

for any period, the consolidated net income (or loss) of the Borrower and its

Subsidiaries for such period as determined in accordance with GAAP, excluding

any gains from Asset Dispositions, any extraordinary gains and any gains from

discontinued operations.

 

     "Non-Excluded Taxes" shall have the meaning set forth in Section 2.8(a)

hereof.

 

     "Note" shall mean the Revolving Note.

 

     "Obligations" shall mean the Loans, as evidenced by any Note, all interest

accrued thereon (including interest which would be payable as post-petition in

connection with any bankruptcy or similar proceeding, whether or not permitted

as a claim thereunder), any fees due the Bank hereunder, any expenses incurred

by the Bank hereunder and any and all other liabilities and obligations of the

Borrower to the Bank under this Agreement and any other Loan Document, including

any reimbursement obligations of the Borrower in respect of Letters of Credit

and surety bonds, all Hedging Obligations of the Borrower which are owed to the

Bank or any Affiliate of the Bank, and all Bank Product Obligations of the

Borrower, all in each case

 

                                       -12-

<PAGE>

howsoever created, arising or evidenced, whether direct or indirect, absolute or

contingent, now or hereafter existing, or due or to become due, together with

any and all renewals or extensions thereof.

 

     "Obligor" shall mean the Borrower, any Guarantor, accommodation endorser,

third party pledgor, or any other party liable with respect to the Obligations.

 

     "Organizational Identification Number" means, with respect to Borrower, the

organizational identification number assigned to Borrower by the applicable

governmental unit or agency of the jurisdiction of organization of the Borrower.

 

     "Other Taxes" shall mean any present or future stamp or documentary taxes

or any other excise or property taxes, charges or similar levies which arise

from the execution, delivery, enforcement or registration of, or otherwise with

respect to, this Agreement or any of the other Loan Documents.

 

     "Permitted Liens" shall mean (a) Liens for Taxes, assessments or other

governmental charges not at the time delinquent or thereafter payable without

penalty or being contested in good faith by appropriate proceedings and, in each

case, for which it maintains adequate reserves in accordance with GAAP and in

respect of which no Lien has been filed; (b) Liens arising in the ordinary

course of business (such as (i) Liens of carriers, warehousemen, mechanics and

materialmen and other similar Liens imposed by law, and (ii) Liens in the form

of deposits or pledges incurred in connection with worker's compensation,

unemployment compensation and other types of social security (excluding Liens

arising under ERISA) or in connection with surety bonds, bids, performance bonds

and similar obligations) for sums not overdue or being contested in good faith

by appropriate proceedings and not involving any advances or borrowed money or

the deferred purchase price of property or services, which do not in the

aggregate materially detract from the value of the property or assets of the

Borrower or materially impair the use thereof in the operation of the Borrower's

business and, in each case, for which it maintains adequate reserves in

accordance with GAAP and in respect of which no Lien has been filed; (c) Liens

described on Schedule 9.2 as of the Closing Date; (d) attachments, appeal bonds,

judgments and other similar Liens, for sums not exceeding Fifty Thousand and

00/100 Dollars ($50,000.00) arising in connection with court proceedings,

provided the execution or other enforcement of such Liens is effectively stayed

and the claims secured thereby are being actively contested in good faith and by

appropriate proceedings and to the extent such judgments or awards do not

constitute an Event of Default under Section 11.8 hereof; (e) easements, rights

of way, restrictions, minor defects or irregularities in title and other similar

Liens not interfering in any material respect with the ordinary conduct of the

business of the Borrower or any of its Subsidiaries; (f) subject to the

limitation set forth in Section 9.1(g), if any, Liens arising in connection with

Capitalized Lease Obligations (and attaching only to the property being leased);

(g) subject to the limitation set forth in Section 9.1(h), Liens that constitute

purchase money security interests on any property securing Debt incurred for the

purpose of financing all or any part of the cost of acquiring such property,

provided that any such Lien attaches to such property within twenty (20) days of

the acquisition thereof and attaches solely to the property so acquired; and (h)

Liens granted to the Bank hereunder and under the Loan Documents.

 

                                      -13-

 

 

 

<PAGE>

     "Person" shall mean any natural person, partnership, limited liability

company, corporation, trust, joint venture, joint stock company, association,

unincorporated organization, government or agency or political subdivision

thereof, or other entity, whether acting in an individual, fiduciary or other

capacity.

 

     "Prime Loan" or "Prime Loans" shall mean that portion, and collectively,

those portions of the aggregate outstanding principal balance of the Loans that

bear interest at the Prime Rate plus Three-Quarters percent (0.75%) per annum.

 

     "Prime Rate" shall mean the floating per annum rate of interest which at

any time, and from time to time, shall be most recently announced by the Bank as

its Prime Rate, which is not intended to be the Bank's lowest or most favorable

rate of interest at any one time. The effective date of any change in the Prime

Rate shall for purposes hereof be the date the Prime Rate is changed by the

Bank. The Bank shall not be obligated to give notice of any change in the Prime

Rate.

 

     "Regulatory Change" shall mean the introduction of, or any change in any

applicable law, treaty, rule, regulation or guideline or in the interpretation

or administration thereof by any governmental authority or any central bank or

other fiscal, monetary or other authority having jurisdiction over the Bank or

its lending office.

 

     "Revolving Interest Rate" shall mean a floating per annum rate of interest

equal to the Prime Rate plus Three-Quarters percent (0.75%).

 

     "Revolving Loan" and "Revolving Loans" shall mean, respectively, each

direct advance and the aggregate of all such direct advances made by the Bank to

the Borrower under and pursuant to this Agreement, as set forth in Section 2.1

of this Agreement.

 

     "Revolving Loan Availability" shall mean, at any time, an amount equal to

the lesser of (a) the Revolving Loan Commitment minus the Letter of Credit

Obligations, or (b) the Borrowing Base Amount minus the Letter of Credit

Obligations.

 

     "Revolving Loan Commitment" shall mean Two Million Seven Hundred Fifty

Thousand and 00/100 Dollars ($2,750,000.00).

 

     "Revolving Loan Maturity Date" shall mean March 31, 2006, unless extended

by the Bank pursuant to any modification, extension or renewal note executed by

the Borrower and accepted by the Bank in its sole and absolute discretion in

substitution for the Revolving Note.

 

     "Revolving Loan Mandatory Prepayment" shall have the meaning set forth in

Section 2.1(d)(ii) hereof.

 

     "Revolving Note" shall mean a revolving note in the form prepared by and

acceptable to the Bank, dated as of the date hereof, in the amount of the

Revolving Loan Commitment and maturing on the Revolving Loan Maturity Date, duly

executed by the Borrower and payable to the order of the Bank, together with any

and all renewal, extension, modification

 

                                      -14-

<PAGE>

or replacement notes executed by the Borrower and delivered to the Bank and

given in substitution therefor.

 

     "Senior Debt" shall mean all Debt of the Borrower and its Subsidiaries

other than Subordinated Debt.

 

     "Subordinated Debt" shall mean that portion of the Debt of the Borrower

which is subordinated to the Obligations in a manner satisfactory to the Bank,

including right and time of payment of principal and interest.

 

     "Subsidiary" and "Subsidiaries" shall mean, respectively, with respect to

any Person, each and all such corporations, partnerships, limited partnerships,

limited liability companies, limited liability partnerships, joint ventures or

other entities of which or in which such Person owns, directly or indirectly,

such number of outstanding Capital Securities as have more than fifty percent

(50.00%) of the ordinary voting power for the election of directors or other

managers of such corporation, partnership, limited liability company or other

entity. Unless the context otherwise requires, each reference to Subsidiaries

herein shall be a reference to Subsidiaries of the Borrower.

 

     "Tangible Assets" shall mean the total of all assets appearing on a balance

sheet of the Borrower prepared in accordance with GAAP (with Inventory being

valued at the lower of cost or market), after deducting all proper reserves

(including reserves for Depreciation) minus the sum of (i) goodwill, patents,

trademarks, prepaid expenses, deposits, deferred charges and other personal

property which is classified as intangible property in accordance with GAAP, and

(ii) any amounts due from shareholders, Affiliates, officers or employees of the

Borrower.

 

     "Tangible Net Worth" shall mean at any time the total of Tangible Assets

minus Liabilities plus Subordinated Debt.

 

     "Taxes" shall mean any and all present and future taxes, duties, levies,

imposts, assessments, charges or withholdings, and any and all liabilities

(including interest and penalties and other additions to taxes) with respect to

the foregoing.

 

     "Total Debt" shall mean all Debt of the Borrower, determined on a

consolidated basis, excluding (i) Contingent Liabilities (except to the extent

constituting Contingent Liabilities in respect of the Debt of a Person other

than the Borrower or any Subsidiaries), (ii) Hedging Obligations and (iii) Debt

of the Borrower to Subsidiaries and Debt of Subsidiaries to the Borrower or to

other Subsidiaries, and (iv) contingent obligations in respect of undrawn

Letters of Credit.

 

     "UCC" shall mean the Uniform Commercial Code in effect in the state of

Michigan from time to time.

 

     "Unmatured Event of Default" shall mean any event which, with the giving of

notice, the passage of time or both, would constitute an Event of Default.

 

     "Voidable Transfer" shall have the meaning set forth in Section 13.21

hereof.

 

                                      -15-

<PAGE>

     "Wholly-Owned Subsidiary" shall mean any Subsidiary of which or in which

the Borrower owns, directly or indirectly, one hundred percent (100%) of the

Capital Securities of such Subsidiary.

 

     "Working Capital" shall mean the total of cash on hand, cash equivalents,

marketable securities, Accounts minus adequate reserves for doubtful Accounts,

and readily salable Inventory at the lower of cost or market value, minus the

total of all liabilities payable within one year, all as determined in

accordance with GAAP.

 

     1.2 Accounting Terms. Any accounting terms used in this Agreement which are

not specifically defined herein shall have the meanings customarily given them

in accordance with GAAP. Calculations and determinations of financial and

accounting terms used and not otherwise specifically defined hereunder and the

preparation of financial statements to be furnished to the Bank pursuant hereto

shall be made and prepared, both as to classification of items and as to amount,

in accordance with sound accounting practices and GAAP as used in the

preparation of the financial statements of the Borrower on the date of this

Agreement. If any changes in accounting principles or practices from those used

in the preparation of the financial statements are hereafter occasioned by the

promulgation of rules, regulations, pronouncements and opinions by or required

by the Financial Accounting Standards Board or the American Institute of

Certified Public Accountants (or any successor thereto or agencies with similar

functions), which results in a material change in the method of accounting in

the financial statements required to be furnished to the Bank hereunder or in

the calculation of financial covenants, standards or terms contained in this

Agreement, the parties hereto agree to enter into good faith negotiations to

amend such provisions so as equitably to reflect such changes to the end that

the criteria for evaluating the financial condition and performance of the

Borrower will be the same after such changes as they were before such changes;

and if the parties fail to agree on the amendment of such provisions, the

Borrower will furnish financial statements in accordance with such changes, but

shall provide calculations, which are reviewed and certified by the Borrower's

accountants, for all financial covenants, shall perform all financial covenants

and shall otherwise observe all financial standards and terms in accordance with

applicable accounting principles and practices in effect immediately prior to

such changes. Calculations with respect to financial covenants required to be

stated in accordance with applicable accounting principles and practices in

effect immediately prior to such changes shall be reviewed and certified by the

Borrower's accountants.

 

     1.3 Other Terms Defined in UCC. All other capitalized words and phrases

used herein and not otherwise specifically defined herein shall have the

respective meanings assigned to such terms in the UCC, to the extent the same

are used or defined therein.

 

     1.4 Other Interpretive Provisions.

 

          (a) The meanings of defined terms are equally applicable to the

     singular and plural forms of the defined terms. Whenever the context so

     requires, the neuter gender includes the masculine and feminine, the single

     number includes the plural, and vice versa, and in particular the word

     "Borrower" shall be so construed.

 

                                       -16-

<PAGE>

 

          (b) Section and Schedule references are to this Agreement unless

     otherwise specified. The words "hereof", "herein" and "hereunder" and words

     of similar import when used in this Agreement shall refer to this Agreement

     as a whole and not to any particular provision of this Agreement

 

          (c) The term "including" is not limiting, and means "including,

     without limitation".

 

          (d) In the computation of periods of time from a specified date to a

     later specified date, the word "from" means "from and including"; the words

     "to" and "until" each mean "to but excluding", and the word "through" means

     "to and including".

 

          (e) Unless otherwise expressly provided herein, (i) references to

     agreements (including this Agreement and the other Loan Documents) and

     other contractual instruments shall be deemed to include all subsequent

     amendments, restatements, supplements and other modifications thereto, but

     only to the extent such amendments, restatements, supplements and other

     modifications are not prohibited by the terms of any Loan Document, and

     (ii) references to any statute or regulation shall be construed as

     including all statutory and regulatory provisions amending, replacing,

     supplementing or interpreting such statute or regulation.

 

          (f) To the extent any of the provisions of the other Loan Documents

     are inconsistent with the terms of this Agreement, the provisions of this

      Agreement shall govern.

 

          (g) This Agreement and the other Loan Documents may use several

     different limitations, tests or measurements to regulate the same or

     similar matters. All such limitations, tests and measurements are

     cumulative and each shall be performed in accordance with its terms.

 

 

SECTION 2 COMMITMENT OF THE BANK.

 

     2.1   Revolving Loans.

 

 

          (a) Revolving Loan Commitment. Subject to the terms and conditions of

     this Agreement and the other Loan Documents, and in reliance upon the

     representations and warranties of the Borrower set forth herein and in the

     other Loan Documents, the Bank agrees to make such Revolving Loans at such

     times as the Borrower may from time to time request until, but not

     including, the Revolving Loan Maturity Date, and in such amounts as the

     Borrower may from time to time request, provided, however, that the

     aggregate principal balance of all Revolving Loans outstanding at any time

     shall not exceed the Revolving Loan Availability. Revolving Loans made by

     the Bank may be repaid and, subject to the terms and conditions hereof,

     borrowed again up to, but not including the Revolving Loan Maturity Date

     unless the Revolving Loans are otherwise accelerated, terminated or

     extended as provided in this Agreement. The Revolving Loans shall be used

     by the Borrower for the purpose of working capital.

 

                                      -17-

<PAGE>

 

          (b) Revolving Loan Interest and Payments. Intentionally omitted.

 

          (c) Revolving Loan Interest and Payments. Except as otherwise provided

     in this Section 2.1(c), the principal amount of the Revolving Loans

     outstanding from time to time shall bear interest at the applicable

     Revolving Interest Rate. Accrued and unpaid interest on the unpaid

     principal balance of all Revolving Loans outstanding from time to time

     which are Prime Loans, shall be due and payable monthly, in arrears,

     commencing on April 1, 2005 and continuing on the 1st day of each calendar

     month thereafter, and on the Revolving Loan Maturity Date. Any amount of

     principal or interest on the Revolving Loans which is not paid when due,

     whether at stated maturity, by acceleration or otherwise, shall bear

     interest payable on demand at the Default Rate.

 

          (d) Revolving Loan Principal Payments.

 

               (i) Revolving Loan Mandatory Payments. All Revolving Loans

          hereunder shall be repaid by the Borrower on the Revolving Loan

          Maturity Date, unless payable sooner pursuant to the provisions of

          this Agreement. In the event the aggregate outstanding principal

          balance of all Revolving Loans and Letter of Credit Obligations

           hereunder exceeds the Revolving Loan Availability, the Borrower shall,

          without notice or demand of any kind, immediately make such repayments

          of the Revolving Loans or take such other actions as are satisfactory

          to the Bank as shall be necessary to eliminate such excess.

 

               (ii) Mandatory [Clean-Up / Clean-Down]. Intentionally omitted.

 

               (iii) Optional Prepayments. The Borrower may from time to time

          prepay the Revolving Loans which are Prime Loans, in whole or in part,

          without any prepayment penalty whatsoever, provided that any

          prepayment of the entire principal balance of the Prime Loans shall

          include accrued interest on such Prime Loans to the date of such

          prepayment.

 

     2.2 Term Loan. Intentionally omitted.

 

     2.3 Capex Loans. Intentionally omitted.

 

     2.4 Additional LIBOR Loan Provisions. Intentionally omitted.

 

     2.5 Interest and Fee Computation; Collection of Funds. Except as otherwise

set forth herein, all interest and fees shall be calculated on the basis of a

year consisting of 360 days and shall be paid for the actual number of days

elapsed. Principal payments submitted in funds not immediately available shall

continue to bear interest until collected. If any payment to be made by the

Borrower hereunder or under any Note shall become due on a day other than a

Business Day, such payment shall be made on the next succeeding Business Day and

such extension of time shall be included in computing any interest in respect of

such payment. Notwithstanding anything to the contrary contained herein, the

final payment due under any of the Loans must be made by wire transfer or other

immediately available funds. All payments made by the Borrower hereunder or

under any of the Loan Documents shall be made without setoff, counterclaim, or

 

                                      -18-

<PAGE>

other defense. To the extent permitted by applicable law, all payments hereunder

or under any of the Loan Documents (including any payment of principal,

interest, or fees) to, or for the benefit, of any Person shall be made by the

Borrower free and clear of, and without deduction or withholding for, or account

of, any taxes now or hereinafter imposed by any taxing authority.

 

     2.6 Late Charge. If any payment of interest or principal due hereunder is

not made within ten (10) days after such payment is due in accordance with the

terms hereof, then, in addition to the payment of the amount so due, the

Borrower shall pay to the Bank a "late charge" of five cents for each whole

dollar so overdue to defray part of the cost of collection and handling such

late payment. The Borrower agrees that the damages to be sustained by the Bank

for the detriment caused by any late payment are extremely difficult and

impractical to ascertain, and that the amount of five cents for each one dollar

due is a reasonable estimate of such damages, does not constitute interest, and

is not a penalty.

 

     2.7 Letters of Credit. Subject to the terms and conditions of this

Agreement and upon (i) the execution by the Borrower and the Bank of a Master

Letter of Credit Agreement in form and substance acceptable to the Bank

(together with all amendments, modifications and restatements thereof, the

"Master Letter of Credit Agreement") and, (ii) the execution and delivery by the

Borrower, and the acceptance by the Bank, in its sole and absolute discretion,

of a Letter of Credit Application, the Bank agrees to issue for the account of

the Borrower such Letters of Credit in the standard form of the Bank and

otherwise in form and substance acceptable to the Bank, from time to time during

the term of this Agreement, provided that the Letter of Credit Obligations may

not at any time exceed the Letter of Credit Commitment and provided further,

that no Letter of Credit shall have an expiration date later than the Letter of

Credit Maturity Date. The amount of any payments made by the Bank with respect

to draws made by a beneficiary under a Letter of Credit for which the Borrower

has failed to reimburse the Bank upon the earlier of (i) the Bank's demand for

repayment, or (ii) five (5) days from the date of such payment to such

beneficiary by the Bank, shall be deemed to have been converted to a Revolving

Loan as of the date such payment was made by the Bank to such beneficiary. Upon

the occurrence of an Event of a Default and at the option of the Bank, all

Letter of Credit Obligations shall be converted to Revolving Loans consisting of

Prime Loans, all without demand, presentment, protest or notice of any kind, all

of which are hereby waived by the Borrower. To the extent the provisions of the

Master Letter of Credit Agreement differ from, or are inconsistent with, the

terms of this Agreement, the provisions of this Agreement shall govern.

 

     2.8 Taxes.

 

          (a) All payments made by the Borrower under this Agreement shall be

     made free and clear of, and without deduction or withholding for or on

     account of, any present or future income, stamp or other taxes, levies,

     imposts, duties, charges, fees, deductions or withholdings, now or

     hereafter imposed, levied, collected, withheld or assessed by any

     governmental authority, excluding net income taxes and franchise taxes

     (imposed in lieu of net income taxes) imposed on the Bank as a result of a

     present or former connection between the Bank and the jurisdiction of the

     governmental authority imposing such tax or any political subdivision or

     taxing authority thereof or therein (other than any such connection arising

     solely from the Bank having executed, delivered or performed its

 

                                      -19-

<PAGE>

     obligations or received a payment under, or enforced, this Agreement or any

     other Loan Document). If any such non-excluded taxes, levies, imposts,

     duties, charges, fees, deductions or withholdings (collectively,

     "Non-Excluded Taxes") or Other Taxes are required to be withheld from any

     amounts payable to the Bank hereunder, the amounts so payable to the Bank

     shall be increased to the extent necessary to yield to the Bank (after

     payment of all Non-Excluded Taxes and Other Taxes) interest or any such

     other amounts payable hereunder at the rates or in the amounts specified in

     this Agreement, provided, however, that the Borrower shall not be required

     to increase any such amounts payable to the Bank with respect to any

     Non-Excluded Taxes that are attributable to the Bank's failure to comply

      with the requirements of subsection (c).

 

          (b) The Borrower shall pay any Other Taxes to the relevant

     governmental authority in accordance with applicable law.

 

          (c) At the request of the Borrower and at the Borrower's sole cost,

      the Bank shall take reasonable steps to (i) contest its liability for any

     Non-Excluded Taxes or Other Taxes that have not been paid, or (ii) seek a

     refund of any Non-Excluded Taxes or Other Taxes that have been paid.

 

          (d) Whenever any Non-Excluded Taxes or Other Taxes are payable by the

     Borrower, as promptly as possible thereafter the Borrower shall send to the

     Bank a certified copy of an original official receipt received by the

     Borrower showing payment thereof. If the Borrower fails to pay any

     Non-Excluded Taxes or Other Taxes when due to the appropriate taxing

     authority or fails to remit to the Bank the required receipts or other

     required documentary evidence or if any governmental authority seeks to

      collect a Non-Excluded Tax or Other Tax directly from the Bank for any

     other reason, the Borrower shall indemnify the Bank on an after-tax basis

     for any incremental taxes, interest or penalties that may become payable by

     the Bank.

 

           (e) The agreements in this Section shall survive the satisfaction and

     payment of the Obligations and the termination of this Agreement.

 

     2.9 All Loans to Constitute Single Obligation. The Loans shall constitute

one general obligation of the Borrower, and shall be secured by Bank's priority

security interest in and Lien upon all of the Collateral and by all other

security interests, Liens, claims and encumbrances heretofore, now or at any

time or times hereafter granted by the Borrower to Bank.

 

 

SECTION 3 CONDITIONS OF BORROWING.

 

     Notwithstanding any other provision of this Agreement, the Bank shall not

be required to disburse, make or continue all or any portion of the Loans, if

any of the following conditions shall have occurred.

 

     3.1 Loan Documents. The Borrower shall have failed to execute and deliver

to the Bank any of the following Loan Documents, all of which must be

satisfactory to the Bank and the Bank's counsel in form, substance and

execution:

 

                                       -20-

 

<PAGE>

          (a) Loan Agreement. Two copies of this Agreement duly executed by the

     Borrower.

 

          (b) Revolving Note. A Revolving Note duly executed by the Borrower, in

     the form prepared by and acceptable to the Bank.

 

           (c) Term Note. Intentionally omitted.

 

          (d) Capex Note. Intentionally omitted.

 

          (e) Master Letter of Credit Agreement. A Master Letter of Credit

     Agreement prepared by and acceptable to the Bank duly executed by the

     Borrower in favor of the Bank.

 

          (f) Guaranty. A Continuing Unconditional Guaranty dated as of the date

     of this Agreement, executed by the Guarantor to and for the benefit of the

     Bank, in the form prepared by and acceptable to the Bank (the "Guaranty").

 

          (g) Guaranties. Intentionally omitted.

 

          (h) Pledge Agreement. Intentionally omitted.

 

          (i) Subordination Agreement. Intentionally omitted.

 

          (j) Collateral Access Agreement. Collateral Access Agreements dated

     effective as of the date of this Agreement, from the owner, lessor or

     mortgagee, as the case may be, of any real estate whereon any Collateral is

     stored or otherwise located, in the form prepared by and acceptable to the

     Bank.

 

                (i) Real Estate Documents. Intentionally omitted.

 

          (k) Borrowing Base Certificate. A Borrowing Base Certificate in the

     form prepared by the Bank, certified as accurate by the Borrower and

     acceptable to the Bank in its sole discretion.

 

          (l) Search Results; Lien Terminations. Copies of UCC search reports

     dated such a date as is reasonably acceptable to the Bank, listing all

     effective financing statements which name the Borrower and any of its

     Subsidiaries, under their present names and any previous names, as debtors,

     together with (i) copies of such financing statements, (ii) payoff letters

     evidencing repayment in full of all existing Debt to be repaid with the

     Loans, the termination of all agreements relating thereto and the release

     of all Liens granted in connection therewith, with UCC or other appropriate

     termination statements and documents effective to evidence the foregoing

     (other than Permitted Liens), and (iii) such other UCC termination

     statements as the Bank may reasonably request.

 

                                      -21-

<PAGE>

 

          (m) Organizational and Authorization Document. Certified copies of (i)

     Articles of Incorporation and Bylaws of the Borrower and each of its

     Subsidiaries, (ii) good standing certificates in the state of incorporation

     of the Borrower and each of its Subsidiaries and in each other state

     requested by the Bank, (iii) resolutions of the board of directors of the

     Borrower and each of its Subsidiaries approving and authorizing such

     Person's execution, delivery and performance of the Loan Documents to which

     it is party and the transactions contemplated thereby, and (iv) signature

     and incumbency certificates of the officers of the Borrower and each of its

     Subsidiaries, executing any of the Loan Documents, it being understood that

     the Bank may conclusively rely on each such certificate until formally

     advised by a like certificate of any changes therein), all certified by its

     secretary or an assistant secretary (or similar officer) as being in full

     force and effect without modification.

 

          (n) Insurance. Evidence satisfactory to the Bank of the existence of

     insurance required to be maintained pursuant to Section 8.6, together with

     evidence that the Bank has been named as a lender's loss payee.

 

          (o) Lockbox Agreement. Intentionally omitted.

 

          (p) Additional Documents. Such other certificates, financial

     statements, schedules, resolutions, opinions of counsel, notes and other

     documents which are provided for hereunder or which the Bank shall require.

 

     3.2 Event of Default. Any Event of Default or Unmatured Event of Default

shall have occurred and be continuing.

 

     3.3 Material Adverse Effect. The occurrence of any event having a Material

Adverse Effect upon the Borrower.

 

     3.4 Litigation. Any litigation or governmental proceeding shall have been

instituted against the Borrower or any of its officers or shareholders having a

Materially Adverse Effect upon the Borrower.

 

     3.5 Representations and Warranties. Any representation or warranty of the

Borrower contained herein or in any Loan Document shall be untrue or incorrect

in any material respect as of the date of any Loan as though made on such date,

except to the extent such representation or warranty expressly relates to an

earlier date.

 

     3.6 Commitment Fee. The Borrower shall have failed to pay to the Bank a

commitment fee in the amount of One-Half percent (0.5%) of the commitment amount

and a facility fee in the amount of One-Quarter percent (0.25%) of the

commitment amount, payable on or before the execution of this Agreement by the

Bank.

 

 

SECTION 4 NOTES EVIDENCING LOANS.

 

     4.1 Revolving Note. The Revolving Loans and the Letter of Credit

Obligations shall be evidenced by the Revolving Note. At the time of the initial

disbursement of a Revolving Loan

 

                                      -22-

<PAGE>

and at each time any additional Revolving Loan shall be requested hereunder or a

repayment made in whole or in part thereon, a notation thereof shall be made on

the books and records of the Bank. All amounts recorded shall be, absent

manifest error, conclusive and binding evidence of (i) the principal amount of

the Revolving Loans advanced hereunder and the amount of all Letter of Credit

Obligations, (ii) any accrued and unpaid interest owing on the Revolving Loans,

and (iii) all amounts repaid on the Revolving Loans or the Letter of Credit

Obligations. The failure to record any such amount or any error in recording

such amounts shall not, however, limit or otherwise affect the obligations of

the Borrower under the Revolving Note to repay the principal amount of the

Revolving Loans, together with all interest accruing thereon.

 

     4.2 Term Note. Intentionally omitted.

 

     4.3 Capex Note. Intentionally omitted.

 

 

SECTION 5 MANNER OF BORROWING.

 

     5.1 Borrowing Procedures. Each Loan shall be made available to the Borrower

upon any written, verbal, electronic, telephonic or telecopy loan request which

the Bank in good faith believes to emanate from a properly authorized

representative of the Borrower, whether or not that is in fact the case. Each

such request shall be effective upon receipt by the Bank, shall be irrevocable,

and shall specify the date, amount and type of borrowing. A request for a direct

advance must be received by the Bank no later than 11:00 a.m. Troy, Michigan

time, on the day it is to be funded. The proceeds of each direct advance shall

be made available at the office of the Bank by credit to the account of the

Borrower. The Borrower does hereby irrevocably confirm, ratify and approve all

such advances by the Bank and does hereby indemnify the Bank against losses and

expenses (including court costs, attorneys' and paralegals' fees) and shall hold

the Bank harmless with respect thereto.

 

     5.2 Borrowing Procedures. Intentionally omitted.

 

     5.3 LIBOR Conversion and Continuation Procedures. Intentionally omitted.

 

     5.4 LIBOR Conversion and Continuation Procedures. Intentionally omitted.

 

     5.5 Letters of Credit. All Letters of Credit shall bear such application,

issuance, renewal, negotiation and other fees and charges, and bear such

interest as charged by the Bank or otherwise payable pursuant to the Master

Letter of Credit Agreement or this Agreement. In addition to the foregoing, all

standby Letters of Credit issued under and pursuant to this Agreement shall bear

an annual issuance fee equal to three and three-quarters percent (3.75%) of the

face amount of such standby Letter of Credit, payable by the Borrower quarterly,

in arrears, until (i) such Letter of Credit has expired or has been returned to

the Bank, or (ii) the Bank has paid the beneficiary thereunder the full face

amount of such Letter of Credit.

 

     5.6 Automatic Debit. In order to effectuate the timely payment of any of

the Obligations when due, the Borrower hereby authorizes and directs the Bank,

at the Bank's option, to (a) debit the amount of the Obligations to any ordinary

deposit account of the Borrower, or (b) make a Revolving Loan hereunder to pay

the amount of the Obligations.

 

                                      -23-

<PAGE>

 

     5.7 Discretionary Disbursements. The Bank, in its sole and absolute

discretion, may immediately upon notice to the Borrower, disburse any or all

proceeds of the Loans made or available to the Borrower pursuant to this

Agreement to pay any fees, costs, expenses or other amounts required to be paid

by the Borrower hereunder and not so paid. All monies so disbursed shall be a

part of the Obligations, payable by the Borrower on demand from the Bank.

 

 

SECTION 6 SECURITY FOR THE OBLIGATIONS.

 

     6.1 Security for Obligations. As security for the payment and performance

of the Obligations, the Borrower does hereby pledge, assign, transfer, deliver

and grant to the Bank, for its own benefit and as agent for its Affiliates, a

continuing and unconditional first priority security interest, or to the extent

a first priority security interest is unavailable as a result of the items

listed in Schedule 9.2 then a security interest with the highest available

priority, in and to any and all property of the Borrower, of any kind or

description, tangible or intangible, wheresoever located and whether now

existing or hereafter arising or acquired, including the following (all of which

property, along with the products and proceeds therefrom, are individually and

collectively referred to as the "Collateral"):

 

           (a) all property of, or for the account of, the Borrower now or

     hereafter coming into the possession, control or custody of, or in transit

     to, the Bank or any agent or bailee for the Bank or any parent, Affiliate

     or Subsidiary of the Bank or any participant with the Bank in the Loans

     (whether for safekeeping, deposit, collection, custody, pledge,

     transmission or otherwise), including all earnings, dividends, interest, or

     other rights in connection therewith and the products and proceeds

     therefrom, including the proceeds of insurance thereon; and

 

          (b) the additional property of the Borrower, whether now existing or

     hereafter arising or acquired, and wherever now or hereafter located,

     together with all additions and accessions thereto, substitutions,

     betterments and replacements therefor, products and Proceeds therefrom, and

     all of the Borrower's books and records and recorded data relating thereto

     (regardless of the medium of recording or storage), together with all of

     the Borrower's right, title and interest in and to all computer software

     required to utilize, create, maintain and process any such records or data

     on electronic media, identified and set forth as follows:

 

               (i) All Accounts and all Goods whose sale, lease or other

          disposition by the Borrower has given rise to Accounts and have been

          returned to, or repossessed or stopped in transit by, the Borrower, or

          rejected or refused by an Account Debtor;

 

               (ii) All Inventory, including, without limitation, raw materials,

          work-in-process and finished goods;

 

               (iii) All Goods (other than Inventory), including, without

          limitation, embedded software, Equipment, vehicles, furniture and

          Fixtures;

 

                                      -24-

<PAGE>

 

               (iv) All Software, computer programs, and intellectual property;

 

               (v) All Securities, Investment Property, Financial Assets and

          Deposit Accounts;

 

               (vi) All Chattel Paper, Electronic Chattel Paper, Instruments,

          Documents, Letter of Credit Rights, all proceeds of letters o