Document:

<PAGE>   1
                                                                   EXHIBIT 10.42

                                CREDIT AGREEMENT

                                 BY AND BETWEEN

                              LASALLE NATIONAL BANK
                            135 SOUTH LASALLE STREET
                                CHICAGO, ILLINOIS

                                       AND

                      UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
                            3350 NORTH KEDZIE AVENUE
                                CHICAGO, ILLINOIS

                            DATED AS OF JULY 14, 1997

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                                      INDEX

<TABLE>
<S>                                                                                  <C>
Article I - Definitions and Interpretation                                             1
         Section 1.01.   Defined Terms                                                 1
         Section 1.02.   Accounting Terms                                             18
         Section 1.03.   Interpretation                                               18

Article II - The Facilities                                                           19
         Section 2.01.   The Loans                                                    19
         Section 2.02.   Evidences of Debt                                            20
         Section 2.03.   Maintenance of Loans: Interest                               20
         Section 2.04.   Interest on Overdue Amounts                                  21
         Section 2.05.   Borrowing Procedures                                         22
         Section 2.06.   Payment                                                      22
         Section 2.07.   Fees                                                         24
         Section 2.08.   Letters of Credit                                            25
         Section 2.09.   Conversion Options: Continuance                              27
         Section 2.10.   Requirements of Law                                          28
         Section 2.11.   Illegality                                                   30
         Section 2.12.   Indemnity                                                    30
         Section 2.13.   Availability of Alternative Currency                         31
         Section 2.14.   Euro                                                         31

Article III - Representations and Warranties                                          31
         Section 3.01.   Organization; Corporate Powers                               31
         Section 3.02.   Authorization                                                32
         Section 3.03.   Governmental Approval                                        32
         Section 3.04.   Enforceability                                               32
         Section 3.05.   Financial Matters                                            32
         Section 3.06.   No Material Adverse Change                                   32
         Section 3.07.   Subsidiaries                                                 32
         Section 3.08.   Litigation                                                   33
         Section 3.09.   Compliance with Laws                                         33
         Section 3.10.   Environmental Protection                                     33
         Section 3.11.   Agreements                                                   34
         Section 3.12.   Federal Reserve Regulations                                  34
         Section 3.13.   Taxes                                                        34
         Section 3.14.   Labor and Employment                                         34
         Section 3.15.   Investment Company Act; Public Utility Holding Company Act   34
         Section 3.16.   Capitalization                                               35
         Section 3.17.   Properties; Security Interests                               35
         Section 3.18.   Intellectual Property: Licenses                              35
         Section 3.19.   Solvency                                                     35
         Section 3.20.   Complete Disclosure                                          36

Article IV - Conditions to the Loans                                                  36
         Section 4.01.   General Conditions                                           36
         Section 4.02.   Conditions to First Advance                                  37

Article V - Affirmative Covenants                                                     39
         Section 5.01.   Existence                                                    40
         Section 5.02.   Businesses and Properties: Compliance with Laws              40
         Section 5.03.   Insurance                                                    40
         Section 5.04.   Obligations and Taxes                                        40
         Section 5.05.   Financial Statements: Reports                                41
         Section 5.06.   Litigation and Other Notices                                 42
         Section 5.07.   Erisa                                                        43
         Section 5.08.   Maintaining Records; Access to Premises and Inspections      43
         Section 5.09.   Use of Proceeds                                              43
         Section 5.10.   Banking Business: Collections                                43
</TABLE>

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<TABLE>
<S>                                                                                  <C>
Article VI - Negative Covenants                                                       44
         Section 6.01.   Indebtedness                                                 44
         Section 6.02.   Negative Pledge                                              44
         Section 6.03.   Sale of Assets                                               45
         Section 6.04.   Consolidations, Mergers or Purchases of Assets               45
         Section 6.05.   Restricted Payments                                          45
         Section 6.06.   Investments, Loans and Advances                              46
         Section 6.07.   Transactions with Affiliates                                 46
         Section 6.08.   Line of Business                                             46
         Section 6.09.   Fiscal Year, Accounting                                      46
         Section 6.10.   Restrictions on Sale of Assets and Distributions             46
         Section 6.11.   Issuance of Equity Interests                                 46
         Section 6.12.   Modifications of Material Documents                          47
         Section 6.13.   Leverage Ratio                                               47
         Section 6.14.   Tangible Net Worth                                           47
         Section 6.15.   Subordinated Debt                                            47
         Section 6.16.   Leases                                                       48

Article VII - Defaults                                                                48
         Section 7.01.   Events of Default                                            48
         Section 7.02.   Remedies upon Default                                        50

Article VIII - Miscellaneous                                                          51
         Section 8.01.   Notices                                                      51
         Section 8.02.   Survival of Agreement                                        52
         Section 8.03.   Successors and Assigns                                       52
         Section 8.04.   Expenses of the Lender; Indemnify; Judgment Currency         52
         Section 8.05.   Right of Setoff                                              54
         Section 8.06.   Applicable Law                                               54
         Section 8.07.   Waivers                                                      54
         Section 8.08.   Amendments                                                   55
         Section 8.09.   Severability                                                 55
         Section 8.10.   Counterparts                                                 55
         Section 8.11.   Headings                                                     55
         Section 8.12.   Consent to Jurisdiction                                      55
         Section 8.13.   Waiver of Jury Trial                                         56
         Section 8.14.   Interest Limitation                                          57
         Section 8.15.   Loan Documents                                               57
</TABLE>

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<PAGE>   4

INDEX OF EXHIBITS AND SCHEDULES

                                    EXHIBITS

EXHIBIT A-1                Revolving Credit Note

EXHIBIT A-2                Term Loan Note

EXHIBIT B-1                Borrower Security Agreement

EXHIBIT B-2                UAI Security Agreement

EXHIBIT B-3                Canadian Security Agreement

EXHIBIT C                  Mortgage

EXHIBIT D-1                Stock Pledge Agreement

EXHIBIT D-2                Canadian Pledge Agreement

EXHIBIT E-1                UAI Guaranty

EXHIBIT E-2                Canadian Guaranty

EXHIBIT F                  Form of Intercompany Note

EXHIBIT G                  Opinion of Counsel

EXHIBIT H                  Borrowing Base Certificate

EXHIBIT I                  Compliance Certificate

EXHIBIT J                  Lockbox Agreement

                                      iii
<PAGE>   5

                                    SCHEDULES

Schedule 3.07               Subsidiaries, Affiliates and Joint Ventures

Schedule 3.08               Litigation

Schedule 3.10               Environmental Matters

Schedule 3.16               Primary Shareholders

Schedule 3.17               Properties

Schedule 6.01               Indebtedness

Schedule 6.02               Liens

                                       iv
<PAGE>   6

                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT (as from time to time amended, modified,
restated, supplemented and in effect, this "AGREEMENT") is entered into as of
July 14, 1997 by and between LASALLE NATIONAL BANK, a national banking
association, its successors and assigns (the "LENDER"), and UNIVERSAL AUTOMOTIVE
INDUSTRIES, INC., a Delaware corporation (the "BORROWER").

                                    RECITALS

         A. The Borrower has requested that the Lender extend credit in the form
of (i) a revolving credit facility (including a letter of credit facility) in an
aggregate principal amount not to exceed $20,000,000 at any time and (ii) a term
loan facility in an aggregate amount not to exceed $4,450,000 at any time, in
each case for the purposes and subject to the terms and conditions hereinafter
set forth.

         B. The Lender is willing to make such credit facilities available to
the Borrower and the Borrower is willing to borrow from the Under, subject to
the terms and conditions hereinafter set forth.

                                    AGREEMENT

         In consideration of the matters set forth in the Recitals and the
covenants and provisions herein set forth, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

                     ARTICLE I DEFINITIONS AND INTERPRETATION

         SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings specified below:

         "ACCOUNT DEBTOR" shall mean the Account Debtor defined in the Security
Agreements.

         "ACCOUNTS" shall mean the Accounts defined in the Security Agreements.

         "ACCOUNTS AVAILABILITY" shall mean 80% of the net amount (after
deduction for such reserves as the Lender deems proper and necessary) of
Eligible Accounts; provided, however, that beginning in Fiscal Year 1998, if the
audited financial statements of the Borrower for Fiscal Year 1997 reflect a an
EBT for such Fiscal Year of at least $1 000,000, the Accounts Availability shall
be increased to 85 % of the net amount (after deduction for such reserves as the
Lender deems proper and necessary) of Eligible Accounts.

         "ACCOUNTS REPORT" shall mean a report delivered to the Lender by the
required by SECTION 5.05(F) of this Agreement, consisting of an aged trial
balance of all of the Borrower's Accounts existing as of the date of such
Accounts Report, specifying for each Account Debtor obligated on the Accounts,
such Account Debtor's name, outstanding balance and the aging of such
outstanding balance.

         "AFFILIATE" shall mean, with respect to any Person, any other Person
(including any member of the immediate family of any such natural Person) which
directly or indirectly beneficially owns or controls 5 % or more of the total
voting power of shares of capital stock of such Person having the right to vote
for directors under ordinary circumstances, any Person controlling, controlled
by or under common control with any such Person (within the meaning of Rule 405
under the Securities Act of 1933), and any shareholder, director or executive
officer of any such Person. Without limitation the foregoing, Affiliates of the
Borrower shall specifically include the Guarantors and UBP Hungary, Inc. a
corporation organized under the laws of Hungary.

         "ALTERNATIVE CURRENCY" shall mean, subject to availability pursuant to
SECTION 2.13 and to the extent freely transferrable. and convertible into
Dollars, Deutsche Marks, the lawful currency of Germany.

         "ALTERNATIVE CURRENCY LOANS" shall mean any Loan made pursuant to
SECTION 2,01(A)(III) in the Alternative Currency, as designated by the Borrower
pursuant to a Notice of Borrowing or Notice of Continuance.

                                       1
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         "ALTERNATIVE CURRENCY RATE" shall mean with respect to each Interest
Period for any Alternative Currency Loan the rate of interest per annum equal to
the quotient of (a) the rate of interest per annum (expressed as a whole number)
at which deposits in the Alternative Currency in immediately available funds are
offered to the Lender at approximately 11: 00 a.m. (London, England time) two
Business Days prior to the beginning of such Interest Period in the interbank
eurocurrency market for a period equal to such Interest Period and in an
Alternative Currency amount equal or comparable to the principal amount of such
Alternative Currency Loan, divided by (b) a number equal to 1.0 minus the daily
average for the applicable Interest Period of the maximum rate (expressed as a
decimal) at which reserves (including, without limitation, basic, supplemental,
marginal and emergency reserves) are imposed during such Interest Period by the
Board (or any successor) under Regulation D on "eurocurrency liabilities," as
defined in such Board's Regulation D (or in respect of any other category of
liabilities that includes deposits by reference to which the interest rate on
the Alternative Currency Loans is determined by any category of extension of
credit or other assets that includes loans by non-United States offices of any
lender to United States residents) subject to any amendments of such reserve
requirement by such Board or its successor, taking into account any transitional
adjustments thereto (such Alternative Currency Rate to be adjusted to the next
higher 1/16 of one percent). For purposes of this definition, the Alternative
Currency Loans shall be deemed to be "eurocurrency liabilities" as defined in
Regulation D.

         "ALTERNATIVE CURRENCY SUBLIMIT" shall mean an amount not to exceed the
lesser $2,000,000 and (b) the Revolving Credit Availability.

         "ALTERNATIVE CURRENCY UTILIZATION " shall mean the Current Dollar
Equivalent of outstanding Alternative Currency Loans at any time.
         "APPLICABLE MARGIN" shall mean the percentage per annum specified in
the chart below for a particular Level and Leverage Ratio and a particular type
of Loan under the Revolving Credit Facility or the Term Loan Facility, as the
case may be:

<TABLE>
<CAPTION>

====================================================================================================================
                                                  REVOLVING CREDIT FACILITY                TERM LOAN FACILITY
\--------------------------------------------------------------------------------------------------------------------
                       LEVERAGE RATIO    PRIME RATE LOANS      LIBOR/ALTERNATIVE        PRIME RATE     LIBOR LOANS
       LEVEL                                                     CURRENCY LOANS            LOANS
--------------------------------------------------------------------------------------------------------------------
<S>                         <C>                <C>                    <C>                  <C>            <C>
Level 1                      4.0               .50                    2.5%                 .75%           2.75%
--------------------------------------------------------------------------------------------------------------------
Level 2              3.4 less than 4.0         .25%                  2.25%                 .50%           2.50%
--------------------------------------------------------------------------------------------------------------------
Level 3              3.0 less than 3.5          0%                   2.00%                 .25%           2.25%
--------------------------------------------------------------------------------------------------------------------
Level 4              2.5 less than 3.0         0%                   1.75%                  0%            2.00%
--------------------------------------------------------------------------------------------------------------------
Level 5                  less than 2.5          0%                   1.50%                  0%            1.75%
====================================================================================================================
</TABLE>

For the period commencing on the Closing Date and ending on the date which
occurs ten (10) days after the Lender receives the financial statements and the
related Compliance Certificate required to be delivered pursuant to SECTION
5.05(B) and SECTION 5.05(E) of this Agreement with respect to the second fiscal
quarter of 1997, the Applicable Margin set forth in Level 4 above shall apply to
all Loans made under both the Revolving Credit Facility and the Tenn Loan
Facility. Thereafter, the Leverage Ratio shall be calculated as of the end of
each fiscal quarter, and shall be reported to the Lender pursuant to a
Compliance Certificate executed by a Financial Officer of the Borrower and
delivered in accordance with SECTION 5.05(E) hereof Not later than five (5)
Business Days after receipt by the Lender of each Compliance Certificate
delivered by the Borrower in accordance with SECTION 5.05(E) for each fiscal
quarter or fiscal year, as applicable, the Borrower, subject to the approval of
the Lender, shall determine the Leverage Ratio for the applicable period. The
Lender shall then determine any change in each Applicable Margin resulting
therefrom. Each Applicable Margin shall be adjusted (upwards or downwards, as
appropriate), if necessary, based on the Leverage Ratio as of the end of the
fiscal quarter immediately preceding the date of determination. The adjustment,
if any, to the Applicable Margin shall be effective as to all Loans commencing
on the tenth (10th) Business Day after the delivery of such quarterly or annual
financial statements delivered in accordance with SECTIONS 5.05(A) AND 5.05(B)
and such related Compliance Certificate of a Financial Officer of the Borrower

                                       2
<PAGE>   8

delivered in accordance with SECTION 5.05(B) and shall be effective from and
including the tenth (10th) Business Day after the date the Lender receives such
Compliance Certificate to but excluding the tenth (10th) Business Day after the
date on which the next Compliance Certificate is required to be delivered
pursuant to SECTION 5.05(E); provided, however, that, in the event that the
Borrower shall fail at any time to furnish to the Lender such financial
statements and any such Compliance Certificate required to be delivered pursuant
to SECTIONS 5.05(A), 5.05(B) AND 5.05(E), the Applicable Margin set forth in
Level 1 above shall apply until the tenth (10th) Business Day after such time as
all such financial statements and each such Compliance Certificate are so
delivered to the Lender. Each determination of the Leverage Ratio by the
Borrower (subject to approval by the Lender) and each determination of the
Applicable Margin by the Lender in accordance with this definition shall be
conclusive and binding on the parties absent manifest error.

         "BOARD" shall mean the Board of Governors of the Federal Reserve System
of the United States.

         "BORROWER" shall mean the Borrower defined in the preamble of this
Agreement.

         "BORROWER SECURITY AGREEMENT" shall mean a security agreement executed
and delivered by the Borrower on the Closing Date, in substantially the form of
EXHIBIT B-1, pursuant to which the Borrower grants the Lender a security
interest in the Collateral described in such Borrower Security Agreement.

         "BORROWER'S REPRESENTATIVE" shall mean Arvin Scott or any other person
or persons as the Borrower shall designate in writing to the Lender.

         "BORROWING BASE" shall mean and, at any particular time, be equal to
the sum of (a) the Accounts Availability plus (b) the Inventory Availability,
all as determined by the Lender from time to time in accordance with this
Agreement.

         "BRAKE PARTS" shall mean Universal Brake Parts, Inc., a corporation
formed under the laws of Ontario and wholly-owned subsidiary of UBP.

         "BUSINESS DAY" shall mean (a) in respect of Loans other than
Alternative Currency Loans and LIBOR Loans, any day other than a Saturday,
Sunday or legal holiday in the State of Illinois on which the Lender is open for
business in Chicago, Illinois, and (b) in respect of Alternative Currency Loans
and LIBOR Loans, any day other than a Saturday, Sunday or legal holiday in the
State of Illinois or London, England on which the Lender is open for business in
Chicago, Illinois and on which banks are open for general banking business in
London, England and Germany (including dealings in foreign currency and
exchange).

         "CANADIAN GUARANTY" shall mean that certain joint and several Guaranty
of UBP, Brake Parts and IDC in favor of the Lender, in substantially the form of
EXHIBIT E-2.

         "CANADIAN PLEDGE AGREEMENT" shall mean those separate pledge agreements
executed and delivered by each of UBP and the Borrower on the Closing Date, in
substantially the form of EXHIBIT D-2.

         "CANADIAN SECURITY AGREEMENT" shall mean those separate security
agreements executed and delivered by each of UBP, Brake Parts and IDC on the
Closing Date, in substantially the form of EXHIBIT B-3, pursuant to which each
of UBP, Brake Parts and IDC grant the Lender a security interest in the
Collateral described in such Canadian Security Agreement.

         "CHANGE OF CONTROL" shall mean (a) the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 30% or more of the outstanding shares of
voting stock of the Borrower; provided, however, that the acquisition by one or
more of the following individuals of 30% or more of the outstanding shares of
voting stock of the Borrower shall not be deemed to constitute a Change of
Control of the Borrower: Arvin Scott, Yehuda Tzur, Reuben Gabay, Sami Israel,
Eric Goodman and Sirrom. Capital Corporation, or (b) during any period of 25
consecutive calendar months, commencing on the date of this Agreement, the
ceasing of those individuals ("CONTINUING DIRECTORS") who (i) were directors of
the Borrower on the first day of such period or (ii) subsequently become
directors of the Borrower and whose initial election or initial nomination for
election

                                       3
<PAGE>   9

subsequent to that date was approved by a majority of Continuing Directors then
on the board of directors of the Borrower, to constitute a majority of the board
of directors of the Borrower.

         "CLOSING DATE" shall mean the date on which all of the conditions
precedent set forth in ARTICLE IV have been satisfied and on which the first
Loan is made by the Lender to the Borrower hereunder.

         "COLLATERAL" shall mean the Collateral defined in the Security
Agreements.

         "COLLATERAL DOCUMENTS" shall mean collectively the Security Agreements,
the Stock Pledge Agreement and the Mortgage.

         "COMMITMENT" shall mean the aggregate commitment of the Lender to the
Borrower to (a) make Loans and issue Letters of Credit under the Revolving
Credit Facility in a maximum principal amount not in excess of the Revolving
Credit Availability and (b) make the Loan under the Term Loan Facility.

         "CONTINGENCY RESERVE" shall mean $850,000 or such other amount as the
Lender may determine as necessary from time to time in its sole discretion as a
reserve for liability in connection with First National Parts Exchange, Inc.,
Chapter 11 Debtor U.S.B.C. N.D. IL, Case No. 93-C-16978 Adv. No. 94-A-1084 Alex
D. Moglin, Trustee v. Universal Automotive, Inc. (the "LITIGATION "); provided,
however, that the Contingency Reserve shall be reduced on a dollar-for-dollar
basis for each dollar or dollar equivalent (e.g. stock delivered at an agreed
upon valuation as of the date of delivery in the event of a settlement) paid by
the Borrower in settlement or judgment relating to the Litigation; provided,
further, that such dollar-for-dollar or dollar-equivalent reduction shall not
begin until the amount owed by Borrower in connection with the settlement or
judgment is less than or equal to the Contingency Reserve.

         "CORE INVENTORY" shall mean Eligible Inventory that consists of raw
core components of brake shoes.

         "CREDIT UTILIZATIONS" shall mean, at any particular time, the sum of
(a) the outstanding principal balance of the Revolving Credit Note at such time
including the Current Dollar Equivalent of any outstanding Alternative Currency
Loans, plus (b) the Letter of Credit Obligations at such time.

         "CURRENT DOLLAR EQUIVALENT" shall mean at any date, with respect to
Alternative Currency Loans, the amount of Dollars into which the principal
amount of such Loan outstanding as of such date may be converted at the spot
rate at which Dollars are offered to the Lender in Chicago for the Alternative
Currency in an amount comparable to the amount of such Loan at approximately
11:00 a.m. (Chicago time) on the second Business Day prior to such date.

         "DEFAULT" shall mean any event that with notice or lapse of time or
both would constitute an Event of Default.

         "DOLLARS" and the symbol "$" shall mean the lawful currency of the
United States of America.

         "DOLLAR EQUIVALENT" shall mean with respect to each Alternate Currency
Loan to be made, continued or converted in an Alternative Currency, the amount
of Dollars into which the principal amount of such advance may be converted at
the spot rate at which Dollars are offered to the Lender in Chicago for the
Alternative Currency in an amount comparable to the amount of such advance at
approximately 11:00 a.m. (Chicago time) the second Business Day prior to the
date such advance is to be made or continued, as the case may be.

         "EBT" shall mean, for any period, on a consolidated basis for the
Borrower and its Subsidiaries, Net Income of the Borrower and its Subsidiaries,
plus consolidated income tax expense for the Borrower and its Subsidiaries
deducted in determining Net Income for such period, all as determined in
accordance with GAAP.

         "ELIGIBLE ACCOUNTS" shall mean those Accounts of each of UAI, UBP,
Brake Parts and IDC included in an Accounts Report which, as of the date of such
Accounts Report and at all times thereafter do not violate the negative
covenants and other provisions of this Agreement and do satisfy the affirmative
covenants and other provisions of this Agreement, including all of the following
criteria:

                                       4
<PAGE>   10

                  (a) The Account arises because of the sale of goods in the
         ordinary course of business and such goods have been shipped or
         delivered on open account and on an absolute sale basis and not on
         consignment, on approval or on a sale-or-return basis or subject to any
         other repurchase or return agreement and no material part of such goods
         has been returned, repossessed, rejected, lost or damaged;

                  (b) The Account is not evidenced by chattel paper or an
         instrument of any kind;

                  (c) The Account Debtor obligated on such Account is not
         insolvent or the subject of any bankruptcy or insolvency proceeding of
         any kind and the Lender is satisfied with the creditworthiness of such
         Account Debtor;

                  (d) The Account Debtor's principal place of business is
         located in the United States or Canada and the Account Debtor does not
         owe other amounts to the Borrower that are more than 90 days past due;
         provided, however, that (i) if 25 % or more of all amounts owed by the
         Account Debtor to the Borrower are more than 90 days past due, all
         amounts owed by such Account Debtor shall be excluded from Eligible
         Accounts in their entirety, and (ii) if less than 25 % of all amounts
         owed by the Account Debtor are more than 90 days past due, only such
         amounts with respect to such Account Debtor that are more than 90 days
         past due will be excluded from Eligible Accounts in their entirety;

                  (e) The Account is a valid, legally enforceable obligation of
         the relevant Account Debtor and such Account Debtor has not asserted
         any offset, counterclaim or defense denying liability thereunder;

                  (f) The Account is subject to and covered by the Lender's
         perfected, first priority security interest and is not subject to any
         other Lien, claim or security interest (except for Permitted Liens);

                  (g) The Account is evidenced by an invoice or other
         documentation in a form acceptable to the Lender, which invoice is
         dated no later than the date of shipment to the Account Debtor and has
         a due date not later than 90 days after the invoice date;

                  (h) The Account is not owing from an employee, officer, agent,
         director, stockholder or Affiliate or from the United States or Canada
         or any department, agency or instrumentality thereof;

                  (i) The Account does not arise out of a contract or order
         which by its terms forbids, restricts or makes void or unenforceable
         the assignment by the Borrower to the Lender of the Account arising
         with respect thereto;

                  (j) The Account Debtor is not located in New Jersey, Minnesota
         or any other state denying creditors access to its courts in the
         absence of a Notice of Business Activities Report or similar filing,
         unless the Borrower (or UAI, UBP, Brake Parts or IDC, as the case may
         be) has either qualified as a foreign corporation, authorized to
         transact business in such state or has filed a Notice of Business
         Activities Report or similar filing with the applicable state agency
         for the then current year;

                  (k) Each of the warranties and representations set forth
         herein and in the Security Agreements with respect to the Account has
         been reaffirmed with respect to such Account at the time the most
         recent Accounts Report was delivered to the Lender;

                  (1) The Account is one against which the Lender is legally
         permitted to make advances and all applicable legal requirements with
         respect to such Account have been satisfied; and

                  (m) The Account is not a "contra receivable" and is net of any
         account payable by the Borrower or its Affiliates to such Account
         Debtor.

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.

                                       5
<PAGE>   11

         "ELIGIBLE INVENTORY" shall mean that Inventory of each of UAI, UBP,
Brake Parts and IDC included in an Inventory Certification Report which, as of
the date of such Inventory Certification Report and at all times thereafter,
does not violate the negative covenants and other provisions of this Agreement
and does satisfy the affirmative covenants and other provisions of this
Agreement, including all of the following criteria:

                  (a) The Inventory is in good condition, meets all standards
         imposed by any governmental agency, or department or division thereof,
         having regulatory authority over such goods, their use or sale and is
         either currently usable or currently saleable in the ordinary course of
         the Borrower's business and is not otherwise unacceptable to the Lender
         due to age, type, category or quantity;

                  (b) The Inventory is located at the Premises (and if any part
         of the Premises is leased, is subject to a landlord's waiver
         satisfactory to the Lender), is subject to and covered by the Lender's
         perfected, first-priority security interest and is not subject to any
         other Lien, claim, encumbrance or security interest (except for
         Permitted Liens);

                  (c) The Inventory has not been consigned to a customer of, or
         from a supplier to, the Borrower;

                  (d) Each of the warranties and representations set forth
         herein and in the Security Agreements relating to Inventory has been
         reaffirmed with respect thereto at the time the most recent Inventory
         Certification Report was delivered to the Lender;

                  (e) The Inventory is not so identified to a contract to sell
         that it constitutes an Account;

                  (f) The Inventory is not being held by a third party
         processor, unless (i) the Lender has a first priority Lien in such
         Inventory which has been acknowledged by such processor in writing
         reasonably acceptable to the Lender, (ii) such processor has waived any
         and all lien rights it may now or in the future have with respect to
         such Inventory, and (iii) such processor has agreed, for the benefit of
         the Lender, that such Inventory shall be clearly marked as being
         Inventory of the Borrower and shall be segregated from other inventory
         and materials held by time to time by such processor;

                  (g) The Inventory was not purchased by UAI, UBP, Brake Parts
         or IDC as pan of a "bulk" transfer or sale of assets unless all
         applicable bulk sales or bulk transfer laws have been complied with;
         and

                  (h) The Inventory is not work-in-process or "expense added
         merchandise" Inventory and is net of any finished goods "burden" and
         raw materials "burden."

Inventory of UAI, UBP, Brake Parts or IDC 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.

         "ENVIRONMENTAL LAWS" shall mean all laws relating to environmental,
health or safety matters, including those relating to fines, orders,
injunctions, penalties, damages, contribution, cost recovery, compensation,
losses or injuries resulting from the release or threatened release of Hazardous
Materials and to the generation, use, storage, transportation, or disposal of
Hazardous Materials, in any manner applicable to the Borrower or its
Subsidiaries or their respective properties, each as heretofore and hereafter
amended or supplemented, and any analogous future or present local, state or
Federal statutes, rules and regulations promulgated thereunder or pursuant
thereto, and any other present or future law, ordinance, rule, regulation,
permit or permit condition, order or directive addressing environmental, health
or safety issues.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.

         "ERISA AFFILIATE" shall mean any corporation, trade or business that is
treated as a single employer with the Borrower or any of its Subsidiaries
pursuant to Section 4001(b)(1) of ERISA.

         "EVENT OF DEFAULT" shall mean the Events of Default specified in
Section 7.01.

                                       6
<PAGE>   12

         "FEDERAL FUNDS RAT " shall mean, for any period, a fluctuating interest
rate per annum equal for each day during such period to (a) 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 (b) 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 Lender from three Federal funds brokers of
recognized standing selected by it.

         "FEES" shall mean all of the fees payable by the Borrower to the Lender
pursuant to SECTIONS 2.07 AND 2.08(h) of this Agreement and elsewhere under the
Loan Documents.

         "FINANCIAL OFFICER" shall mean either the Chief Executive Officer, the
President or the Chief Financial Officer of the Borrower.

         "FISCAL YEAR" or "FISCAL YEAR" shall mean each twelve-month period
ending on December 31.

         "FOREIGN CONTROL REGULATIONS" shall have the meaning set forth in
SECTION 3.09.

         "GUARANTY" shall mean any obligation, contingent or otherwise, of any
Person guarantying or having the economic effect of guarantying any Indebtedness
of any other Person in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness, or (c) to maintain working capital, equity capital
or other financial condition of the primary obligor so as to enable the primary
obligor to pay such Indebtedness (including any obligation to make capital
contributions, loans or other payments pursuant to a keep well guaranty or
similar instrument); provided, however, that the term "Guaranty" shall not
include endorsements for collection or deposit, in either case in the ordinary
course of business.

         "GUARANTORS " shall mean UAI, UBP, Brake Parts and IDC.

         "HAZARDOUS MATERIALS" shall mean (a) any chemical, material or
substance defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "toxic pollutants," "contaminants," "pollutants,"
"toxic substances" or words of similar import under any applicable local, state
or Federal law or under the regulations adopted or publications promulgated
pursuant thereto, including Environmental Laws, (b) any oil, petroleum or
petroleum derived substances, any drilling fluids, produced waters or other
wastes associated with the exploration, development or production of crude oil,
any flammable substances or explosives, any radioactive materials, any hazardous
wastes or substances, any toxic wastes or substances or any other materials or
pollutants which (i) pose a hazard to any property of the Borrower or any of its
Subsidiaries or to. Persons on or about such properties, or (ii) cause such
properties to be in violation of any Environmental Laws, (c) asbestos in any
form which is or could become friable, radon gas, urea formaldehyde foam
insulation, or transformers or other electrical equipment which contain any oil
or dielectric fluid containing polychlorinated biphenyls, and (d) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.

         "HEDGING AGREEMENT" shall mean any interest rate or currency hedging
contract now existing or hereafter entered into by any Person.

         "HEDGING RESERVE" shall mean 8 % of the notional (face) amount of any
Hedging Agreement between the Borrower and/or any of its Subsidiaries and any
Person.

         "INDEBTEDNESS" shall mean, with respect to any Person, without
duplication (a) all obligations of such Person for borrowed money, or with
respect to deposits with such Person or advances to such Person of any kind, (b)
all obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property purchased by such Person,
(e) all obligations of such Person issued or assumed as the deferred purchase
price of property or services (other than trade payables and

                                       7
<PAGE>   13

accrued expenses incurred in the ordinary course of business not yet due and
payable or not yet more than 60 days in arrears or with respect to which such
Person is contesting in good faith the amount or validity thereof), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all obligations of such Person under
leases that are classified as capital leases under generally accepted accounting
principles, (h) all Guaranties of such Person including, but not limited to, the
Subsidiary Guaranties, (i) all obligations of such Person under any Hedging
Agreement, and 0) all obligations of such Person under or with respect to
letters of credit and bankers acceptances.

         "INTERCOMPANY NOTES" shall mean those promissory notes of each of UAI,
UBP, Brake Parts and IDC in favor of the Borrower, in substantially in the form
of EXHIBIT F.

         "INTEREST PAYMENT DATE" shall mean: (a) with respect to any Prime Rate
Loan, the first Business Day of each calendar month and the date of any
conversion of such Prime Rate Loan into a LIBOR Loan; and (b) with respect to
any LIBOR Loan or Alternative Currency Loan, the last Business Day of each 30
day period during each applicable Interest Period.

         "INTEREST PERIOD" shall mean with respect to any LIBOR Loan or
Alternative Currency Loan (a) initially, the period commencing on the initial
date of borrowing as set forth in the Notice of Borrowing described in SECTION
2.05 or the conversion date, or continuation date, as the case may be, with
respect to such LIBOR Loan or Alternative Currency Loan and ending one month,
two months or three months thereafter, as selected by the Borrower in the Notice
of Borrowing or Notice of Conversion, and (b) thereafter, each period commencing
on the last day of the next preceding Interest Period applicable to such LIBOR
Loan or Alternative Currency Loan and ending one month, two months or three
months thereafter, as selected by the Borrower in the Notice of Continuance
described in SECTION 2.09(b); provided that the foregoing provisions relating to
Interest Periods are subject to the following:

         (i) if any Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next succeeding
Business Day except if the result of such extension would be for such Interest
Period to end in another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;

         (ii) any Interest Period that would otherwise extend beyond the
Revolving Credit Termination Date shall end on the Revolving Credit Termination
Date, and any Interest Period that would otherwise extend beyond the Tenn Loan
Maturity Date shall end on the Tenn Loan Maturity Date;

         (iii) if the Borrower fails to give notice of the length of the
Interest Period it requests with respect to the LIBOR Loan or Alternative
Currency Loan, it shall be deemed to have selected a LIBOR Loan or Alternative
Currency Loan of one month;

         (iv) any Interest Period pertaining to a LIBOR Loan or Alternative
Currency Loan that begins on the last Business Day of a calendar month (or a day
for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of a calendar
month; and

          (v) no Interest Period with respect to any Loan under the Term Loan
Facility shall extend beyond a date on which the Borrower is required to make a
scheduled payment of principal of any Loan under the Term Loan Facility unless
the aggregate principal amount of the Loans under the Tenn Loan Facility that
are Prime Rate Loans plus the aggregate principal amount of Loans under the Term
Loan Facility that are LIBOR Loans with Interest Periods expiring on or before
such date equals or exceeds the principal amount required to be paid on any such
Loan under the Tenn Loan Facility on such date.

         "IDC" shall mean International Discus Corporation, a corporation formed
under the laws of Ontario and wholly-owned subsidiary of UBP.

         "INVENTORY" shall mean the Inventory defined in the Security
Agreements.

                                       8
<PAGE>   14

         "INVENTORY AVAILABILITY " shall mean the lesser of (a) the sum of (i)
with respect to Eligible Inventory other than Core Inventory, 50% of the
aggregate value of such Eligible Inventory, and (ii) with respect to Eligible
Inventory which is Core Inventory, 25 % of the aggregate value of such Eligible
Inventory (lower of cost or market, with cost generally determined using the
weighted average method, which approximates the first-in, first-out method, net
of such reserves as the Lender deems proper and necessary); and (b) $9,000,000;
provided, however, that beginning in Fiscal Year 1998, if the audited financial
statements of the Borrower for Fiscal Year 1997 reflect an EBT for such Fiscal
Year of at least $1,000,000, the amount in subsection (b) of this definition
shall be increased to $10,000,000, effective on the date of delivery of such
audited financial statements pursuant to SECTION 5.05(a).

         "INVENTORY CERTIFICATION REPORT" shall mean a report delivered to the
Lender by the Borrower, as required by SECTION 5.05, consisting of a detailed
listing of all of UAI's and UBP's Inventory as of the date of such Inventory
Certification Report describing the kind, type, quality, quantity, location and
the lower of cost (computed on the basis of a first-in, first-out cost flow
assumption) or market value of such Inventory.

         "LENDER" shall mean the Lender defined in the preamble of this
Agreement.

         "LETTER OF CREDIT" shall mean any letter of credit issued by the Lender
for the account of the Borrower in accordance with SECTION 2.08.

         "LETTER OF CREDIT OBLIGATIONS" shall mean, at any particular time, the
sum of (a) Reimbursement Obligations and (b) the aggregate maximum amount then
available to be drawn under the Letters of Credit.

         "LETTER OF CREDIT REIMBURSEMENT AGREEMENT" shall mean, with respect to
a Letter of Credit, such reimbursement agreement as the Lender may employ in the
ordinary course of business for its own account.

         "LEVERAGE RATIO" shall mean, as at any date of determination thereof,
the ratio of (a) the total Indebtedness of the Borrower and its Subsidiaries to
(b) the sum of (i) the Tangible Net Worth of the Borrower and its Subsidiaries
plus (ii) the Subordinated Debt of the Borrower and its Subsidiaries for the
most recently ended fiscal quarter, all calculated on a consolidated basis in
accordance with generally accepted accounting principles applied on a consistent
basis.

         "LIBOR RATE" shall mean with respect to each Interest Period for any
LIBOR Loan the rate of interest per annum equal to the quotient of (a) the rate
of interest per annum (expressed as a whole number) at which deposits in U.S.
Dollars in immediately available funds are offered to the Lender at
approximately 11: 00 a.m. (London, England time) two Business Days prior to the
beginning of such Interest Period in the London interbank eurodollar market for
a period equal to such Interest Period and in a Dollar amount equal or
comparable to the principal amount of such LIBOR Loan, divided by (b) a number
equal to 1.0 minus the daily average for the applicable Interest Period of the
maximum rate (expressed as a decimal) at which reserves (including, without
limitation, basic, supplemental, marginal and emergency reserves) are imposed
during such Interest Period by the Board (or any successor) under Regulation D
on to "eurocurrency liabilities," as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on the LIBOR Loans is determined by any category of
extension of credit or other assets that includes loans by non-United States
offices of any lender to United States residents) subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto (such LIBOR Rate to be adjusted to the next
higher 1/16 of one percent). For purposes of this definition, the LIBOR Loans
shall be deemed to be "eurocurrency liabilities" as defined in Regulation D.

         "LIBOR LOAN" shall mean any Loan (or portion thereof) bearing interest
at the LIBOR Rate, as designated by Borrower in its Notice of Borrowing, Notice
of Conversion or Notice of Continuance.

         "LIEN" shall mean, with respect to any asset, any hen, mortgage,
security interest, charge or encumbrance of any kind, including the rights of a
vendor, lessor, or similar party under any conditional sale agreement or other
title retention agreement or lease substantially equivalent thereto, any
production or advance payment and any other right of or arrangement with any
creditor to have his claim satisfied out of any property or assets, or the
proceeds therefrom, prior to the general creditors of the owner thereof.

                                       9
<PAGE>   15

         "LOAN" shall mean any advance made by the Lender to the Borrower under
the Revolving Credit Facility (including any Alternative Currency Loan) or the
Term Loan Facility.

         "LOAN ACCOUNT " shall mean the Loan Account defined in SECTION 2.06(b).

         "LOAN DOCUMENTS" shall mean collectively this Agreement, the Notes, the
Collateral Documents, the UAI Guaranty, the Canadian Guaranty, the Intercompany
Notes, the Subordination Agreement and the reports, certificates, financial
statements and other agreements and instruments executed and delivered by the
Borrower or any Guarantor, as the case may be, in connection herewith or
therewith.

         "LOCKBOX AGREEMENT" shall mean the Lockbox Agreement among the Lender,
the Borrower and the Guarantors, executed and delivered on the Closing Date in
substantially the form of EXHIBIT J.

         "MARGIN STOCK" shall have the meaning assigned such term in Regulation
U.

         "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse effect upon
the business, operations, prospects, properties, assets, liabilities, operating
results, cash flows or condition (financial or otherwise) of the Borrower or any
of the Guarantors or (b) a material impairment of the ability of the Borrower or
any Guarantor to perform the obligations, or the impairment of the validity or
enforceability of, or material impairment of the rights or remedies of, or
benefits to, the Lender, under any Loan Document, including a material
impairment of the value of any Collateral.

         "MORTGAGE" shall mean the mortgage in substantially the form of EXHIBIT
C.

         "MULTIEMPLOYER PLAN" shall mean a multiemployer plan (within the
meaning of Section 3(37) of ERISA) that is maintained for employees of the
Borrower or any of its Subsidiaries or any ERISA Affiliate.

         "NET INCOME" shall mean, for any period, with respect to the Borrower
and its Subsidiaries on a consolidated basis, cumulative Net Income earned
during such period, determined in accordance with GAAP.

         "NOTES" shall mean collectively the Revolving Credit Note and the Term
Loan Note to be executed and delivered by the Borrower on the Closing Date.

         "NOTICE OF BORROWING" shall mean the Notice of Borrowing described in
SECTION 2.05.

         "NOTICE OF CONTINUATION" shall mean the Notice of Continuation
described SECTION 2.09(b).

         "NOTICE OF CONVERSION" shall mean the Notice of Conversion described in
SECTION 2.09(a).

         "OBLIGATIONS" shall mean the Obligations as defined in the Borrower
Security Agreement.

         "PENSION PLAN" shall mean any Plan and any Multiemployer Plan that is
subject to the provisions of Section 302 of ERISA or Title IV of ERISA.

         "PERMITTED LIENS" shall mean the Liens permitted by SECTION 6.02.

         "PERSON" shall mean and includes natural persons, corporations
(business, municipal or not-for-profit), limited partnerships, general
partnerships, limited liability companies, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts and other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.

         "PLAN" shall mean any employee Benefit plan (within the meaning of
Section 3(3) of ERISA), other than a Multiemployer Plan, that is maintained for
employees of the Borrower or any ERISA Affiliate.

         "PREMISES" shall mean the Premises described in SECTION 3.17.

                                       10
<PAGE>   16

         "PRIME RATE" shall mean on any day a fluctuating rate per annum. equal
to the higher of (i) the rate of interest designated by the Lender from time to
time as its "Prime Rate," and (ii) a rate of interest equal to the sum of (A)
the Federal Funds Rate, plus (B) 0. 5 %. The Prime Rate is not necessarily the
lowest rate of interest charged by the Lender in connection with extensions of
credit. Changes in the rate of interest on the Loan shall take effect
simultaneously with each change in the Prime Rate. The applicaM2 Prime Rate
shall be determined by the Lender in its sole judgment, and such determination
shall be conclusive absent manifest error.

         "PRIME RATE LOAN" shall mean any Loan (or portion thereof) bearing
interest at the Prime Rate, as designated by the Borrower pursuant to its Notice
of Borrowing, Notice of Conversion or Notice of Continuance.

         "REGULATION D, G, T, U OR X" shall mean Regulation D, G, T, U or X of
the Board, as each of the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.

         "REIMBURSEMENT OBLIGATION" shall mean all amounts owed by the Borrower
to the Lender (whether or not evidenced by any note or instrument), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, representing the principal of and interest on payments made
by the Lender under or in connection with any Letter of Credit, including but
not limited to, all unpaid drawings, fees, premiums, expenses, attorneys' fees,
accountants' fees, capital adequacy charges, increased costs and similar costs
and expenses owed or payable under this Agreement or any Letters of Credit,
including but not limited to, the fees set forth in SECTION 2.08 hereof.

         "REPORTABLE EVENT" shall mean any Reportable Event within the meaning
of Section 4043(b) of Title IV of ERISA or the regulations issued thereunder.

         "REVOLVING CREDIT AVAILABILITY" shall mean the Revolving Credit
Availability described in SECTION 2.01(a).

         "REVOLVING CREDIT FACILITY" shall mean the Revolving Credit Facility
described in SECTION 2.01(a).

         "REVOLVING CREDIT NOTE" shall mean the Revolving Credit Note described
in SECTION 2.02, to be executed and delivered by the Borrower on the Closing
Date, in substantially the form of EXHIBIT A-1.

         "REVOLVING CREDIT TERMINATION DATE" shall mean May 1, 1999.

         "SECURITY AGREEMENTS" shall mean the Borrower Security Agreement, the
UAI Security Agreement and the Canadian Security Agreement.

         "SHAREHOLDERS' EQUITY" shall mean the sum of the capital stock, capital
in excess of par and stated value of shares of its capital stock, retained
earnings and any other account, including any special account for common stock
subject to redemption, which, in accordance with generally accepted accounting
principles, constitutes stockholder's equity (or such other appropriate account
designation).

         "STOCK PLEDGE AGREEMENT" shall mean that certain Stock Pledge Agreement
executed and delivered by the Borrower on the Closing Date, in substantially the
form of EXHIBIT D-1, pursuant to which the Borrower pledges the stock of UAI and
UBP to the Lender.

         "SUBORDINATION AGREEMENT" the Intercreditor and Subordination Agreement
among the Borrower, the Lender and Sirrom Capital Corporation to be executed and
delivered as of the Closing Date.

         "SUBORDINATED DEBT" shall mean funded Indebtedness of the Borrower
payable to a Person on terms and subject to conditions satisfactory to the
Lender and which is subordinated to the Obligations pursuant to a written
subordination agreement satisfactory to the Lender in its sole discretion. The
Subordination Agreement executed and delivered on the Closing Date shall be
deemed satisfactory to the Lender.

         "SUBSIDIARY" shall mean, as to any Person (a) any corporation, more
than 50 % of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have

                                       11
<PAGE>   17

voting power by reason of the happening of any contingency) is at the time owned
by such Person and/or one or more Subsidiaries of such Person and (b) any
partnership, association, joint venture, or other entity in which such Person
and/or one or more Subsidiaries of such Person has greater than a 50% equity
interest at the time.

         "SUBSIDIARY GUARANTIES" shall mean the UAI Guaranty and the Canadian
Guaranty.

         "TANGIBLE NET WORTH" shall mean, as of any particular date, the
Borrower's Shareholders' Equity, minus the value of the Borrower's unamortized
debt discount and expense, prepaid expenses, deposits, unamortized deferred
charges, goodwill, organization costs, noncompetition agreements, patents,
copyrights, trademarks and other intangible items, all as determined in
accordance with generally accepted accounting principles.

         "TAXES" shall mean the Taxes detailed in SECTION 2.06(e).

         "TERM LOAN FACILITY" shall mean the Term Loan Facility described in
SECTION 2.01(b).

         "TERM LOAN MATURITY DATE" shall mean May 1, 2002.

         "TERM LOAN NOTE" shall mean the Term Loan Note described in Section
2.02, to be executed and delivered by the Borrower on the Closing Date in
substantially the form of EXHIBIT A-2.

         "TOOLING INVENTORY" shall mean coreboxes and other patterns used for
the purpose of producing parts or castings.

         "TRANSACTIONS" shall mean collectively the execution, delivery and
performance by the Borrower and the Guarantors of this Agreement and each of the
other Loan Documents, the borrowing by the Borrower hereunder, the grant of
Liens pursuant to the Collateral Documents and all other transactions
contemplated by this Agreement and the other Loan Documents.

         "UAI" shall mean Universal Automotive, Inc., an Illinois corporation
and wholly subsidiary of the Borrower.

         "UAI GUARANTY" shall mean that certain Guaranty of UAI in favor of the
Lender, in substantially the form of EXHIBIT E-1.

         "UAI SECURITY AGREEMENT" shall mean a security agreement executed and
delivered by UAI on the Closing Date, in substantially the form of EXHIBIT
B-2,pursuant to which UAI grants the Lender a security interest in the
Collateral described in such UAI Security Agreement.

         "UBP" shall mean UBP Canholdings, Inc., a corporation formed under the
laws of Ontario and wholly-owned subsidiary of the Borrower.

         "UNITED STATES" and "U.S." shall each mean the United States of
America.

         SECTION 1.02. ACCOUNTING TERMS. Except as otherwise herein specifically
provided, each accounting term used herein shall have the meaning given it under
generally accepted accounting principles in effect from time to time in the
United States applied on a consistent basis; provided, however, that each
reference in ARTICLE VI hereof, or in the definition of any term used in ARTICLE
VI hereof, to generally accepted accounting principles, shall mean generally
accepted accounting principles as in effect in the United States on the date
hereof.

         SECTION 1.03. INTERPRETATION. In this Agreement and each other Loan
Document, unless a clear contrary intention appears:

         (a) the singular number includes the plural number and vice versa;

                                       12
<PAGE>   18

         (b) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
the Loan Documents, and reference to a Person in a particular capacity excludes
such Person in any other capacity;

         (c) reference to either gender includes the other gender;

         (d) reference to any agreement (including this Agreement and the
Schedules and Exhibits and the other Loan Documents), document or instrument
means such agreement, document or instrument as amended or modified and in
effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof and the other Loan Documents, and reference to any
promissory note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor;

         (e) reference to any law, rule, regulation, order, decree, requirement,
policy, guideline, directive or interpretation means as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect on the
determination date, including rules and regulations promulgated thereunder;

         (f) reference to any Article, Section, Schedule, or Exhibit means such
Article or Section of this Agreement or Schedule or Exhibit to this Agreement;

         (g) "hereunder," "hereof," "hereto" and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof;

         (h) "including" (and with correlative meaning "include") means limiting
the generality of any description preceding such term; and

         (i) relative to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding."

                            ARTICLE II THE FACILITIES

SECTION 2.01. THE LOANS.

         (a) REVOLVING CREDIT FACILITY.

                  (i) Subject to the terms and-conditions of this Agreement, the
         Lender shall make available to the Borrower from time to time during
         the term of this Agreement up to the Revolving Credit Termination Date,
         a revolving line of credit (the "REVOLVING CREDIT FACILITY") in an
         aggregate amount not to exceed at any one time the lesser of (A)
         $20,000,000, and (B) the Borrowing Base; provided, however, that such
         lesser amount shall be reduced by the amount of (w) any Letter of
         Credit Obligations, (x) the Contingency Reserve, (y) the Hedging
         Reserve and (z) the Alternative Currency Utilization (the "REVOLVING
         CREDIT AVAILABILITY").

                  (ii) If (A) the Borrower's audited financial statements for
         Fiscal Year 1997 reflect (1) an EBT of at least $3,000,000 for such
         Fiscal Year and (2) a Leverage Ratio of less than 3. 0: 1.0 at the end
         of Fiscal Year 1997 and (B) at such time, the Borrower is in compliance
         with all covenants contained in this Agreement (and no Default or Event
         of Default otherwise exists hereunder), the Borrowing Base limitation
         on the Revolving Credit Availability shall be suspended. If thereafter
         the Borrower (A) incurs a net loss (calculated for the Borrower and its
         Subsidiaries on a consolidated basis in accordance with GAAP) as at the
         end of any subsequent month, calculated on a cumulative, year-to-date
         basis as of the end of such month, (B) has a Leverage Ratio of greater
         than 3. 0: 1. 0 at the end of any month or (C) is in noncompliance with
         any covenant contained in this Agreement or a Default or Event of
         Default otherwise occurs, the Borrowing Base limitation on the
         Revolving Credit Availability shall be automatically reinstated as of
         the earliest of the events specified in clauses (A), (B) or (C) above
         to occur, until such time as (x) with respect to a noncompliance with
         clauses (B) or (C), such noncompliance ceases to exist, and (y) in the
         event of noncompliance with clause (A) above, until such time as the
         Borrower records a positive

                                       13
<PAGE>   19

         Net Income for a period of three consecutive months, calculated on a
         cumulative, year-to-date basis; whereupon following the curing of such
         noncompliance, the Borrowing Base limitation on the Revolving Credit
         Availability shall be rescinded, subject to reinstatement upon a
         subsequent violation of clause (A), (B) or (C) above.

                  (iii) Subject to the terms and conditions of this Agreement,
         the Lender shall make available to the Borrower from time to time under
         the Revolving Credit Facility during the term of this Agreement up to
         the Revolving Credit Termination Date Alternative Currency Loans in a
         Dollar Equivalent not to exceed at any one time (together with the
         Current Dollar Equivalent at such time of all outstanding Alternative
         Currency Loans) the Alternative Currency Sublimit. The Current Dollar
         Equivalent of outstanding Alternative Currency Loans shall constitute
         utilization under the Revolving Credit Facility.

                  (iv) Subject to the terms and conditions of this Agreement,
         the Borrower may borrow, repay, prepay and reborrow under the Revolving
         Credit Facility.

         (b) TERM LOAN FACILITY. Subject to the terms and conditions of this
Agreement, the Lender shall make available to the Sorrow"e-i on the Closing Date
a term loan (the "TERM LOAN FACILITY") in an aggregate amount of up to
$4,450,000. Repayments and prepayments of the Term Loan Facility shall not be
subject to reborrowing.

         SECTION 2.02. EVIDENCES OF DEBT. The Revolving Credit Facility and the
Loans made by the Lender to the Borrower thereunder shall be evidenced by the
Revolving Credit Note. The Term Loan Facility shall be evidenced by the Term
Loan Note. Alternative Currency Loans under the Revolving Credit Facility shall
be maintained and recorded by the Lender in accordance with its usual practice
for evidencing such Loans (and the Borrower agrees to execute and deliver upon
the request of the Lender a promissory note or other evidence of debt
denominated in the Alternative Currency and in the amount of the Alternative
Currency Sublimit, in which case any such note shall be deemed a "Note"
hereunder for all purposes.) The Lender shall, and is hereby authorized by the
Borrower to, record on any schedules attached to the Notes (or on a continuation
of such schedules attached to the Notes and made a part thereof), or otherwise
record in the Lender's internal records, an appropriate notation evidencing the
date and amount of each Loan from the Lender, each payment of principal of any
portion of each Loan, each payment of interest on each Loan and the other
information provided for on such schedule; provided, however, that the failure
of the Lender to make such a notation or any error in such a notation shall not
affect the obligation of the Borrower to repay the Loans in accordance with the
terms of the Notes and this Agreement.

         SECTION 2.03. MAINTENANCE OF LOANS: INTEREST.

                  (a) MAINTENANCE OF LOANS. The Loans may be made and maintained
         as (i) Prime Rate Loans, (ii) LIBOR Loans, (iii) Alternative Currency
         Loans (subject to the limitations on Alternative Currency Loans
         contained herein), or (iv) any combination of Prime Rate Loans, LIBOR
         Loans and Alternative Currency Loans (subject to the limitations on
         Alternative Currency Loans contained herein), provided that all Loans
         comprising a part of the same borrowing shall be of the same type. The
         aggregate principal amount of each Loan, whether new, converted or
         continued, shall not be less than $100,000 for a Prime Rate Loan or
         $1,000,000 for a LIBOR Loan or an Alternative Currency Loan and shall
         be in integral multiples of $25,000 for Prime Rate Loans and $500,000
         for LIBOR Loans and Alternative Currency Loans. More than one borrowing
         may occur on the same date, but at no time shall there be outstanding
         more than five LIBOR Loans and Alternative Currency Loans.

                  (b) INTEREST. Except as set forth in SECTION 2.04, the
         Borrower shall pay the Lender interest on the outstanding principal
         balance of the Loans from time to time at a rate per annum equal to (i)
         with respect to Prime Rate Loans, the Prime Rate plus the Applicable
         Margin per annum; (ii) with respect to LIBOR Loans, the LIBOR Rate plus
         the Applicable Margin per annum; and (iii) with respect to Alternative
         Currency Loans, the Alternative Currency Rate plus the Applicable
         Margin per annum. The records of the Lender as to the interest rate
         applicable to a particular advance shall be binding and conclusive
         absent manifest error. Interest shall be payable from the day of such
         advance of the Loan to the day of repayment of such advance. Interest
         shall be computed on the basis of the actual number of days elapsed on
         the basis of a year consisting of 360 days, and shall be payable as
         provided in SECTION 2.06.

                                       14
<PAGE>   20

                  (c) INABILITY TO DETERMINE INTEREST RAT. In the event, and on
         each occasion, that on the day two Business Days prior to the
         commencement of any Interest Period for a LIBOR Loan or Alternative
         Currency Loan, the Lender shall have determined in good faith (which
         determination shall be conclusive and binding upon the Borrower) that
         currency deposits in the amount of such LIBOR Loan or Alternative
         Currency Loan, as the case may be, are not generally available in the
         London Interbank market, or that the rate at which such currency
         deposits are being offered will not adequately and fairly reflect the
         cost to the Lender of maintaining the principal amount of such LIBOR
         Loan or Alternative Currency Loan during such Interest Period, the
         Lender shall promptly after such determination shall have been made
         give telex or telecopy notice of such determination, confirmed in
         writing, to the Borrower. In the event of such a determination, any
         request by the Borrower for (i) the making of, conversion to or
         continuation of a LIBOR Loan shall be deemed to be a request for a
         Prime Rate Loan and (ii) the making of or continuation of an
         Alternative Currency Loan shall be deemed to be withdrawn by the
         Borrower and any outstanding Alternative Currency Loan shall be repaid
         on such date. The Lender shall use reasonable efforts to notify the
         Borrower of a change in the circumstances causing the LIBOR Loan or
         Alternative Currency Loans to be unavailable but shall not incur any
         liability for any failure so to notify the Borrower.

         SECTION 2.04. INTEREST ON OVERDUE AMOUNTS. If the Borrower shall
default in the payment of the principal of or interest on any Loan or any other
amount becoming due hereunder, by scheduled maturity, notice of prepayment,
acceleration or otherwise, the Borrower shall on demand from time to time from
the Lender pay interest, to the extent permitted by law, on such defaulted
amount from the day after the due date thereof to the date of actual payment
(after as well as before judgment) at a rate per annum computed on the basis of
the actual number of days elapsed on the basis of a year consisting of 360 days,
equal to (a) with respect to Prime Rate Loans, the Prime Rate 4LIus the
Applicable Margin) plus 3 % per annum, (b) with respect to LIBOR Loans, the rate
applicable to such Loans pursuant to SECTION 2.03(b) above until the end of the
applicable Interest Period, plus 3 % per annum, and thereafter at a rate equal
to the Prime Rate plus the Applicable Margin) plus 3 % per annum, and (c) with
respect to Alternative Currency Loans, the rate applicable to such Loans
pursuant to SECTION 2.03(b) above, plus 3 % per annum (any such applicable
post-default rate, the "DEFAULT RATE").

         SECTION 2.05. BORROWING PROCEDURES. In order to effect a Loan under
the Revolving Credit Facility or the Term Loan Facility, Borrower's
Representative shall give the Lender written notice or telephone notice
(immediately confirmed by facsimile) not later than 11:00 a.m., Chicago time, on
(a) the third Business Day prior to the proposed borrowing date in the case of a
LIBOR Loan or Alternative Currency Loan, and (b) not later than 11: 00 a.m.,
Chicago time, on the proposed borrowing date in the case of a Prime Rate Loan
(the "NOTICE OF BORROWING"). The Borrower hereby authorizes the Lender to extend
advances and make Loans to Borrower based on written or telephone notice from
Borrower's Representative. Each Notice of Borrowing shall specify the principal
amount of the Loans to be made pursuant to such borrowing, the date of such
borrowing (which shall be a Business Day), whether the Loans being made pursuant
to such Borrowing are to be initially maintained as Prime Rate Loans,
Alternative Currency Loans or LIBOR Loans and, if LIBOR Loans or Alternative
Currency Loans, the initial Interest Period to be applicable thereto. The Term
Loan Facility shall only be subject to borrowing on the Closing Date and the
Commitment with respect to the Term Loan Facility shall expire and terminate on
the Closing Date.

         SECTION 2.06. PAYMENT

                  (a) PRINCIPAL AND INTEREST. If not sooner paid, the
         outstanding principal amount of each Loan made under the Revolving
         Credit Facility (including Alternative Currency Loans) shall be paid on
         the Revolving Credit Termination Date. If not sooner paid, the
         outstanding principal amount of the Loan made under the Term Loan
         Facility shall be repaid monthly on the first Business Day of each
         month in equal principal payments of $24,722, with the remaining
         outstanding balance of principal and all accrued interest payable on
         the Tenn Loan Maturity Date. All principal payments of the Loans shall
         be accompanied by accrued interest on the principal amount being repaid
         to the date of payment. Interest on all Loans shall be payable in
         arrears on each Interest Payment Date. All payments by the Borrower
         pursuant to this Agreement, the Notes or any other Loan Document,
         whether in respect of principal, interest, or otherwise, shall be made
         without setoff, counterclaim or deduction in same day funds by the
         Borrower to the Lender. All such payments required to be made to the
         Lender shall be made not later than 2:00 p.m., Chicago time, on the
         date due by wire transfer (or by advice of transfer from or between
         accounts of the Borrower at the

                                       15
<PAGE>   21

         Lender) to the Loan Account or such other account as the Lender shall
         specify from time to time by notice to the Borrower. All payments in
         respect of LIBOR Loans and Prime Rate Loans shall be made in
         immediately available Dollars. All payments of Alternative Currency
         Loans shall be made in immediately available Alternative Currency.
         Funds received after that time shall be deemed to have been received by
         the Lender on the next following Business Day. Whenever any payment to
         be made shall otherwise be due on a day which is not a Business Day,
         such payment shall be made on the next succeeding Business Day and such
         extension of time shall be included in computing interest, if any, in
         connection with such payment.

                  (b) LOAN ACCOUNT. The Borrower shall maintain a demand deposit
         account ("LOAN ACCOUNT") with the Lender into which all advances of
         the Loans by the Lender to the Borrower shall be made. The Borrower
         hereby authorizes the Lender, and the Lender may, in its sole and
         absolute discretion, charge for any payments due hereunder, under the
         Notes and under the other Loan Documents, the Loan Account or any other
         bank account of the Borrower with the Lender; provided, however, that
         the provisions of this SECTION 2.06(b) shall not affect the Borrower's
         obligation to pay when due all amounts payable by the Borrower under
         this Agreement, the Notes and any other Loan Document, whether or not
         there are sufficient funds in the Loan Account or any such other bank
         account of the Borrower.

                  (c) MANDATORY PAYMENTS. If, at any time the Credit
         Utilizations exceed the Revolving Credit Availability, the Borrower
         immediately shall pay to the Lender an amount equal to such excess,
         which will be (i) first, used to prepay the outstanding principal
         amount of the Revolving Credit Note and (ii) second, held by the Lender
         as cash collateral to secure the obligations of the Borrower hereunder
         with respect to the Letters of Credit. The Lender shall give written
         notice to the Borrower of any such excess, but failure to give such
         notice shall not relieve the Borrower of its obligation to immediately
         pay to the Lender such excess as provided above. If on the last
         Business Day of any month the Current Dollar Equivalent of outstanding
         Alternative Currency Loans exceeds the Alternative Currency Sublimit,
         the Borrower immediately shall pay the Lender an amount in the
         Alternative Currency equal to such excess, which will be used to prepay
         the outstanding principal amount of Alternative Currency Loans under
         the Revolving Credit Facility.

                  (d) APPLICATION OF PAYMENTS. The Borrower irrevocably waives
         the right to direct the application of payments and collections
         received by the Lender from or on behalf of the Borrower, and the
         Borrower agrees that the Lender shall have the continuing exclusive
         right to apply and reapply any and all such payments and collections
         against the Obligations in such manner as the Lender may deem
         appropriate, notwithstanding any entry by the Lender upon any of its
         books and records. To the extent that the Borrower makes a payment or
         payments to the Lender or the Under receives any payment or proceeds of
         the Collateral for the Borrower's benefit, which payments or proceeds
         or any part thereof are subsequently invalidated, declared to be
         fraudulent or preferential, set aside and/or required to be repaid to a
         trustee, receiver or any other party under any bankruptcy act, state or
         Federal law, common law or equitable cause, then, to the extent of such
         payment or proceeds received, the Obligations or part thereof intended
         to be satisfied shall be revived and shall continue in full force and
         effect, as if such payments or proceeds had not been received by the
         Lender.

                  (e) TAXES ON PAYMENTS. All Payments made by the Borrower under
         the Notes or 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, assessments, imposts,
         deductions, charges, or withholdings imposed by any foreign, Federal,
         state, local or other jurisdiction or any governmental agency thereof
         or political subdivision or taxing authority therein, excluding taxes
         imposed on the overall net income of the Lender by the jurisdiction in
         which the Lender has its principal office (all such non-excluded taxes
         being hereinafter called "TAXES"). If any Taxes are required to be
         withheld from any amounts so payable to the Lender hereunder or under
         the Notes, the amounts so payable to the Lender shall be increased to
         the extent necessary to yield to the Lender (after payment of all
         Taxes) interest or any such other amounts payable hereunder at the
         rates or in the amounts specified in the Notes or this Agreement. If
         (i) any Borrower or any other Person is required by law to make any
         deduction or withholding on account of any Taxes or other amount from
         any sum paid or expressed to be payable by the Borrower to the Lender
         under this Agreement; or (ii) any party to this Agreement (or any
         Person on its behalf) other than the Borrower is required by law to
         make any deduction or, withholding from, or any payment on or
         calculated

                                       16
<PAGE>   22

         by reference to the amount of, any such sum received or receivable by
         the Lender under this Agreement, then: (A) the Borrower shall notify
         the Lender of any such requirement or any change in any such
         requirement as soon as the Borrower becomes aware of it; (B) the
         Borrower shall pay any such Taxes or other amount before the date on
         which penalties attached thereto become due and payable, such payment
         to be made (if the liability to pay is imposed on the Borrower) for its
         own account or (if that liability is imposed on any other party to this
         Agreement) on behalf of and in the name of that party; (C) the sum
         payable by the Borrower in respect of which the relevant deduction,
         withholding or payment is required shall be increased to the extent
         necessary to ensure that, after the making of that deduction,
         withholding or payment, that party receives on the due date and retains
         (free from any liability in respect of any such deduction, withholding
         or payment) a sum equal to that which it would have received and so
         retained had no such deduction, withholding or payment been required or
         made; and (D) within thirty (30) days after payment of any sum from
         which the Borrower is required by law to make any deduction or
         withholding, and within thirty (30) days after the due date of payment
         of any Taxes or other amount which it is required by clause (B) above
         to pay, it shall deliver to the Lender all such certified documents and
         other evidence as to the making of such deduction, withholding or
         payment as (1) are reasonably satisfactory to other affected parties as
         proof of such deduction, withholding or payment and of the remittance
         thereof to the relevant taxing or other authority and (2) are
         reasonably required by any such party to enable it to claim a tax
         credit with respect to such deduction, withholding or payment. If the
         Borrower fails to pay any Taxes when due to the appropriate taxing
         authority, the Borrower shall indemnify the Lender for any incremental
         taxes, interest or penalties that may become payable by the Lender as a
         result of any such failure.

         SECTION 2.07. FEES. The Borrower shall pay the Lender (a) a one-time
closing fee of $12,000 on the Closing Date, which fee shall be fully earned and
nonrefundable when paid and (b) a commitment fee of .25 % per annum. of the
average daily unused portion of the maximum aggregate amount of the Revolving
Credit Facility as specified in SECTION 2.01(a)(M), payable in arrears on the
first Business Day of each calendar quarter.

         SECTION 2.08. LETTERS OF CREDIT.

                  (a) OBLIGATION TO ISSUE. Subject to the terms and conditions
         of this Agreement, the Lender hereby agrees to issue for the account of
         the Borrower one or more Letters of Credit, up to an aggregate face
         amount (which shall be in Dollars) at any one time outstanding equal to
         the unused amount of the Revolving Credit Availability from time to
         time during the term of this Agreement up to the Business Day which is
         15 Business Days prior to the Revolving Credit Termination Date. The
         Letter of Credit Obligations shall constitute financial accommodations
         under the Revolving Credit Facility and shall increase the utilization
         of the Revolving Credit Facility by the stated amount of such Letter of
         Credit; provided, however, that with respect to Loans made to reimburse
         the Lender for a drawing under a Letter of Credit, Letter of Credit
         Obligations shall not include the amount of such drawing.

                   (b) TYPES AND AMOUNTS. The Lender shall not have any
         obligation to issue any Letter of Credit at any time: (i) if the
         aggregate maximum amount then available for drawing under Letters of
         Credit, after giving effect to the Letter of Credit requested
         hereunder, shall exceed any limit imposed by law or regulation upon the
         Lender; (ii) if the proposed Letter of Credit has an expiration date
         later than five Business Days immediately preceding the Revolving
         Credit Termination Date; or (iii) if, after giving effect to the Letter
         of Credit requested hereunder, the Credit Utilizations would exceed the
         Revolving Credit Availability.

                  (c) CONDITIONS. In addition to being subject to the
         satisfaction of the conditions precedent contained in Article IV, the
         obligation of the Lender to issue any Letter of Credit is subject to
         the satisfaction in full of the following conditions: (i) the Borrower
         shall have delivered to the Lender, at such times and in such manner as
         the Lender may prescribe and if required by the Lender, a Letter of
         Credit Reimbursement Agreement and such other documents and materials
         as may be required by the Lender pursuant to the terms thereof, and the
         terms of the proposed Letter of Credit shall be reasonably satisfactory
         to the Lender and shall be consistent with the Lender's ordinary
         practice with respect to terms of its letters of credit; and (ii) as of
         the date of issuance of the Letter of Credit, no order, judgment or
         decree of any court, arbitrator or governmental authority shall purport
         by its terms to enjoin or restrain the Lender from issuing the Letter
         of Credit and no law, rule or regulation applicable to the Lender and
         no request or

                                       17
<PAGE>   23

         directive (whether or not having the force of law and whether or not
         the failure to comply therewith would be unlawful) from any
         governmental authority with jurisdiction over the Lender shall prohibit
         or request the Lender to refrain from the issuance of Letters of Credit
         generally or the issuance of that Letter of Credit specifically.

                  (d) ISSUANCE OF LETTERS OF CREDIT. The Borrower shall give the
         Lender written notice of a requested issuance of a Letter of Credit,
         which Letter of Credit shall be issued in a manner and within such
         period of time consistent with the Lender's ordinary practice with
         respect to issuing letters of credit. Such notice shall be irrevocable
         and in the form of the customary letter of credit application used by
         the Lender and shall specify (i) the stated amount of the Letter of
         Credit requested, (ii) the effective date (which day shall be a
         Business Day) of issuance of such requested Letter of Credit, (iii) the
         date on which such requested Letter of Credit is to expire (subject to
         SECTION 2.08(b)(II)), (iv) the Person for whose benefit the requested
         Letter of Credit is to be issued, and (v) the amount of Letter of
         Credit Obligations then outstanding.

                  (e) EXTENSION/AMENDMENT OF LETTERS OF CREDIT. The Lender shall
         not be obligated to extend or amend any Letter of Credit if the
         issuance of a new Letter of Credit having the same terms as such Letter
         of Credit as so extended or amended would be prohibited by SECTION
         2.08(b).

                  (f) REIMBURSEMENT OBLIGATIONS: DUTIES OF THE LENDER.
         Notwithstanding any provisions to the contrary in any Letter of Credit
         Reimbursement Agreement: (i) the Borrower shall reimburse the Lender
         for drawings under a Letter of Credit issued by it no later than the
         earlier of (A) the time specified in such Letter of Credit
         Reimbursement Agreement, and (B) one Business Day after the payment by
         the Lender of such drawing; and (ii) any Reimbursement &ligation with
         respect to any Letter of Credit shall bear interest from the date of
         the relevant drawing under the pertinent Letter of Credit at the
         interest rate applicable to Prime Rate Loans under the Revolving Credit
         Facility for one Business Day after such date and thereafter at the
         interest rate for past due Prime Rate Loans in accordance with SECTION
         2.04. In the event this Agreement and any Letter of Credit
         Reimbursement Agreement are inconsistent, the terms of this Agreement
         shall prevail.

                  (g) PAYMENT OF REIMBURSEMENT OBLIGATIONS. The Borrower agrees
         to pay to the Lender the amount of all Reimbursement Obligations,
         interest and other amounts payable to the Lender under or in connection
         with any Letter of Credit issued on behalf of the Borrower immediately
         when due, irrespective of any claim, setoff, defense or other right
         which the Borrower may have at any time against the Lender or any other
         Person.

                  (h) COMPENSATION FOR LETTERS OF CREDIT. The Borrower shall pay
         to the Lender on the first Business Day of each calendar quarter
         (January, April, May and October) a letter of credit fee at a rate per
         annum (the "LETTER OF CREDIT FEES") equal to 1.0% per annum of the
         stated amount of each Letter of Credit. In addition, the Borrower shall
         pay to the Lender any other processing, issuance, amendment or other
         similar fees customarily charged in connection with letters of credit,
         together with the Lender's out-of-pocket costs of issuing and servicing
         letters of credit. All Letter of Credit Fees shall be computed on the
         basis of the actual number of days elapsed in a year of 360 days.

                  (i) INDEMNIFICATION; EXONERATION. In addition to amounts
         payable as elsewhere provided in this SECTION 2.08, the Borrower hereby
         agrees to protect, indemnify, pay and save the Lender harmless from and
         against any and all loss, liability, damage and expense (including
         reasonable attorneys' fees and expenses) which the Lender may incur or
         be subject to as a consequence, direct or indirect, of (i) the issuance
         of a Letter of Credit, other than as a result of its gross negligence
         or willful misconduct, or (ii) the failure of the Lender to honor a
         drawing under such Letter of Credit as a result of any act or omission,
         whether rightful or wrongful, of any present or future de jure or de
         facto governmental authority. As between the Borrower and the Lender,
         the Borrower assumes all risks of the acts and omissions of or misuse
         of such Letter of Credit by the beneficiary of such Letter of Credit.
         In furtherance and not in limitation of the foregoing, subject to the
         provisions of the Letter of Credit Reimbursement Agreements, the Lender
         shall not be responsible for (A) the form, validity, sufficiency,
         accuracy, genuineness or legal effect of any document submitted by any
         party in connection with the application for and issuance of a Letter
         of Credit, even if it should in fact prove to be in any or all respects
         invalid, insufficient, inaccurate,

                                       18
<PAGE>   24

         fraudulent or forged, (B) the validity or sufficiency of any instrument
         transferring or assigning or purporting to transfer or assign a 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) errors, omissions, interruptions or delays in transmission
         or delivery of any messages, by mail, cable, telegraph, telex, or other
         similar form of teletransmission or otherwise, whether or not they be
         in cipher, (D) errors in interpretation of technical terms; (E) any
         loss or delay in the transmission or otherwise of any document required
         in order to make a drawing under-any Letter of Credit or of the
         proceeds thereof, (F) the misapplication by the beneficiary of a Letter
         of Credit of the proceeds of any drawing under such Letter of Credit,
         (G) any consequences arising from causes beyond the control of the
         Lender, except in each case if caused by the gross negligence or
         willful misconduct of the Lender, and (H) any other act or omission for
         which banks are relieved of responsibility under the Uniform Customs &
         Practices for Documentary Credits of the International Chamber of
         Commerce. In furtherance and extension and not in limitation of the
         specific provisions hereinabove set forth, any action taken or omitted
         by the Lender under or in connection with letters of Credit issued on
         behalf of the Borrower or any related certificates, if taken or omitted
         in good faith, shall not in the absence of gross negligence or willful
         misconduct by the Lender, put the Lender under any resulting liability
         to the Borrower or relieve the Borrower of any of its obligations
         hereunder to the Lender.

         SECTION 2.09 CONVERSION OPTIONS: CONTINUANCE.

                  (a) CONVERSION REQUIREMENTS. Provided that no Default or Event
         of Default has occurred and is continuing, the Borrower may elect from
         time to time to convert a Prime Rate Loan, or any portion thereof, to a
         LIBOR Loan by giving the Lender at least three Business Days' prior
         irrevocable notice of conversion (which notice must be received by the
         Lender prior to 11:00 a.m. (Chicago time) (the "NOTICE OF CONVERSION").
         If the date on which a Prime Rate Loan is to be converted to a LIBOR
         Loan is not a Business Day, then such conversion shall be made on the
         next succeeding Business Day, and during the period from such date to
         such succeeding Business Day, such Prime Rate Loan shall bear interest
         as if it were a Prime Rate Loan. All or any part of outstanding
         borrowings may be converted as provided herein.

                  (b) CONTINUANCE. Any LIBOR Loan or Alternative Currency Loan
         may be continued as such, in whole or in part, upon the expiration of
         an Interest Period with respect thereto if the Borrower gives the
         Lender irrevocable notice of continuance (which notice must be received
         by the Lender prior to 11: 00 a.m. (Chicago time), at least three
         Business Days prior to the date of expiration of the Interest Period
         expiring with respect to the LIBOR Loan or Alternative Currency Loan
         which is requested to be continued, specifying (i) the LIBOR Loan or
         Alternative Currency Loan, or portion thereof, requested to be
         continued; (ii) the date of expiration of the Interest Period expiring
         with respect to the LIBOR Loan or Alternative Currency Loan, or portion
         thereof, which is requested to be continued; and (iii) the length of
         the Interest Period with respect to such LIBOR Loan or Alternative
         Currency Loan, or portion thereof, after the continuation thereof;
         provided, that no LIBOR Loans or Alternative Currency Loans may be
         continued as such when any Default or Event of Default has occurred and
         is continuing, but shall be automatically (A) converted to a Prime Rate
         Loan (in the case of LIBOR Loans) or (B) due and payable (in the case
         of Alternative Currency Loans) on the last day of the Interest Period
         for such Loan (the "NOTICE OF CONTINUANCE"). If the Borrower does not
         comply with the notice provisions of this clause (b), such (x) LIBOR
         Loan shall be automatically converted to a Prime Rate Loan upon the
         expiration of the Interest Period with respect thereto and (y)
         Alternative Currency Loan shall continue automatically for an Interest
         Period of one month upon the expiration of the Interest Period with
         respect thereto. Notwithstanding the foregoing, no Alternative Currency
         Loan shall be continued for a new Interest Period if the Current Dollar
         Equivalent (as determined as of the date of any proposed continuation
         thereof) to be outstanding after giving effect to such conversion
         causes the Credit Utilizations to exceed the Revolving Credit
         Availability.

                  (c) RESTATEMENT OF REPRESENTATIONS AND WARRANTIES. Any Notice
         of Conversion or Continuance pursuant to this SECTION 2.09 shall be
         deemed to be a representation that all of the representations and
         warranties of the Borrower contained in this Agreement shall then be
         true and correct in all material respects as if made on such date,
         except to the extent that such representations and warranties expressly
         relate to an earlier date, and that no Default or Event of Default
         shall 'have occurred and be continuing.

                                       19
<PAGE>   25

         SECTION 2.10 REQUIREMENTS OF LAW.

                  (a) INCREASED COSTS. Notwithstanding any other provisions
         herein, in the event that the introduction of or any change in any law,
         rule, regulation, treaty or directive or in the interpretation or
         application thereof, or compliance by the Lender with any request or
         directive (whether or not having the force of law) from any central
         bank or other governmental authority, agency or instrumentality or
         regulatory body:

                           (i) subjects the Lender to any tax of any kind
                  whatsoever with respect to this Agreement, the Notes, the
                  other Loan Documents or the Loans made hereunder, or changes
                  the basis of taxation of payments to the Lender of principal,
                  interest or any other amount payable hereunder (except for
                  changes in the rate of tax imposed on the overall net income
                  of the Lender by the United States, any state or subdivision
                  thereof);

                           (ii) imposes, modifies, holds applicable any reserve,
                  special deposit, compulsory loan or similar requirement
                  against assets held by, or deposits or other liabilities in or
                  for the account of, advances or loans by, or other credit
                  extended by, or any other acquisition of funds by, any office
                  of the Lender (which is not otherwise included in the
                  determination of the LIBOR Rate or Alternative Currency Rate
                  hereunder); or

                           (iii) imposes on the Lender or the London interbank
                  market any other condition;

and the result of any of the foregoing is to increase the cost to the Lender of
agreeing to make, making, continuing or maintaining or participating in LIBOR
Loans or Alternative Currency Loans, or to reduce any amount receivable
thereunder or to increase the withholding taxes payable then, in any such case,
the Borrower shall pay the Lender, within 15 days after the demand by the
Lender, any additional amounts necessary to compensate the Lender on an
after-tax basis for such additional cost or reduced amount receivable or
increased withholding taxes payable which the Lender deems to be material as
determined by the Lender with respect to this Agreement, the Notes, the other
Loan Documents or the Loans made hereunder.

                  (b) CAPITAL ADEQUACY. In the event that the Lender shall have
         determined that the adoption of any law, rule, regulation, treaty or
         guideline regarding capital adequacy, or any change in any of the
         foregoing or in the interpretation or application of any of the
         foregoing or compliance by the Lender with any request or directive
         regarding capital adequacy (whether or not having the force of law)
         from any central bank or other governmental authority, agency or
         instrumentality or regulatory body, does or shall have the effect of
         reducing the rate of return on the Lender's or its parent's capital as
         a consequence of its obligations under this Agreement to a level below
         that which the Lender or such parent could have achieved but for such
         adoption, change, or compliance (taking into consideration the Lender's
         or such parent's policies with respect to capital adequacy) by an
         amount deemed by the Lender to be material, then from time to time,
         after submission by the Lender to the Borrower of a written request
         therefor, the Borrower shall pay to the Lender, within 15 days after
         its demand, such additional amount or amounts as will compensate the
         Lender or such parent on an after-tax basis for such reduction.

                  (c) CERTIFICATE FOR CLAIM. If the Lender or its parent becomes
         entitled to claim any additional amounts pursuant to this SECTION 2.10,
         it shall promptly notify the Borrower of the event by reason of which
         it has become so entitled. A certificate setting forth in reasonable
         detail any additional amounts payable pursuant to the foregoing
         sentence submitted by the Lender or its parent shall be conclusive and
         binding on the Borrower in the absence of manifest error. The
         provisions of this SECTION 2.10 shall survive the repayment of the
         Loans and the termination of this Agreement.

                  (d) NO WAIVER. Failure on the part of the Lender or its parent
         to demand compensation for any increased costs or reduction in amounts
         received or receivable or reduction in return on capital with respect
         to any period shall not constitute a waiver of such party's :right to
         demand compensation with respect to such period or any other period.
         The protection of this SECTION 2.10 shall be available to such party
         regardless of any possible contention of the invalidity or
         inapplicability of the law, rule, regulation, guideline or other change
         or condition which shall have occurred or been imposed; provided,
         however that

                                       20
<PAGE>   26

         if such party shall have recouped any amount theretofore paid to it by
         the Borrower under this Section 2.10, the Lender shall pay to the
         Borrower an amount equal to the net recoupment so received by such
         party, as determined in good faith by such party.

         SECTION 2.11 ILLEGALITY . The Lender may make or maintain LIBOR Loans
and Alternative Currency Loans at or for the credit of any branch, subsidiary or
affiliate office inside or outside the United States or any international
banking facility within the United States, as the Lender may elect from time to
time. Notwithstanding any other provisions herein, if any law, rule, regulation,
treaty or directive or any change therein or in the interpretation or
application thereof, shall make it unlawful for the Lender to maintain LIBOR
Loans or Alternative Currency Loans as contemplated by this Agreement, the
agreement of the Lender to make or maintain LIBOR LOANS or Alternative Currency
Loans, as the case may be, shall terminate and (a) all outstanding LIBOR Loans
shall be converted automatically to Prime Rate Loans, on the last day of the
then current Interest Period or within such earlier period as required by law
and (b) all outstanding Alternative Currency Loans shall be due and payable and
repaid by the Borrower on the last day of the then current Interest Period or
within such earlier period as required by law.

         SECTION 2.12 INDEMNITY. The Borrower agrees to indemnify the Lender and
to hold the Lender harmless from any cost, loss or expense which the Lender may
sustain or incur and any lost profit of the Lender as a consequence of (a) the
Borrower making a payment or prepayment of principal or interest on any LIBOR
Loan or Alternative Currency Loan (including, without limitation, through a
conversion to the same or a different type of Loan or pursuant to SECTIONS
2.03(c) AND 2.11 above) on a day which is not the last day of an Interest Period
with respect thereto, (b) any failure by the Borrower to borrow or convert any
Loan hereunder after a Notice of Borrowing or Notice of Conversion has been
given (in the case of LIBOR Loans or Alternative Currency Loans), (c) default by
the Borrower in making any prepayment after the Borrower has given a notice of
prepayment, and (d) any acceleration of the maturity of the Loans in accordance
with the terms of this Agreement, including, but not limited to, any such
reasonable cost, loss or expense arising in liquidating the Loans and from
interest or fees payable by the Lender to lenders of funds obtained by it in
order to maintain the Loans hereunder. For purposes hereof, "lost profits" shall
mean, without duplication of any amounts otherwise payable pursuant to this
SECTION 2.12 or otherwise, an amount equal to the excess, if any, as reasonably
determined by such Lender, of (i) its cost of obtaining the funds for the Loan
being paid, prepaid, converted or not borrowed (based on the LIBOR Rate or
Alternative Currency Rate applicable thereto) for the period from the date of
such payment, prepayment, conversion or failure to borrow to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date of such
failure) over (H) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in re-employing the funds so paid,
prepaid, converted or not borrowed for such period or Interest Period, as the
case may be. A certificate setting forth in reasonable detail any additional
amounts payable pursuant to the preceding sentence submitted by Lender shall be
conclusive and binding upon the Borrower absent manifest error. The provisions
of this Section 2.12 shall survive the repayment of the Loans and the
termination of this Agreement.

         SECTION 2.13 AVAILABILITY OF ALTERNATIVE CURRENCY. The Lender shall not
be required to make or continue any Loan requested to be made or continued in
the Alternative Currency if, at any time prior to making or continuing such
Loan, the Lender shall determine, in its sole discretion, that (a) deposits in
the Alternative Currency in the amounts and maturities required to fund such
Loan will not be available to the Lender; (b) a fundamental change has occurred
in the foreign or interbank-markets with respect to the Alternative Currency
(including, without limitation, changes in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls); or (c) it has become otherwise materially impractical for the Lender
to make or continue such Loan in the Alternative Currency. Whenever, pursuant to
any provision of this Agreement, (x) a Loan is initially funded, as opposed to
any continuation or conversion thereof, in the Alternative Currency, the amount
to be advanced hereunder will be the equivalent in the Alternative Currency of
the Dollar Equivalent of such Loan, and (y) an existing Alternative Currency
Loan is to be continued, in whole or in part, the amount of the new Loan shall
be continued in the Alternative Currency.

         SECTION 2.14 EURO. If the "Euro" (or some other similar unit of
account) becomes a currency in its own right in connection with European
monetary union contemplated by the Maestricht Treaty, in replacement of the
Alternative Currency, then the Borrower and the Lender agree to negotiate in
good faith an amendment to this Agreement satisfactory in form and substance to
the Borrower and the Lender to account therefor.

                                       21
<PAGE>   27

         ARTICLE III REPRESENTATIONS AND WARRANTIES

         To induce the Lender to execute this Agreement and perform its
obligations hereunder, the Borrower represents and warrants to the Lender as
follows:

         SECTION 3.01. ORGANIZATION; CORPORATE POWERS. The Borrower and its
Subsidiaries are each duly organized, validly existing and in good standing
under the laws of the jurisdictions of their respective organization. Each of
the Borrower and its Subsidiaries has the requisite power and authority,
including all material licenses, registrations, permits, franchises, patents,
copyrights, trademarks, trade names, consents and approvals, to own its property
and assets and to carry on its business as now conducted and is qualified to do
business and in good standing in every jurisdiction where such qualification is
required, except where failure to so qualify could not have a Material Adverse
Effect. The Borrower has all requisite power and authority to consummate the
Transactions.

         SECTION 3.02. AUTHORIZATION. The consummation of the Transactions (a)
has been duly authorized by all requisite corporate action of the Borrower and
the Guarantors and (b) will not (i) violate (A) any provision of law, statute,
rule or regulation (including Regulations D, G, T, U or X) or the articles of
incorporation or other constitutive documents or the by-laws or regulations of
the Borrower or the Guarantors, (B) any order of any court, or any rule,
regulation or order of any other agency of government binding upon the Borrower
or the Guarantors, or (C) any provisions of any material indenture, agreement or
other instrument to which the Borrower or any of the Guarantors is a party, or
by which the Borrower or any of the Guarantors or any of their respective
properties or assets is or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to in clause
(b)(i)(C) above or (iii) result in the creation or imposition of any Lien (other
than in favor of the Lender as contemplated by this Agreement) upon any property
or assets of the Borrower or the Guarantors.

         SECTION 3.03. GOVERNMENTAL APPROVAL. Except as specifically provided by
the Loan Documents, no registration with or consent or approval of, or other
action by, any Federal, state or other governmental agency, authority or
regulatory body is or will be required in connection with the consummation of
the Transactions by the Borrower or the Guarantors.

         SECTION 3.04. ENFORCEABILITY. This Agreement constitutes, and each of
the other Loan Documents when duly executed and delivered by the Borrower will'
constitute, legal, valid and binding obligations of the Borrower enforceable in
accordance with their respective terms. When duly executed and delivered by the
Guarantors, each of the Loan Documents to be executed and delivered by the
Guarantors will constitute legal, valid and binding obligations of the
Guarantors enforceable in accordance with their respective terms, except to the
extent enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the availability of equitable
remedies.

         SECTION 3.05. FINANCIAL MATTERS. The Borrower has heretofore furnished
to the Lender audited financial statements for the year ending December 31, 1996
and unaudited financial statements for the 3-months ended March 31, 1997, which
financial statements fairly state the Borrower's financial condition and results
of operations as of the dates, and for the periods, set forth therein. Such
financial statements and the notes thereto, together with the schedules to this
Agreement, disclose all material liabilities, direct or contingent, of the
Borrower and its Subsidiaries as of the dates thereof. The financial statements
referred to in this SECTION 3.05 have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis.

         SECTION 3.06. NO MATERIAL ADVERSE CHANGE. Since March 31, 1997 there
has been no event or occurrence that could have a Material Adverse Effect.

         SECTION 3.07. SUBSIDIARIES. All Subsidiaries of the Borrower are
identified on SCHEDULE 3.07 hereto, together with the ownership structure of
each such Subsidiary and Affiliate. The Borrower does not have any subsidiaries
and is not a partner or joint venturer in any partnerships or joint ventures
except as set forth on SCHEDULE 3.07. The Borrower owns all of the issued and
outstanding capital stock of each Subsidiary. All such capital stock is owned
free and clear of all Liens (other than Liens created by the Loan Document). The
Borrower has the unencumbered right to vote all such equity interests. There are
no outstanding options, warrants or rights to

                                       22
<PAGE>   28

purchase or any shareholder agreement or other agreement for the subscription,
purchase or acquisition of any such equity interest.

         SECTION 3.08. LITIGATION. Except as described in SCHEDULE 3.08, there
are no actions, suits or proceedings at law or in equity or by or before any
arbitrator or any governmental instrumentality or other agency or regulatory
authority now pending or threatened against or affecting the Borrower or any of
its Subsidiaries or the businesses, assets or rights of the Borrower or any of
its Subsidiaries (a) which involve this Agreement or any of the other Loan
Documents or any of the Transactions, or (b) as to which, if adversely
determined, could, individually or in the aggregate, have a Material Adverse
Effect.

         SECTION 3.09 COMPLIANCE WITH LAWS. Neither the Borrower nor any of its
Subsidiaries are in violation in any material respect of any applicable law,
rule. or regulation, including but not limited to, (a) any Environmental Law,
and (b) any for4iga asset control regulations ("Foreign Control Regulations") of
the United States Treasury Department, 31 C.F.R. , Subtitle B, Chapter V, as
amended, or any ruling issued thereunder or any enabling legislation or
Presidential Executive Order granting authority therefor, nor will the proceeds
of the Loan be used by the Borrower in any manner that would violate any
thereof. Neither the Borrower nor any of its Subsidiaries is in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court or governmental agency or instrumentality.

         SECTION 3.10. ENVIRONMENTAL PROTECTION. Except as specified in SCHEDULE
3.10 and after giving effect to the Transactions: (a) the business of the
Borrower and its Subsidiaries, the methods and means employed by the Borrower
and its Subsidiaries in the operation thereof (including all operations and
conditions at or in the properties of the Borrower and its Subsidiaries), and
the assets owned, leased, held or operated by the Borrower and its Subsidiaries,
comply in all material respects with all applicable laws, rules, regulations,
ordinances and codes of every kind, including Environmental Laws; (b) each of
the Borrower and its Subsidiaries have obtained all permits under Environmental
Laws necessary to its operations other than such permits the absence of which
could not, individually or in the aggregate, have a Material Adverse Effect, and
all such permits are in good standing and the Borrower and its Subsidiaries are
in compliance with all material terms and conditions of such permits; and (c)
neither the Borrower nor its Subsidiaries have received (i) any claim or notice
of violation, lien, complaint, suit, order or other claim or notice to the
effect that it is or may be liable to any Person as a result of (A) the
environmental condition of any of their respective properties or any other
property, or (B) the release or threatened release of any Hazardous Materials,
or (ii) any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. ss.9604), or comparable state laws, and to the best of the
Borrower's knowledge, none of the operations of the Borrower or its Subsidiaries
are the subject of any Federal or state investigation evaluating whether any
remedial action is needed to respond to a release or threatened release of any
Hazardous Material at the Borrower's or its Subsidiaries' properties or at any
other location, including any location to which the Borrower or its Subsidiaries
have transported, or arranged for the transportation of, any Hazardous
Materials.

         SECTION 3.11. AGREEMENTS. Neither the Borrower nor its Subsidiaries is
a party to any agreement or instrument or subject to any restriction that has a
present Material Adverse Effect.

         SECTION 3.12. FEDERAL RESERVE REGULATIONS. Neither the Borrower nor its
Subsidiaries are engaged principally, or as of one of their important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock. Neither the Loans nor any of the proceeds thereof, are
for the purpose, whether immediate, incidental or ultimate of (a) buying or
carrying Margin Stock, or (b) extending credit to others for the purpose of
buying or carrying Margin Stock, or (c) refunding indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of, or
which is inconsistent with, the provisions of Regulations of the Board,
including Regulations D, G, T, U and X thereof.

         SECTION 3.13. TAXES. The Borrower and each of its Subsidiaries have
filed or caused to be filed all Federal, foreign state and local tax returns
which are required to be filed by it, and has paid or caused to be paid all
taxes shown to be due and payable on such returns or on any assessments received
by it, other than any taxes or assessments, the validity of which the Borrower
is contesting in good faith by appropriate proceedings, and with respect to
which the Borrower shall have set aside on its books adequate reserves.

                                       23
<PAGE>   29

         SECTION 3.14. LABOR AND EMPLOYMENT. The Borrower, each of its
Subsidiaries and each Plan is in compliance in all material respects with those
provisions of ERISA, the Internal Revenue Code of 1986, as amended and the Age
Discrimination in Employment Act, and the regulations and published
interpretations thereunder which are applicable to the Borrower, its
Subsidiaries or such Plan. As of the date hereof, no Reportable Event has
occurred with respect to any Pension Plan as to which the Borrower or any of its
Subsidiaries was required to file a report with the Pension Benefit Guaranty
Corporation. No Pension Plan (other than a Multiemployer Plan) has any material
amount of unfunded benefit liabilities (within the meaning of Section
4001(a)(18) of ERISA) or any accumulated funding deficiency (within the meaning
of Section 302(a)(2) of ERISA), whether or not waived, and neither the Borrower
nor any of its ERISA Affiliates has incurred or expects to incur any material
withdrawal liability under Subtitle E of Title IV of ERISA to a Multiemployer
Plan. No Plan of the Borrower or its Subsidiaries obligates any of them to
provide post-retirement medical benefits, except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1986. The Borrower and its
Subsidiaries are in compliance in all material respects with all labor and
employment laws, rules, regulations and requirements of all applicable domestic
and foreign jurisdictions. There are no pending or threatened labor disputes,
work stoppages or strikes.

         SECTION 3.15. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Borrower nor any of its Subsidiaries is (a) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 4940, as amended or (b) a "holding company" or
a "subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.

         SECTION 3.16. CAPITALIZATION. The capital stock of the Borrower is
publicly traded and listed on the NASDAQ Small Cap Market. Each record and
beneficial owner of 10 % or more of the outstanding equity interests of the
Borrower are set forth in Schedule 3.1-6.

         SECTION 3.17. PROPERTIES; SECURITY INTERESTS. The Borrower has good and
marketable title to, or valid leasehold interests in, all of its material assets
and properties reflected in its March 31, 1997 balance sheet, except for such
properties as are no longer useful in the conduct of its business or have been
disposed of in the ordinary course of business, subject to no Liens except for
Permitted Liens. All such assets and properties are in good repair, working
order and condition and all such assets and properties are owned by the Borrower
free and clear of all Liens except for Permitted Liens. With the exceptions set
forth therein, the Security Agreements create and grant to the Lender a valid
and perfected first priority security interest in all the Collateral. All real
estate owned or leased by, and all public warehouses utilized by, the Borrower
("PREMISES") or its Subsidiaries is listed on SCHEDULE 3.17. The Mortgage
creates and grants to the Lender a valid and perfected first-priority mortgage
in the Premises (as reflected on SCHEDULE 3.17 , subject only to Permitted
Liens.

         SECTION 3.18. INTELLECTUAL PROPERTY: LICENSES. The Borrower and each of
its Subsidiaries possesses adequate assets, licenses, patents, patent
applications, copyrights, trademarks, trademark applications and tradenames to
continue to conduct its business as heretofore conducted. No event has occurred
which permits, or after notice or lapse of time or both would permit, the
revocation or termination of any of the foregoing which taken in isolation or
when considered with all other such revocations or terminations could have a
Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries have
notice or knowledge of any fact or any past, present or threatened occurrence
that could preclude or impair the Borrower's or any such Subsidiaries' ability
to retain or obtain any authorization necessary for the operation of their
respective businesses.

         SECTION 3.19. SOLVENCY. Neither the Borrower nor any of the Guarantors
is insolvent and the execution and delivery of this Agreement and the other Loan
Documents pursuant thereto and the consummation of the Transactions will not
render the Borrower or any Guarantor insolvent. Each of the fair value and
present fair saleable value of the assets of the Borrower and the Guarantors
exceeds its liabilities. The Borrower understands that in this context
"insolvent" means that the present fair saleable value of the total assets of
the Borrower or any Guarantor is less than the amount of the total liabilities
of the Borrower or any Guarantor. The Borrower also understands that the term
"liabilities" includes any legal liability, whether matured or unmatured,
liquidated or unliquidated, absolute, fixed or contingent (with contingent
liabilities valued based on the Borrower's good faith estimate of the
probability of occurrence). The Borrower and each Guarantor will be able to pay
its debts as they become absolute and mature. In the event that the maximum
amount available under this Agreement is borrowed by

                                       24
<PAGE>   30

the Borrower, the Borrower-and each Guarantor will not incur debts beyond its
ability to pay as they mature. The borrowing of the maximum amount available
under this Agreement, and the Borrower's and each Guarantor's granting liens on
their respective properties pursuant to this Agreement and the other Loan
Documents executed pursuant thereto, will not leave the Borrower or such
Guarantor with property remaining in its hands constituting unreasonably small
capital with which to conduct its business.

         SECTION 3.20. COMPLETE DISCLOSURE. All factual information furnished by
or on behalf of the Borrower to the Lender for purposes of or in connection with
this Agreement or the Transactions is, and all other such factual information
hereafter furnished by or on behalf of the Borrower will be, true and accurate
in all material respects on the date as of which such information is furnished
and not incomplete by omitting to state any fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided.

                       ARTICLE IV CONDITIONS TO THE LOANS

         SECTION 4.01. GENERAL CONDITIONS. The obligation of the Lender to make
each Loan or issue each Letter of Credit under the Revolving Credit Facility is
subject to the satisfaction of the Lender with the fulfillment of the following
conditions precedent:

                  (a) Revolving Credit Available. After giving effect to such
         Loan or the issuance of such Letter of Credit, the Credit Utilizations
         will not exceed the Revolving Credit Availability.

                  (b) Borrowing Notice. The Lender shall have received a notice
         of such borrowing or issuance of such Letter of Credit as required by
         SECTION 2.05 OR SECTION 2.08, as the case may be.

                  (c) Representations. The representations and warranties set
         forth in Article III shall be true and correct in all material respects
         with the same effect as though made on and as of such date.

                  (d) Compliance. The Borrower and each of the Guarantors shall
         be in compliance in all material respects with all the terms and
         provisions contained herein and in the other Loan Documents to be
         observed or performed, and at the time of and immediately after such
         borrowing or issuance, no Default or Event of Default shall have
         occurred and be continuing.

The acceptance by the Borrower of the proceeds of any Loan or the issuance of
any Letter of Credit hereunder shall be deemed to constitute a representation
and warranty by the Borrower on the date of such Loan or the date of the
issuance of such Letter of Credit, as the case may be, that all of the
conditions set forth in Section 4.01 have been satisfied.

         SECTION 4.02. CONDITIONS TO FIRST ADVANCE. The obligations of the
Lender to make the initial advance of the Revolving Credit Facility and the Term
Loan Facility is subject to the following additional conditions precedent, all
of which shall be in form and substance satisfactory to the Lender in its sole
and absolute discretion:

                  (a) Legal Opinion(s). The Lender shall have received a
         favorable written opinion(s) of counsel for the Borrower and the
         Guarantors in substantially the form contained in EXHIBIT G.

                  (b) Authorization Documentation. The Lender shall have
         received (i) a copy of the certificate/articles of incorporation of the
         Borrower and the Guarantors, certified by the applicable Secretary of
         State as of a recent date, and a certificate as to the good standing
         from such Secretary of State and from the Secretary of State of the
         States of Illinois, Texas and California, all dated as of a recent
         date, (ii) a certificate of the Secretary or an Assistant Secretary of
         the Borrower and the Guarantors, dated the Closing Date and certifying
         (A) that attached thereto is a true and complete copy of the
         certificate/articles of incorporation and bylaws of the Borrower and
         the Guarantors as in effect on the date of such certificate, (B) that
         attached thereto is a true and complete copy of resolutions duly
         adopted by the Borrower and the Guarantors authorizing the execution,
         delivery and performance of the Transactions, and that such resolutions
         have not been modified, rescinded or amended and are in full force and
         effect, and (C) as to the

                                       25
<PAGE>   31

         incumbency and specimen signature of each officer of the Borrower or
         the Guarantors executing this Agreement or the other Loan Documents,
         (iii) a certificate of another officer of the Borrower or the
         Guarantors as to the incumbency and specimen signature of the Secretary
         or such Assistant Secretary of such corporation, (iv) such documents
         with respect to any other Subsidiaries as the Lender or its counsel may
         reasonably request and (v) such other documents as the Lender or its
         counsel may reasonably request.

                  (c) Notes. The Lender shall have received the Revolving Credit
         Note and the Term Loan Note, duly executed and delivered by the
         Borrower, payable to its order on behalf of the Lender and otherwise
         complying with the provisions of SECTION 2.02.

                  (d) Guaranties . The Lender shall have received (i) the UAI
         Guaranty, duly executed and delivered by UAI and (ii) the Canadian
         Guaranty, duly executed and delivered by UBP, Brake Parts and IDC, and
         a contribution agreement with respect thereto, duly executed and
         delivered by all of the Guarantors.

                  (e) Security Agreements. The Lender shall have received (i)
         the Borrower Security Agreement, duly executed and delivered by the
         Borrower, (h) the UAI Security Agreement, duly executed and delivered
         by UAI and (iii) the Canadian Security Agreement, duly executed and
         delivered by UBP, Brake Parts and IDC, together with all UCC financing
         statements and other instruments as may be necessary to create the
         first priority security interests to be created th6ieunder (and
         post-filing searches confirming such priority and filings).

                  (f) Mortgage. The Lender shall have received the duly executed
         and delivered Mortgage, together with (i) evidence of the completion
         (or satisfactory arrangements for the completion) of all recordings and
         filings of such Mortgage as may be necessary or, in the opinion of the
         Lender, desirable to effectively create a valid, perfected first
         priority lien and security interest in the Premises, and (ii) a title
         insurance policy in the amount of the appraised value of the Premises,
         issued by a title insurer satisfactory to the lender (or a signed and
         effective "mark-up" thereof) ("TITLE INSURANCE POLICY"), insuring the
         Lien of the Mortgage as prior and paramount Lien against the Borrower's
         fee simple interest in such Premises subject only to the Permitted
         Liens (the Title Insurance Policy shall contain (A) a comprehensive
         endorsement, (B) a 3.1 zoning endorsement, to the extent available
         based on the existing surveys (modified to cover parking and off-street
         loading, if available), (C) a survey endorsement specifically insuring
         the Lender that the survey described accurately depicts the same real
         estate covered by the Title Insurance Policy, (D) an access
         endorsement, (E) a usury endorsement, (F) an environmental lien
         endorsement (insuring against environmental protection liens filed in
         the applicable court or recorded in the public records) and (G) a
         revolving credit and letter of credit endorsement, and (H) any other
         endorsements the Lender or its counsel may reasonably require).

                  (g) Stock Pledges. The Lender shall have received the Stock
         Pledge Agreement and the Canadian Pledge Agreement, duly executed and
         delivered by the Borrower or UBP, as the case may be.

                  (h) Intercompany Notes. The Lender shall have received the
         Intercompany Notes, duly executed and delivered by each of UAI, UBP,
         Brake Parts and IDC, together with subordination agreements relating
         thereto in form and substance satisfactory to the Lender.

                  (i) Insurance. The Lender shall have received certificates
         evidencing the insurance required under the Security Agreements, the
         Mortgage and SECTION 5.03 of this Agreement.

                  (j) Certification. The Lender shall have received a
         certificate, dated as of the Closing Date, whereby the Borrower
         certifies as to the matters specified in SECTIONS 4.01(a) (c) AND (d).

                  (k) Searches: Releases. The Lender shall have received
         recently dated reports (which may be post-filing searches) describing
         all Lien filings with respect to the Borrower reflected in the records
         of the State of Illinois, Cook County, Illinois, the State of
         California, Los Angeles County, California, the State of Texas, and
         Webb County, Texas. The Lender shall have received recently dated
         reports describing all Lien filings with respect to UAI reflected in
         the records of the State of Illinois, Cook County, Illinois, the State

                                       26
<PAGE>   32

         of California, Los Angeles County, California, the State of Texas, and
         Webb County, Texas. The Lender shall have received recently dated
         reports describing all Lien filings with respect to UBP reflected in
         the records of the State of Illinois and the Providence of Ontario. No
         such report shall list any Lien other than (i) Permitted Liens and (ii)
         Liens released on or before the Closing Date pursuant to such
         termination statements, releases and other documents as are acceptable
         to the Lender. The Lender shall have received releases of all Liens to
         be released on or before the Closing Date in form and substance
         satisfactory to the Lender or other provision satisfactory to the
         Lender in its sole discretion shall have been made for release of such
         Liens. The Lender shall also have received recently dated judgment and
         state and Federal tax hen search reports for the Borrower and each
         Guarantor, satisfactory to the Lender.

                  (1) Survey. The Lender shall have received plats of survey of
         the Premises certified to the Lender, together with certificates from
         the Borrower as to no changes since the date such survey was prepared.

                  (m) Environmental Matters. The Lender shall have received (i)
         an environmental reports for the Premises, and (ii) executed,
         recordable originals of any statement or disclosure required to be
         filed under the Illinois Responsible Property Transfer Act.

                  (n) Appraisals. The Lender shall have received an appraisal of
         the Premises certified to the Lender, prepared by an independent MAI
         certified appraiser satisfactory to the Lender, complying with
         standards promulgated by the Board, the Federal Deposit Insurance
         Corporation and the Office of the Comptroller of the Currency.

                  (o) Subordinated Debt. At least $3,000,000 of Subordinated
         Debt shall have been funded and the Lender shall have received complete
         copies of all documents relating to or evidencing the Subordinated
         Debt, together with a fully executed Subordination Agreement.

                  (p) Collection Accounts: Lockbox Requirements. The Lender
         shall have received the Lockbox Agreement pursuant to which all
         Accounts and other collections and proceeds of Collateral of the
         Borrower and the Guarantors shall be paid.

                  (q) Landlord's Waivers. A waiver from each lessor of property
         leased by the Borrower or its Subsidiaries on which Collateral is
         located, if any.

                  (r) Fees. The Lender shall have received the amounts to be
         paid on the Closing Date pursuant to SECTION 2.07 hereof.

                  (s) Further Assurances. The Lender shall have received all
         further documents, notifications and other assurances reasonably
         required by the Lender to evidence and secure the Loan.

         ARTICLE V AFFIRMATIVE COVENANTS

         The Borrower covenants and agrees with the Lender that, so long as this
Agreement shall remain in effect or the principal of or interest on the Notes,
any Fee or any other expense or amount payable hereunder shall be unpaid, unless
the Lender shall otherwise consent in writing, the Borrower shall, and shall
cause each of its Subsidiaries to:

         SECTION 5.01. EXISTENCE. Do or cause to be done all things necessary to
preserve, renew and keep in full force. and effect its legal existence.

         SECTION 5.02. BUSINESSES AND PROPERTIES: COMPLIANCE WITH LAWS. At all
times (a) do or cause to be done all things necessary to preserve, renew and
keep in full force and effect the rights, licenses, registrations,
authorizations, permits, franchises, patents, copyrights, trademarks and trade
names, material to the conduct of its business, (b) maintain and operate its
business in substantially the manner in which it is presently conducted and
operated, (c) comply in all material respects with all laws and regulations
applicable to the operation of such business, including but not limited to, all
Environmental Laws and all Foreign Control Regulations, whether now in

                                       27
<PAGE>   33

effect or hereafter enacted and with all other applicable laws and regulations,
(d) take all action which may be required to obtain, preserve, renew and extend
all franchises, registrations, licenses, permits and other authorizations which
may be material to the operation of such business, (e) maintain, preserve and
protect all property material to the conduct of such business, and (f) keep its
property in good repair, working order and condition and from time to time make,
or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times.

         SECTION 5.03. INSURANCE. Maintain insurance required by the Loan
Documents, including but not limited to, coverage on its insurable properties,
including all inventory, equipment and real property, against the perils of
fire, theft, burglary, public liability, worker's compensation and business
interruption and such other risks as are customary with companies similarly
situated and in the same or similar business under policies issued by
financially sound and reputable insurers in such amounts as are customary with
companies similarly situated and in the same or similar business. The Borrower
shall pay all insurance premiums payable by it and shall deliver the policy or
policies of such insurance (or certificates of insurance with copies of such
policies) to the Lender. All insurance policies of the Borrower shall contain
endorsements, in form and substance reasonably satisfactory to the Lender,
providing that the insurance shall not be cancellable except upon 30 days' prior
notice to the Lender. The Lender shall be shown as an additional named insured
party under all such insurance policies.

         SECTION 5.04. OBLIGATIONS AND TAXES. Pay and discharge promptly when
due all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise, which, if unpaid, might give rise to liens
or charges upon such properties or any part thereof-, provided, however, that
the Borrower shall not be required-to pay -And discharge or to cause to be paid
and discharged any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and the Borrower shall have set aside on its books adequate reserves
with respect thereto.

         SECTION 5.05. FINANCIAL STATEMENTS: REPORTS. Furnish to the Lender:

                  (a) Annual Statements. Within 120 days after the end of each
         Fiscal Year a consolidated balance sheet and income statement and cash
         flows statement of the Borrower and each of its Subsidiaries showing
         the financial condition of the Borrower and each of its Subsidiaries as
         of the close of such year and the results of operations during such
         year, all the foregoing financial statements to be audited by a firm of
         independent certified public accountants acceptable to the Lender,
         together with an audit report to the effect that such financial
         statements have been prepared in accordance with GAAP and present
         fairly in accordance with GAAP the consolidated financial condition of
         the Borrower and its subsidiaries as of the close of such fiscal year
         and the results of their operations and cash flows for the fiscal year
         then ended.

                  (b) Quarterly Statements. Within 60 days after the end of each
         fiscal quarter, an unaudited consolidating balance sheet and income
         statement showing the financial condition and results of operations of
         the Borrower and each of its Subsidiaries as of the end of such fiscal
         quarter and for the time elapsed portion of the current fiscal year,
         together with a certificate of a Financial Officer that such financial
         statements have been prepared in accordance with generally accepted
         accounting principles consistently applied.

                  (c) Monthly Statements. Within 45 days after the end of each
         month, unaudited balance sheets and income statements showing the
         financial condition and results of operations of the Borrower and each
         of its Subsidiaries as of the end of each such month and for the then
         elapsed portion of the current fiscal year, together with a certificate
         of a Financial Officer that such financial statements have been
         prepared in accordance with generally accepted accounting principles
         consistently applied.

                  (d) Borrowing Base Certificate. Within 3 days after the end of
         each week, a borrowing base certificate of a Financial Officer in the
         form of EXHIBIT H; PROVIDED, however , that beginning in Fiscal Year
         1998, if (i) the Borrower has positive Net Income for three consecutive
         months and (ii) the Leverage Ratio is less than or equal to 3.5: 1,
         then such borrowing base certificates shall only be required to be

                                       28
<PAGE>   34

         delivered to the Lender within 15 days of the end of each month. If at
         any time thereafter (i) the Borrower incurs a net loss as at the end of
         any calendar month, calculated on a cumulative, year-to-date basis, or
         (ii) the Leverage Ratio is greater than 3.5: 1 at the end of any month,
         borrowing base certificates shall be required to be delivered to the
         Lender within 3 days after the end of each week until the conditions
         set forth in clauses (i) and (ii) of the first sentence of this Section
         5.05(d) are again satisfied.

                  (e) Compliance Certificate. Within 15 days after the end of
         each month, a certificate of a Financial Officer M-the t6fih of EXHIBIT
         1.

                  (f) Account and Inventory Reports. Within 15 days after the
         end of each month, an Accounts Report and Inventory Certification
         Report.

                  (g) Accountant Reports. Promptly upon the receipt thereof,
         copies of all reports, if any, submitted to the Borrower by independent
         certified public accountants in connection with each annual, interim or
         special review of the financial statements of the Borrower or any of
         its Subsidiaries made by such accountants, including but not limited
         to, any comment letter submitted by such accountants to management in
         connection with any annual review.

                  (h) Regulatory Reports. Promptly upon completion thereof,
         copies of all financial statements, reports and proxy statements
         furnished to shareholders of the Borrower, and promptly upon filing
         thereof, copies of all registration statements and annual, quarterly,
         monthly and other regular reports which the Borrower or its
         Subsidiaries are required to file with the Securities and Exchange
         Commission.

                  (i) Additional Information. Promptly, from time to time, such
         other information regarding the compliance by the Borrower or any of
         its Subsidiaries with the terms of this Agreement and the other Loan
         Documents or the affairs, operations or condition (financial or
         otherwise) of the Borrower or any of its Subsidiaries as the Lender may
         reasonably request and which is capable of being obtained, produced or
         generated by the Borrower or any of its Subsidiaries or of which the
         Borrower or any of its Subsidiaries has knowledge.

         SECTION 5.06. LITIGATION AND OTHER NOTICES. Give the Lender prompt
written notice of the following:

                  (a) Orders: Injunction. The issuance by any court or
         governmental agency or authority of any injunction, order, decision or
         other restraint prohibiting, or having the effect of prohibiting, the
         making of any Loan or the issuance of any Letter of Credit or the
         initiation of any litigation or similar proceeding seeking any such
         injunction, order or other restraint.

                  (b) Litigation. The filing or commencement of any action,
         suit or proceeding against the Borrower or any of its Subsidiaries
         whether at law or in equity or by or before any court or any Federal,
         state, municipal or other governmental agency or authority and which,
         if adversely determined against the Borrower or any of its Subsidiaries
         could result in liability in excess of $100,000 in the aggregate, and
         any material developments relating to the Contingency Reserve.

                  (c) Environmental Matters. (i) Any release or threatened
         release of any Hazardous Material required to be reported to any
         Federal, state or local governmental or regulatory agency under any
         applicable Environmental Laws, (h) any remedial action taken by the
         Borrower or any of its Subsidiaries or any other Person in response to
         any Hazardous Material on, under or about the Borrower's or any of its
         Subsidiaries' properties or any other property, and (iii) any violation
         by the Borrower or any of its Subsidiaries of any Environmental Law, in
         each case, which could result in a Material Adverse Effect.

                  (d) Default. Any Default or Event of Default, specifying the
         nature and extent thereof and the action (if any) which is proposed to
         be taken with respect thereto.

                  (e) Material Adverse Effect. Any development in the business
         or affairs of the Borrower or any of its Subsidiaries, which could have
         a Material Adverse Effect.

                                       29
<PAGE>   35

         SECTION 5.07. ERISA. Comply in all material respects with the
applicable provisions of ERISA and the provisions of the Internal Revenue Code
of 1986, as amended, relating thereto and furnish to the Lender (a) as soon as
possible, and in any event within 30 days after the Borrower knows or has reason
to know thereof, notice of (i) the establishment by the Borrower or any ERISA
Affiliate of any Pension Plan, (ii) the commencement by the Borrower or any of
its Subsidiaries of contributions to a Multiemployer Plan, (iii) any failure by
the Borrower or any ERISA Affiliate to make contributions required by Section
302 of ERISA (whether or not such requirement is waived pursuant to Section 303
of ERISA), or (iv) the occurrence of any Reportable Event with respect to any
Pension Plan for which the reporting requirement is not waived, together with a
statement of a Financial Officer setting forth details as to such Reportable
Event and the action which the Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event given to the Pension
Benefit Guaranty Corporation if any notice is required to be given to said
Corporation, (b) promptly after receipt thereof, a copy of any notice the
Borrower or any of its Subsidiaries may receive from the Pension Benefit
Guaranty Corporation relating to the intention of said Corporation to terminate
any Pension Plan, or to appoint a trustee to administer any Pension Plan and (c)
promptly after receipt thereof, a copy of any notice of withdrawal liability
from any Multiemployer Plan.

         SECTION 5.08. MAINTAINING RECORDS; ACCESS TO PREMISES AND INSPECTIONS.
Maintain financial records in accordance with generally accepted practices and,
upon reasonable notice, at all reasonable times and as often as the Lender may
reasonably request, permit any authorized representative designated by the
Lender to visit and inspect the properties and financial records of the Borrower
and any of its Subsidiaries and to make extracts from such financial records at
the Borrower's expense, and permit any authorized representative designated by
the Lender to discuss the affairs, finances and condition of the Borrower and
any of its Subsidiaries with the Borrower's or such Subsidiary's chief financial
officer and such other officers as the Borrower shall deem appropriate, and the
Borrower's independent public accountants.

         SECTION 5.09. USE OF PROCEEDS. Use the proceeds of the Loans only for
the following purposes:

                  (a) Revolving Credit Facility -The Revolving Credit Facility
         shall only be used for working capital purposes for the Borrower, the
         issuance of Letters of Credit and the refinancing and repayment of
         certain existing indebtedness of the Borrower to First Chicago NBD
         Corporation.

                  (b) Term Loan Facility. The Term Loan Facility shall only be
         used for refinancing and repayment of certain existing indebtedness of
         the Borrower to First Chicago NBD Corporation.

         SECTION 5.10. BANKING BUSINESS: COLLECTIONS. In order to facilitate the
Lender's maintenance and monitoring of its security interest in the Collateral,
the Borrower and the Guarantors shall maintain all of their accounts and other
banking activities with the Lender, including for international services and
cash management requirements. The Borrower and the Guarantors shall at all times
maintain lockbox arrangements at the Lender for all Accounts, collections and
other proceeds of Collateral.

         ARTICLE VI NEGATIVE COVENANTS

         The Borrower covenants and agrees with the Lender that, so long as this
Agreement shall remain in effect or the principal of or interest on the Notes,
any Fee or any other expense or amount payable hereunder shall be unpaid, unless
the Lender shall otherwise consent in writing, it will not and it will not
permit any of its Subsidiaries to, either directly or indirectly:

         SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to exist
any Indebtedness, including pursuant to any Guaranty, except that the following
Indebtedness is permitted: (a) Indebtedness incurred pursuant to this Agreement
and the other Loan Documents, (b) Indebtedness incurred in the ordinary course
of business with respect to customer deposits, trade payables and other
unsecured current liabilities not the result of borrowing and not evidenced by
any note or other evidence of indebtedness, (c) Indebtedness pursuant to the
Intercompany Notes, and (d) the Indebtedness listed on SCHEDULE 6.01.

                                       30
<PAGE>   36

         SECTION 6.02. NEGATIVE PLEDGE. Create, incur, assume or permit to exist
any Lien on any property or assets now owned or hereafter acquired by it or on
any income or rights in respect of any thereof, except the following permitted
Liens (the "PERMITTED LIE"):

                  (a) Liens created pursuant to the Loan Documents on behalf of
         the Lender;

                  (b) Liens for or priority claims imposed by law which are
         incidental to the conduct of business or the ownership of properties
         and assets (including mechanic's, warehousemen's, attorneys' and
         statutory landlords' liens) and deposits, pledges or liens to secure
         statutory obligations, surety or appeal bonds or other liens of like
         general nature incurred in the ordinary course of business and not in
         connection with the borrowing of money; provided, however that in each
         case, the obligation secured is not overdue or, if overdue, is being
         contested in good faith and adequate reserves have been set up by the
         Borrower as the case may be; provided, further, that the lien and
         security interest provided in the Loan Documents or any portion thereof
         created or intended to be created thereby is not, in the opinion of the
         Lender, unreasonably jeopardized thereby;

                  (c) Liens securing the payment of taxes, assessments and
         governmental charges or levies incurred in the ordinary course of
         business, either (i) not delinquent, or (ii) being contested in good
         faith by appropriate legal or administrative proceedings and as to
         which the Borrower shall have set aside on its books adequate reserves,
         and so long at during the period of any such contest, the Borrower
         shall suffer no loss of any privilege of doing business or any other
         right, power or privilege necessary or material to the operation of its
         business; and

                  (d) Liens securing the Indebtedness listed on SCHEDULE 6.02;

                  (e) Permitted Encumbrances (as defined in the Mortgage); and

                  (f) Liens in favor of Waupaca Foundry, Inc. on Tooling
         Inventory in the possession of Waupaca Foundry, Inc. from time to time;

                  (g) Liens securing purchase money security interests in favor
         of lessors or vendors of assets to the Borrower in the ordinary course
         of business; and

                  (h) extensions, renewals and replacements of Liens referred to
         in paragraphs (a) through (g) of this SECTION 6.02; provided, however,
         that any such extension, renewal or replacement Lien shall be limited
         to the property or assets covered by the Lien extended, renewed or
         replaced and that the obligations secured by any such extension,
         renewal or replacement Lien shall be in an amount not greater than the
         amount of the obligations secured by the Lien extended, renewed or
         replaced.

         SECTION 6.03. SALE OF ASSETS. Except as expressly permitted by the
Security Agreements, sell, transfer or otherwise dispose of any of its assets,
including the Collateral and the Premises, except (a) Inventory disposed of in
the ordinary course of business, (b) obsolete equipment disposed of in the
ordinary course of business and (c) subject to the prior written consent of the
Lender, which consent shall not be unreasonably withheld, the sale in whole or
in part of the assets or capital stock of the Hungarian foundry owned directly
or indirectly by the Borrower, UBP Hungary, Inc. or UBP Csepel, Iron Foundry,
Kft.

         SECTION 6.04. CONSOLIDATIONS, MERGERS OR PURCHASES OF ASSETS. Merge
into or consolidate or combine with any other Person, or purchase, lease or
otherwise acquire (in one transaction or a series of related transactions) all
or any part of the property or assets of any Person (other than purchases or
other acquisitions of inventory, materials, leases, property and equipment in
the ordinary course of business).

         SECTION 6.05. RESTRICTED PAYMENTS. Declare or pay, directly or
indirectly, any dividend or distribution or any other payment of any kind to any
Person, including, but not limited to, any of its stockholders or its Affiliates
(including any redemption, purchase or acquisition of, whether in cash,
property, securities or a combination thereof, any partnership interests or
capital accounts or warrants, options or any of its other securities) or set
apart any sum for the aforesaid purposes, except for (a) payments on
Intercompany Notes in accordance with the terms of such

                                       31
<PAGE>   37

Intercompany Notes, (b) payments or prepayments on Subordinated Debt (but only
pursuant to the terms of the Subordination Agreement and provided no Default or
Event of Default has occurred and is continuing or would result therefrom) and
(c) payment of the Indebtedness set forth on Schedule 6.01.

         SECTION 6.06. INVESTMENTS, LOANS AND ADVANCES. Purchase, or hold
beneficially, any stock, other securities or evidences of Indebtedness of, or
make or permit to exist any loan, Guaranty or advance to, or make any investment
or acquire any interest whatsoever in, any other Person (including, but not
limited to, the formation or acquisition of any Subsidiaries not existing on the
date of this Agreement), except loans evidenced by the Intercompany Notes from
the Borrower to each of the Guarantors and (b) intercompany loans of up to
$3,850,000 to UBP Hungary, Inc., $1,600,000 of which sum shall be used to repay
in full a loan of UBP Hungary, Inc. to First National Bank of Chicago -
Frankfurt Branch (provided that neither the Borrower, UBP nor UAI shall make any
additional or future loans, advances or Guaranties for the benefit of UBP
Hungary, Inc.).

         SECTION 6.07. TRANSACTIONS WITH AFFILIATES. Sell or transfer any assets
to, or purchase or acquire any assets of, or make any loan (other than pursuant
to the Intercompany Notes), advance or investment in, or otherwise engage in any
material transaction with, or permit any Affiliate to sell or transfer assets
to, or purchase or acquire any assets of, or otherwise engage in any other
material transaction with any other Affiliate, except for sales to and purchases
from Affiliates in the ordinary course of business on "arms-length" terms no
less favorable to the Borrower than similar arrangements with third parties. The
transactions specified in Schedule 6.01 and any refinancings thereof shall not
be deemed in default of the provisions of this Agreement.

         SECTION 6.08. LINE OF BUSINESS. Engage, directly or indirectly, in any
businesses other than the businesses in which it is engaged on the Closing Date.

         SECTION 6.09. FISCAL YEAR, ACCOUNTING. Change its Fiscal Year or method
of accounting (other than immaterial changes and methods), except as required by
generally accepted accounting principles.

         SECTION 6.10. RESTRICTIONS ON SALE OF ASSETS AND DISTRIBUTIONS. Permit
or place any material restriction, directly or indirectly, on the sale, pledge,
transfer or other disposition of any material asset (other than such
restrictions as ordinarily appear in contracts entered into in the ordinary
course of business, examples of which include restrictions on the ability to
assign leases or contract rights and obligations and the restrictions arising
under this Agreement and the other Loan Documents).

         SECTION 6.11 ISSUANCE OF EQUITY INTERESTS. Without the prior written
approval of the Lender, issue any capital stock or other equity interests of the
Borrower or any Subsidiary or any options or warrants to purchase, or securities
convertible into, capital or equity interests of the Borrower or any Subsidiary,
except for warrants for (i) common stock of the Borrower issuable to Sirrom
Capital Corporation in connection with Subordinated Debt, (ii) common stock of
the Borrower issued in connection with the Borrower's initial public offering,
(iii) common stock of the Borrower issuable with respect to warrants or options
presently outstanding, (iv) options to purchase common stock of the Borrower
(and the common stock issuable upon exercise of such options) with respect to
the authorized options issuable pursuant to the Borrower's existing stock option
plan, which permits the issuance of up to 300,000 shares of common stock of the
Borrower in the aggregate upon exercise of such options, (v) rights to acquire
common stock of the Borrower in accordance with the settlement of the
Litigation, or (vi) issuance of capital stock in accordance with secondary
public or private offerings priced at not less than 80% of the then existing
fair market value of the Borrower's common stock; provided, however, that 50 %
of the net cash proceeds (after deductions for reasonable expenses in connection
with the issuance) from such offering shall be used to make prepayments on the
Loans, applied first, to scheduled principal payments of the Term Loan, if any
amounts remain outstanding thereunder, in inverse order of maturity and second,
to permanently reduce the Revolving Credit Availability; further provided,
however, that if at the time of such issuance the Leverage Ratio is less than or
equal to 2.5: 1.0, once the outstanding principal balance of the Tenn Loan has
been paid down to $2,250,000, no further prepayment shall be required for such
issuance.

         SECTION 6.12 MODIFICATIONS OF MATERIAL DOCUMENTS. Without the prior
written approval of the Lender, amend, terminate, modify or waive (or agree to
the amendment, modification or termination or waiver of) any material term or
provision of the articles/certificate of incorporation or bylaws of the Borrower
or any of its Subsidiaries, or any document evidencing Subordinated Debt.

                                       32
<PAGE>   38

         SECTION 6.13 LEVERAGE RATIO. Permit the Leverage Ratio to be no greater
than the following during each of the following periods, measured as of the end
of each fiscal quarter during each such period:

     =========================================================================
                    PERIOD                           LEVERAGE RATIO
     -------------------------------------------------------------------------
         Closing Date through 12/30/97                  4.50:1.0
     -------------------------------------------------------------------------
           12/31/97 through 12/30/98                    3.75:1.0
     -------------------------------------------------------------------------
            12/31/98 and thereafter                     3.50:1.0
     =========================================================================

         SECTION 6.14 TANGIBLE NET WORTH. Permit Tangible Net Worth to be less
than the following amounts at the end of any fiscal quarter during following
fiscal years:

     =========================================================================
                    PERIOD                         TANGIBLE NET WORTH
     -------------------------------------------------------------------------
         Closing Date through 12/30/97                 $5,500,000
     -------------------------------------------------------------------------
           12/31/97 through 12/30/98                   $6,000,000
     -------------------------------------------------------------------------
            12/31/98 and thereafter                    $6,500,000
     =========================================================================

         SECTION 6.15 SUBORDINATED DEBT. Permit the Subordinated Debt of the
Borrower to be less than $3,000,000 at any time (including after giving effect
to any payments or prepayments).

         SECTION 6.16 LEASES. Enter into or permit to exist any arrangements for
the leasing by the Borrower or its Subsidiaries of any real or personal property
(or interests therein) under leases, other than leases existing as of the date
of this Agreement, which require the payment of rental amounts in excess of
$500,000 in any Fiscal Year.

                              ARTICLE VII DEFAULTS

         SECTION 7.01. EVENTS OF DEFAULT. Each of the following events shall
constitute events of default ("Events of Default") hereunder:

                  (a) any representation or warranty made by or on behalf of the
         Borrower in connection with this Agreement or the other Loan Documents
         or any of the Transactions shall prove to have been false or misleading
         in any material respect when made;

                  (b) default shall be made in the payment of any principal on
         the Loans or any Reimbursement Obligations when and as the same shall
         become due and payable, whether at the due date thereof or at a date
         fixed for prepayment thereof or by acceleration thereof or otherwise.

                  (c) default shall be made in the payment of any interest or
         other amounts payable hereunder or under the other Loan Documents when
         and as the same shall become due and payable, whether at the due date
         thereof or at a date fixed for prepayment thereof or by acceleration
         thereof or otherwise, and such amount shall remain unpaid for 3
         Business Days.

                  (d) default shall be made in the due observance of any
         covenant, condition or agreement on the part of the Borrower contained
         in SECTIONS 5.01, 5.05, 5.06(d) OR ARTICLE VI.

                  (e) default shall be made in the due observance or performance
         of any other covenant, condition or agreement to be observed or
         performed by the Borrower pursuant to the terms of this Agreement or
         the other Loan Documents and such default shall continue unremedied for
         a period of 30 days after the earlier

                                       33
<PAGE>   39

         of (i) written notice from the Lender of such default or (ii) actual
         knowledge by the Borrower of such default;

                  (f) the Borrower, the Guarantors or any of their Subsidiaries
         shall (i) voluntarily commence any proceeding or file any petition
         seeking relief under Title I I of the United States Code or any other
         Federal or state bankruptcy, insolvency or similar law, (ii) consent to
         the institution of, or fail to controvert in a timely and appropriate
         manner, any such proceeding or the filing of any such petition, (iii)
         apply for or consent to the appointment of a receiver, trustee,
         custodian, sequestrator or similar official for the Borrower, any
         Guarantor or any of their Subsidiaries or for a substantial part of
         their respective properties or assets, (iv) file an answer admitting
         the material allegations of a petition filed against it in any such
         proceeding, (v) make a general assignment for the benefit of creditors,
         (vi) become unable generally, or admit in writing its inability, to pay
         its debts as they become due, (vii) suspend the transaction of all or a
         substantial portion of its usual business or (viii) take corporate
         action for the purpose of effecting any of the foregoing;

                  (g) an involuntary proceeding shall be commenced or an
         involuntary petition shall be filed in a court of competent
         jurisdiction seeking (i) relief in respect of the Borrower, any
         Guarantor or any of their Subsidiaries of a substantial part of any of
         their respective properties or assets under Title 11 of the United
         States Code or any other Federal or state bankruptcy, insolvency or
         similar law, (ii) the appointment of a receiver, trustee, custodian,
         sequestrator or similar official for the Borrower, any Guarantor or any
         of their Subsidiaries or for a substantial part of their respective
         properties, or (iii) the winding-up or liquidation of the Borrower, any
         Guarantor or any of their Subsidiaries; and such proceeding or petition
         shall continue undismissed for 60 days or an order or decree approving
         or ordering any of the foregoing shall continue unstayed and in effect
         for 60 days;

                  (h) a default shall be made with respect to any Indebtedness
         of the Borrower or any Guarantor, including, but not limited to, the
         Subordinated Debt of the Borrower payable to Sirrom Capital
         Corporation, or any event shall occur if the effect of any such default
         or event shall be to accelerate, or to permit the holder or obligee of
         any Indebtedness (or any trustee or agent on behalf of such holder or
         obligee) to accelerate (with or without notice or lapse of time or
         both), the maturity of Indebtedness in an aggregate amount in excess of
         $100,000; or any payment of principal or interest, regardless of
         amount, on any Indebtedness of the Borrower or any Guarantor or any of
         their Subsidiaries in an aggregate principal amount in excess of
         $100,000, shall not be paid when due, whether at maturity, by
         acceleration or otherwise (after giving effect to any period of grace
         specified in the instrument evidencing or governing such Indebtedness);

                  (i) a Reportable Event shall have occurred with respect to any
         Pension Plan or a notice of intent to terminate a Pension Plan shall
         have been furnished to the affected parties (as provided in Section
         4041(c)(1) of ERISA); or the Pension Benefit Guaranty Corporation shall
         have instituted proceedings to terminate any Pension Plan, or a trustee
         shall have been appointed by a United States District Court to
         administer any Pension Plan, if in any such case such Pension Plan then
         has an amount of unfunded benefit liabilities (within the meaning of
         Section 4001(a)(18) of ERISA) aggregating in excess of $100,000 or the
         Borrower or any ERISA Affiliate incurs withdrawal liability to any
         Multiemployer Plan under subtitle E of Title IV of ERISA aggregating in
         excess of $100,000;

                  (j) a final judgment for the payment of money in excess of
         $100,000 shall be rendered by a court or other tribunal against the
         Borrower or any of its Subsidiaries and shall remain undischarged for a
         period of 30 consecutive days during which execution of such judgment
         shall not have been stayed effectively or final judgments for the
         payment of money aggregating in excess of $100,000 shall be rendered
         against the Borrower or any of its Subsidiaries and such judgments
         shall remain undischarged for a period of 30 consecutive days during
         which execution of such judgments shall not have been stayed
         effectively;

                  (k) the Subsidiary Guaranties or any Collateral Document shall
         cease to be in full force and effect, enforceable in accordance with
         its terms, or the Borrower or any Guarantor shall assert the invalidity
         of any such instrument, or any security interest or Lien purported to
         be created by any Collateral Document shall cease to be a valid and
         perfected first priority security interest in any collateral described
         therein;

                                       34
<PAGE>   40

                  (1) a default or event of default shall occur under any of the
         other Loan Documents, which shall remain uncured after the expiration
         of any applicable notice, cure or grace period, if any;

                  (m) the Borrower or any of its Subsidiaries shall be the
         subject to any proceeding pertaining to the release by (i) the Borrower
         or its Subsidiaries, (ii) any Person acting on the Borrower's behalf,
         or (iii) any predecessor in interest to the assets and properties of
         the Borrower or its Subsidiaries, of Hazardous Materials into the
         environment or any violation of any Environmental Loans which, in
         either case, could have a Material Adverse Effect.

                  (n) a Change of Control shall occur.

         SECTION 7.02. REMEDIES UPON DEFAULT. Upon the occurrence of any Event
of Default (other than an event described in Section 7.01(f) or W), and at any
time thereafter during the continuance of such event, the Lender may, by written
notice to the Borrower, take either or all of the following actions-at the same
or different times: (a) terminate forthwith the Commitment (including the
Revolving Credit Facility and any obligation to issue Letters of Credit
hereunder) of the Lender hereunder, and (b) declare the Notes to be forthwith
due and payable, whereupon the principal of the Notes, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under the other Loan Documents, shall become
forthwith due and payable both as to principal and interest, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein or in the
Notes to the contrary notwithstanding, or (c) take any other action available at
law or in equity. Upon the occurrence of any event described in Section 7.01(f)
or (g)), (i) the Commitment (including the Revolving Credit Facility, and any
obligation to issue Letters of Credit hereunder) of the Lender shall
automatically terminate, and (ii) the principal amount outstanding under the
Notes, together with Eon accrued interest thereon and any accrued unpaid Fees
and all other liabilities of the Borrower accrued hereunder and under the other
Loan Documents, shall automatically become due and payable, both as to principal
and interest, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained
herein or in the Notes to the contrary notwithstanding. Upon any acceleration of
the Notes and the other amounts payable hereunder, the Borrower shall pay to the
Lender an amount equal to the aggregate stated amount of all Letters of Credit
to be held by the Lender as cash collateral to secure the obligations of the
Borrower hereunder with respect to the Letters of Credit.

         ARTICLE VIII MISCELLANEOUS

         SECTION 8.01. NOTICES. (a) Notices and other communications provided
for herein and in the other Loan Documents shall be in writing and shall be
delivered personally or mailed, by certified or registered mail, postage prepaid
(or in the case of facsimile communication, delivered by telex, graphic scanning
or other facsimile communications equipment) or delivered by overnight courier
addressed:

         If to Lender:
         LaSalle National Bank
         135 South LaSalle Street
         Chicago, Illinois 60603
         Attention: Angela K. DePew
         Telephone: (312) 904-4561
         Facsimile: (312) 904-6353

with a copy (which shall not constitute notice) to:

         Hopkins & Sutter
         Three First National Plaza
         Chicago, Illinois 60602
         Attention: Patrick M. Hardiman
         Telephone: (312) 558-6751
         Facsimile: (312) 558-3310

         If to Borrower:

                                       35
<PAGE>   41

         Universal Automotive Industries, Inc.
         3350 North Kedzie Avenue
         Chicago, Illinois 60618
         Attention: Arvin Scott
         Telephone: (773) 478-2323
         Facsimile: (773) 866-9068

with a copy (which shall not constitute notice) to:

         Shefsky & Froelich Ltd.
         444 North Michigan Avenue
         Chicago, Illinois 60611
         Attention: Mitchell D. Goldsmith
         Telephone: (312) 836-4006
         Facsimile: (312) 527-3194

                  (b) All notices and other communications given to any party
         hereto in accordance with the provisions of this Agreement shall be
         deemed to have been given on the date of receipt, in each case
         addressed to such Person as provided in this Section 8.01 or in
         accordance with the latest unrevoked direction from such Person.

         SECTION 8.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Borrower herein and in the other Loan
Documents shall be considered to have been relied upon by the Lender and shall
survive the making by the Lender of the Loans and the execution and delivery to
the Lender of the Notes evidencing the Loans and shall continue in full force
and effect until the Notes and all accrued interest thereon and all other
Obligations then due and payable have been fully paid and the Lender has no
further commitment to lend hereunder.

         SECTION 8.03. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the Borrower or the Lender that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Lender. The
Lender shall have the right to sell participations in and make assignments of
all or any part of the Commitment, the Notes and the Letters of Credit in its
sole and absolute discretion and without the consent of or notice to the
Borrower.

         SECTION 8.04. EXPENSES OF THE LENDER; INDEMNIFY; JUDGMENT CURRENCY.

                  (a) The Borrower agrees to pay all- out-of-pocket expenses
         reasonably incurred by the Lender (including the fees and expenses of
         the Lender's counsel and its paralegals, field exam expenses and
         related fees and environmental audit and appraisal fees) in connection
         with the preparation and administration of this Agreement and the other
         Loan Documents, or with any amendments, modifications or waivers of the
         provisions hereof or thereof (whether or not the Transactions shall be
         consummated) or reasonably incurred by the Lender (including the fees
         and expenses of the Lender's counsel and its paralegals) in connection
         with the enforcement of its rights in connection with this Agreement or
         the other Loan Documents. The Borrower further agrees that it shall
         indemnify the Lender from and hold it harmless against any documentary
         taxes, assessments or charges made by any governmental authority by
         reason of the execution and delivery of this Agreement or any of the
         other Loan Documents.

                  (b) The Borrower agrees to indemnify the Lender and its
         Affiliates, directors, officers, employees and agents against, and to
         hold the Lender and such Persons harmless from, any and all losses,
         claims, damages, liabilities, penalties, actions, judgments, suits,
         costs, and related expenses, including legal and paralegal fees and
         expenses, incurred by or asserted against the Lender or any such
         Persons arising out of, in any way connected with, or as a result of
         any claim, investigation, litigation or other proceeding (whether or
         not the Lender is a party) relating to (i) this Agreement or the other
         Loan Documents, (ii) the performance by the parties hereto and thereto
         of their respective obligations hereunder and thereunder

                                       36
<PAGE>   42

         (including the making of the Commitment), (iii) the consummation of the
         Transactions, (iv) the release, presence, spillage, disposal,
         discharge, transporting, emission or leakage of Hazardous Materials,
         which is at, in, on, under, about, from or affecting the Premises,
         including any damage or injury resulting from any such Hazardous
         Materials to or affecting the Borrower's properties or the soil, water,
         air, vegetation, buildings, personal property, persons or animals
         located on such properties or on any other property or otherwise, or
         (v) any violation of any Environmental Laws. The foregoing indemnity
         includes the cost of remedial action to the extent required to cause
         the Borrower's properties to be in compliance with all applicable
         Environmental Laws. Notwithstanding the foregoing, this indemnity shall
         not apply to any such losses, claims, damages, liabilities or related
         expenses arising solely from the gross negligence or willful misconduct
         of the Lender.

                  (c) The relationship between the Borrower (and its
         Subsidiaries) and the Lender shall be solely that of borrower and
         lender. The Lender shall not have any fiduciary responsibilities to the
         Borrower (or its Subsidiaries). The Lender does not undertake any
         responsibility to the Borrower (or its Subsidiaries) to review or
         inform the Borrower (or its Subsidiaries) of any matter in connection
         with any phase of the Borrower's (or its Subsidiaries') business or
         operations. The Borrower agrees that the Lender shall not have
         liability to the Borrower or its Subsidiaries (whether sounding in
         tort, contract or otherwise) for losses suffered by the Borrower or its
         Subsidiaries in connection with, arising out of, or in any way related
         to, the transactions contemplated and the relationship established by
         the Loan Documents, or any act, omission or event occurring in
         connection therewith, unless it is determined by a court of competent
         jurisdiction in a final and non-appealable order that such losses
         resulted from the gross negligence or willful misconduct of the party
         from which recovery is sought. The Lender shall not have any liability
         with respect to, and the Borrower hereby waives, releases and agrees
         not to sue for, any special, indirect or consequential damages suffered
         by the Borrower or its Subsidiaries in connection with, arising out of,
         or in any way related to the Loan Documents or the transactions
         contemplated thereby.

                  (d) If for any purpose, including the obtaining of judgment in
         any court, it is necessary to convert a sum due hereunder from the
         currency in which it is payable (the "PAYMENT CURRENCY") into another
         currency (the "JUDGMENT CURRENCY"), the parties hereto agree, to the
         fullest extent that they may lawfully and effectively do so, that the
         rate of exchange used shall be that at which, in accordance with normal
         banking procedures, the Lender could purchase the Payment Currency with
         the Judgment Currency in the Chicago foreign exchange market on the
         Business Day preceding the date of final judgment. The obligation of
         the Borrower in respect of any sum due from it to the Lender hereunder
         shall, notwithstanding any judgment or payment in a currency other than
         the Payment Currency, be discharged only to the extent that on the
         Business Day following receipt by the Lender of any sum so paid or
         adjudged to be so due in the Judgment Currency the Lender may in
         accordance with normal banking procedures, purchase the Payment
         Currency with the amount of Judgment Currency so paid or adjudged to be
         due; if the amount in the Payment Currency so purchased is less than
         the sum originally due to the Lender in the Payment Currency, the
         Borrower agrees, as a separate obligation and additional cause of
         action and notwithstanding any such payment or judgment, to indemnify
         the Lender against such loss and if the amount in the Payment Currency
         so purchased exceeds the sum originally due to the Lender in the
         Payment Currency, the Lender agrees to remit to the Borrower such
         excess. The term "rate of exchange" in this SECTION 8.04 means the spot
         rate at which the Lender, in accordance with normal practices, is able
         on the relevant date to purchase the Payment Currency with the Judgment
         Currency and includes any premium and costs of exchange payable in
         connection with the purchase.

                  (e) The provisions of this Section shall remain operative and
         in full force and effect regardless of the expiration of the term of
         this Agreement, the other Loan Documents, the consummation of the
         Transactions, the repayment of any of the Loans, the invalidity or
         unenforceability of any term or provision of this Agreement or any of
         the other Loan Documents, or any investigation made by or on behalf of
         the Lender. All amounts due under this Section 8.04 shall be payable on
         written demand in reasonable detail therefor.

         SECTION 8.05. RIGHT OF SETOFF. The Lender is hereby authorized at any
time and from time to time after the occurrence and during the continuance of an
Event of Default to setoff and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the

                                       37
<PAGE>   43

Lender to or for the credit or the account of the Borrower (other than trust
accounts held for the benefit of third parties in the ordinary course of the
Borrower's business) to amounts then due and payable under this Agreement and
the other Loan Documents, irrespective of whether or not the Lender shall have
made any demand under this Agreement or any of the other Loan Documents. The
rights of the Lender under this Section 8.05 are in addition to other rights and
remedies (including other rights of setoff) which the Lender may have under
applicable law.

         SECTION 8.06 APPLICABLE LAW. THIS AGREEMENT, THE NOTES AND EACH OF THE
OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ILLINOIS CHOICE OF LAW
DOCTRINE.

         SECTION 8.07. WAIVERS. No failure or delay of the Lender in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Lender hereunder are cumulative and not exclusive of any
rights or remedies which it would otherwise have. No waiver of any provision of
this Agreement, the Notes or the other Loan Documents, or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be authorized as provided in Section 8.08, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.

         SECTION 8.08. AMENDMENTS. Neither this Agreement nor any provision
hereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrower and the Lender.

         SECTION 8.09. SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement, the Notes or the other Loan Documents
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein or
therein shall not in any way be affected or impaired thereby.

         SECTION 8.10. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one contract, and shall become
effective when copies hereof which, when taken together, bear the signatures of
each of the parties hereto shall be delivered or mailed to the Lender and the
Borrower.

         SECTION 8.11. HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.

         SECTION 8.12. CONSENT TO JURISDICTION. THE BORROWER IRREVOCABLY AGREES
THAT ANY LEGAL ACTION, SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO ITS
OBLIGATIONS, LIABILITIES OR ANY OTHER MATTER UNDER OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, AND THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION
OR ENFORCEMENT OF ANY JUDGMENTS RENDERED IN ANY SUCH ACTION, SUIT, OR
PROCEEDINGS MAY BE BROUGHT IN THE UNITED STATES COURT FOR THE NORTHERN DISTRICT
OF ILLINOIS OR IN THE COURTS OF THE STATE OF ]ILLINOIS LOCATED IN COOK COUNTY
(AND THE BORROWER WAIVES ANY OTHER PREFERENTIAL JURISDICTION BY REASON OF ITS
PRESENT OR FUTURE DOMICILE OR OTHERWISE), AS 11-1E LENDER MAY ELECT AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY UNCONDITIONALLY
AND IRREVOCABLY ACCEPTS AND SUBMITS TO THE JURISDICTION OF EACH OF THE AFORESAID
COURTS IN PERSON", GENERALLY AND UNCONDITIONALLY WITH RESPECT TO ANY SUCH
ACTION, SUIT OR PROCEEDING FOR IT AND IN RESPECT OF ITS PROPERTIES, ASSETS AND
REVENUES. THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY DESIGNATES,
APPOINTS AND EMPOWERS ARVIN SCOTT (THE "PROCESS AGENT"), AS ITS DESIGNEE,
APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND

                                       38
<PAGE>   44

ACKNOWLEDGE FOR AND ON BEHALF OF THE BORROWER AND ITS PROPERTIES, ASSETS AND
REVENUES, SERVICES OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
THAT MAY BE SERVED IN ANY SUCH ACTION, SUIT OR PROCEEDING IN THE UNITED STATES
COURT FOR THE NORTHERN DISTRICT OF ILLINOIS OR THE COURTS OF THE STATE OF
ILLINOIS LOCATED IN COOK COUNTY, WHICH SERVICE MAY BE MADE ON THE PROCESS AGENT
IN ACCORDANCE WITH LEGAL PROCEDURES PRESCRIBED FOR SUCH COURTS. THE BORROWER
FURTHER AGREES THAT SERVICE UPON THE PROCESS AGENT MALL CONSTITUTE VALID AND
EFFECTIVE SERVICE UPON THE BORROWER AND THAT THE FAILURE OF THE PROCESS AGENT TO
GIVE ANY NOTICE OF SUCH SERVICE TO THE BORROWER SHALL NOT AFFECT THE VALIDITY OF
SUCH SERVICE OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING BASED THEREON,
AND THAT SERVICE OF ANY AND ALL SUCH PROCESS OR OTHER DOCUMENT ON THE BORROWER
MAY ALSO BE EFFECTED BY REGISTERED MAIL OR REGISTERED AIR MAIL, AS THE CASE MAY
BE, POSTAGE PREPAID, TO THE ADDRESS OF THE BORROWER SET FORTH IN SECTION 8.01
HEREOF, SUCH SERVICE TO BE EFFECTIVE 4 BUSINESS DAYS AFTER THE MAILING THEREOF.
NOTHING HEREIN SHALL, OR MALL BE CONSTRUED SO AS TO, LIMIT THE RIGHT OF THE
LENDER, TO THE EXTENT PERMITTED) BY APPLICABLE LAW, TO BRING ACTIONS, SUITS OR
PROCEEDINGS WITH RESPECT TO THE OBLIGATIONS AND LIABILITIES OF THE BORROWER
UNDER, OR ANY OTHER MATTER ARISING OUT OF OR IN CONNECTION WITH, THIS AGREEMENT
OR THE LOAN DOCUMENTS OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RENDERED
IN ANY SUCH ACTION, SUIT OR PROCEEDING IN THE COURTS OF ANY JURISDICTION IN
WHICH ANY OFFICE OF THE LENDER MAY BE LOCATED OR ANY ASSETS, PROPERTIES OR
REVENUES OF THE BORROWER MAY BE FOUND OR AS THE LENDER SHALL OTHERWISE DEEM
APPROPRIATE, OR THE RIGHT TO AFFECT SERVICE OF PROCESS IN ANY JURISDICTION IN
ANY OTHER MANNER PERMITTED BY LAW. IN ADDITION, THE BORROWER IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS, SUITS OR PROCEEDINGS BROUGHT IN
ANY OF THE COURTS REFERRED TO ABOVE, AND FURTHER IRREVOCABLY AND UNCONDITIONALLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM THAT ANY SUCH ACTION, SUIT OR PROCEEDING
BROUGHT IN ANY OF THE AFORESAID COURTS HAS BEEN BROUGHT IN ANY INCONVENIENT
FORUM.

         SECTION 8.13. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY
EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHT, POWER, OR REMEDY UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER WAN DOCUMENT OR UNDER OR IN CONNECTION WITH ANY
AMENDMENT, INSTRUMENT, DOCUMENT, OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION OR THEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH TIES AGREEMENT OR ANY OTHER LOAN
DOCUMENT, AND AGREE THAT ANY SUCH ACTION MALL BE TRIM BEFORE A COURT AND NOT
BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

         SECTION 8.14. INTEREST LIMITATION. Anything in this Agreement, the
Notes or any Loan Document to the contrary notwithstanding, the Borrower shall
never be required to pay interest at a rate in excess of the highest lawful
rate, and if the effective rate of interest that would otherwise be payable
under this Agreement, the Notes or any Loan Document would exceed the highest
lawful rate, or if any holder of the Notes shall receive monies that are deemed
to constitute interest which would increase the effective rate of interest
payable under this Agreement, the Notes or any Loan Document to a rate in excess
of the highest lawful rate, then (a) the amount of interest that would otherwise
be payable under this Agreement, the Notes and the Loan Documents shall be
reduced to the amount allowed under applicable law, and (b) any interest paid in
excess of the highest lawful rate shall, at the option of the holders of the
Notes, be either refunded to the payor or credited on the principal of the
Notes.

                                       39
<PAGE>   45

         SECTION 8.15. LOAN DOCUMENTS. In the event of any conflict or
inconsistency between the terms and provisions of this Agreement and those of
any other Loan Document, the terms and provisions of this Agreement shall govern
and control to the extent of such conflict or inconsistency.

         The parties hereto have caused this Agreement to be duly executed by
their duly authorized officers, all as of the day and year first above written.

                                           BORROWER:

                                           UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.

                                           By:
                                              ----------------------------------
                                           Its:
                                               ---------------------------------

                                           LENDER:

                                           LASALLE NATIONAL BANK

                                           By:
                                              ----------------------------------
                                           Its:
                                               ---------------------------------

                                       40<PAGE>   1
                                                                   EXHIBIT 10.43

                          DEBENTURE PURCHASE AGREEMENT
                          ----------------------------

         This DEBENTURE PURCHASE AGREEMENT (the "Agreement") entered into the
11th day of July, 1997, by and between UNIVERSAL AUTOMOTIVE INDUSTRIES, INC. a
Delaware corporation (the "Company"), and SIRROM CAPITAL CORPORATION d/b/a
Tandem Capital, a Tennessee corporation (the "Purchaser").

         WITNESSETH:

         WHEREAS, the Company desires to obtain additional capital for use in
connection with its business through the issue and sale of certain obligations,
and Purchaser is willing to purchase such obligations from the Company, on the
terms and conditions set forth herein.

         NOW, THEREFORE, in mutual consideration of the premises and the
respective representations, warranties, covenants and agreements contained
herein, the parties agree as follows:

         1.       SALE AND PURCHASE OF DEBENTURES.

                  1.1 Debentures. The Company has authorized the issue and sale
of Four Million Five Hundred Thousand ($4,500,000.00) aggregate principal amount
of its 12.25% Subordinated Debentures due July 11, 2002 (the "Debentures"), to
be dated the date of issue, to bear interest from such date at the rate of
12.25% per annum, payable quarterly by automatic debit on the first day of each
March, June, September, and December in each year, commencing September 1, 1997,
and at maturity, to mature on July 11 1, 2002, and to bear such other terms as
are set forth in the form attached hereto as Exhibit A-1. Interest on the
Debentures shall be computed on the basis of a 360day year of twelve 30-day
months. The Debentures are subject to prepayment or redemption at the option of
the Company prior to their expressed maturity without penalty and as provided
herein. The term "Debenture" as used herein shall include each Debenture
delivered pursuant to this Agreement. Capitalized terms shall have the meanings
assigned by Section II unless otherwise defined herein.

                  1.2 Initial Warrants. At the closing of the purchase and sale
of the Debentures, the Company shall grant, issue, and deliver to Purchaser its
Stock Purchase Warrant, dated July 11, 1997, in the form attached hereto as
Exhibit A-2 (the "Initial Warrant"), entitling Purchaser to purchase 450,000
Shares of Common Stock at an Exercise Price equal to 80% of the average bid
price of the Company's Common Stock for the 20 trading days preceding July 11,
1998, at any time and from time to time during the five year period beginning on
July 11, 1997.

                  1.3 Additional Warrants. Until the indebtedness evidenced by
the Debenture has been paid in full, the Company shall grant, issue, and deliver
to Purchaser additional Stock Purchase Warrants, in the form of Exhibit A-3 (the
"Additional Warrants"), entitling Purchaser to purchase Shares of Common Stock
at an Exercise Price equal to 80% of the average bid price of the Company's
Common Stock for the 20 trading days preceding the date of issue, at any time
and from time to time during the five year period beginning on the date of issue
of each Additional Warrant, such-Additional Warrants to be issued the 11th day
of the following months and with respect to the following numbers of Shares of
Common Stock.

         Issue Date                                  Number of Shares
         ----------                                  ----------------
         August 1998                                 225,000
         February 1999                               225,000
         August 1999                                 225,000
         August 2000                                 225,000
         August 2001                                 225,000

         Provided that the Additional Warrants issuable in 1999, 2000, and 2001
shall be prorated to the extent the Debentures have been prepaid, if no Event of
Default has occurred and is continuing on the issue date.

                                       1
<PAGE>   2

                  1.4 Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to Purchaser, and
Purchaser agrees to purchase from the Company, Debentures in the aggregate
principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00)
at a price of 100% of the principal amount thereof. Delivery of the Debentures
will be made at the offices of Tandem Capital, Inc., Nashville, Tennessee,
against payment therefor by federal funds wire transfer in immediately available
funds and to the accounts and in the amounts set forth in the Company's wire
instructions in the form of Exhibit B hereto, at 10:00 A.M., Nashville time, on
July 11, or such later date as the Company and Purchaser shall agree (the
"Closing Date"). The Debentures delivered to Purchaser on the Closing Date will
be delivered to Purchaser in the form of a single registered Debenture for the
full amount of such purchase (unless different denominations are specified by
Purchaser), registered in Purchaser's name or in the name of such nominee as
Purchaser may specify and, with appropriate insertions, in the form attached
hereto as Exhibit A-1, all as Purchaser may specify at least 24 hours prior to
the date fixed for delivery,

         1.5 Processing Fee. The Company shall pay to Purchaser on or before the
Closing Date a processing fee in an amount equal to $90,000.

         2.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Purchaser as follows:

         2.1 Corporate Status.

         (a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has the corporate
power to own and operate its properties, to carry on its business as now
conducted and to enter into and to perform its obligations under this Agreement,
the Debentures, the Initial Warrant, the Registration Rights Agreement, and any
other document executed and delivered by the Company in connection herewith or
therewith (collectively, the "Operative Documents"). The Company is qualified to
do business and-is in good standing in each state or other jurisdiction in which
such qualification is necessary under applicable law, except where the failure
to so qualify would not have a Material Adverse Effect on the financial
condition or results of operations of the Company. The states or other
jurisdictions in which the Company is so qualified are set forth on Schedule 2.
hereto.

         (b) Schedule 2.1 Unmarked Box -- sets forth a complete list of each
corporation, partnership, joint venture, limited liability company or other
business organization in which the Company owns, directly or indirectly, any
capital stock or other equity interest (the "Subsidiary" or, collectively, the
"Subsidiaries"), or with respect to which the Company or any Subsidiary, alone
or in combination with others, is in a control position, which list shows the
jurisdiction of incorporation or other organization and the percentage of stock
or other equity interest of each Subsidiary owned by the Company. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of incorporation or other organization as indicated on
Schedule 2. 1 (b), each has all requisite power and authority and holds all
material licenses, permits and other required authorizations from government
authorities necessary to own its properties and assets and to conduct its
business as now being conducted, and each is qualified to do business as a
foreign corporation (or business organization) and is in good standing in every
jurisdiction in which such qualification is necessary under applicable law,
except where the failure to so qualify would not have a Material Adverse Effect
on the financial condition or results of operations of the Company. All of the
outstanding shares of capital stock, or other equity interest, of each
Subsidiary owned, directly or indirectly, by the Company have been validly
issued, are fully paid and nonassessable, and are owned by the Company free and
clear of all liens, charges, security interests, or encumbrances.

         2.2 Capitalization.

                  (a) The authorized capital stock of the Company consists of
(i) 1,000,000 shares of Preferred Stock, S.01 par value, none of which are
issued and outstanding, and (ii) 15,000,000 shares of Common Stock, [???] par
value, 6,729,425 of which are issued and outstanding as of the date hereof. The
Company is in the process of issuing an additional 40,000 shares of Common
Stock, which may be issued prior to the Closing, and upon which issuance a total
of 6,769,425 shares of Common Stock will be issued, and 6,769,425 will be
outstanding. All shares of Common Stock outstanding have been validly issued and
are fully paid and nonassessable. There are no statutory or contractual
preemptive rights, rights of first refusal, antidilution rights, or any similar
rights held by any party

                                       2
<PAGE>   3

with respect to the issuance of the Debentures.

         (b) The Company has not granted, or agreed to grant or issue, any
options, warrants or rights to purchase or acquire from the Company any shares
of capital stock of the Company, there are no securities outstanding or
committed to be issued by the Company or any Subsidiary which are convertible
into or exchangeable for any shares of capital stock or other securities of the
Company, and there are no contracts, commitments, agreements, understandings,
arrangements or restrictions as to which the Company is a party, or by which it
is bound, relating to any shares of capital stock or other securities of the
Company, whether or not outstanding except for (i) the Debentures to be issued
pursuant to this Agreement, (ii) the Initial Warrants and Additional Warrants to
be issued pursuant to this Agreement, and (iii) such options, warrants and other
rights to acquire capital stock of the Company set forth on Schedule 2.2(b).
Except as set forth on Schedule 2.2(b), all such shares have been duly reserved
for issuance, have been duly and validly authorized, and upon issuance in
accordance with the terms of the respective instruments and receipt of payment
therefor, will be validly issued, fully paid, and nonassessable.

         2.3. Authorization. The Company has full legal right, power and
authority to enter into and perform its obligations under this Agreement and the
Operative Documents without the consent or approval of any other person, firm,
governmental agency, or other legal entity, except LaSalle National Bank, whose
approval has been obtained, subject to the simultaneous payoff of all
obligations due and owing to American National Bank & Trust Company of Chicago.
The execution and delivery of this Agreement, the issuance of the Debentures
hereunder, the execution and delivery of each other document in connection
herewith or therewith to which the Company is a party, and the performance by
the Company of its obligations hereunder or thereunder are within the corporate
powers of the Company and have been duly authorized by all necessary corporate
action properly taken, have received all necessary governmental approvals, if
any were required, and do not and will not contravene or conflict with (i) the
Certificate of Incorporation or Bylaws of the Company, (ii) any material
agreement to which the Company or any of its Subsidiaries is a party or by which
any of them or their properties is bound, or constitute a default thereunder, or
result in the creation or imposition of any lien, charge, security interest, or
encumbrance of any nature upon any of the property or assets of the Company or
any of its Subsidiaries pursuant to the terms of any such agreement or
instrument, or (iii) violate any provision of law or any applicable judgment,
ordinance, regulation or order of any court or governmental agency. The officer
executing this Agreement, the Debentures, and any other document executed and
delivered by the Company in connection herewith or therewith, is duly authorized
to act on behalf of the Company.

         2.4 Validity and Binding Effect. Each of the Operative Documents is the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to such limitations on
enforceability as may exist under equitable principles of law or the application
of bankruptcy or insolvency laws.

         2.5 Other Agreements. Except as disclosed on Schedule 2.5, there are no
(i) outstanding loans, liens, pledges, security interests, agreements,
indentures, or instruments defining the rights of security holders, under any
securities or other financings upon which the Company or any Subsidiary is
obligated or by which the Company is bound, or (ii) other contracts required to
be filed by the Company with the Securities and Exchange Commission ("SEC") as
an exhibit pursuant to Item 601(b)(10) of Regulation S-K under the Securities
Act (each instrument identified in Schedule 2.5 individually being an
"Applicable Contract"). Consummation of the transactions hereby contemplated and
the performance of the obligations of the Company under and by virtue of the
Operative Documents, will not result in any breach of, or constitute a default
under, or require the consent of any person under, any Applicable Contract or
for which the Company has not obtained an effective waiver.

         2.6 Litigation. Except as set forth on Schedule 2.6, there is no
litigation, arbitration, claim. proceeding or investigation pending or
threatened in writing which the Company or any Subsidiary is a party or to which
any of its respective properties or assets is the subject which, if determined
adversely to the Company or such Subsidiary, would individually or in the
aggregate have a Material Adverse Effect on the financial position, results of
operations, or business of the Company and its Subsidiaries.

         2.7 Financial Statements. The consolidated financial statements of the
Company and its Subsidiaries for the fiscal years ended December 31, 1996, 1995,
and 1994, and the unaudited consolidated financial

                                       3
<PAGE>   4

statements as of and for the five months ended May 31, 1997, and the related
notes, copies of which the Company previously has delivered to Purchaser, fairly
present the financial position, results of operations, cash flows and changes in
stockholders' equity of the Company and its consolidated Subsidiaries, at the
respective dates of and for the periods to which they apply in such financial
statements, and have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
indicated, subject, in the case of interim financial statements. to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially, from those included in the most recent
audited consolidated financial statements). No financial statements of any other
person(s) are required by GAAP to be included in the consolidated financial
statements of the Company.

         2.8 SEC Reports. The Company's Common Stock is listed for trading on
The Chicago Stock Exchange, and NASDAQ SmallCap Market and has been duly
registered with the SEC under the Securities Exchange Act of 1934. as amended
(the "Exchange Act"). Since January 1, 1994, the Company has timely filed all
reports, registrations, proxy or information statements, and all other
documents, together with any amendments required to be made thereto, required to
be filed with the SEC under the Securities Act and the Exchange Act
(collectively, the "SEC Reports"). The Company previously has furnished to
Purchaser true copies of all the SEC Reports, together with all exhibits thereto
that Purchaser has requested. The financial statements contained in the SEC
Reports fairly presented the financial position of the Company as of the dates
mentioned and the results of operations, changes in stockholders' equity and
changes in financial position or cash flows for the periods then ended, in
conformity with GAAP applied on a consistent basis throughout the periods
involved. As of their respective dates, the SEC Reports complied (or will
comply, as the case may be) in all material respects with all rules and
regulations promulgated by the SEC and did not (or will not, as the case may be)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

         2.9 Absence of Changes. Since May 31, 1997, (i) neither the Company nor
any of its Subsidiaries have incurred any liabilities or obligations, direct or
contingent, or entered into any transactions. not in the ordinary course of
business, that are material to the Company or any of its Subsidiaries, (ii)
neither the Company nor any of its Subsidiaries have purchased any of its
outstanding capital stock or declared, or paid any dividend or other
distribution or payment in respect of its capital stock, (iii) there has not
been any change in the authorized or issued capital stock, long-term debt, or
short-term debt of the Company, and (iv) there has not been any material adverse
change in or affecting the business, operations, properties, prospects, assets,
or condition (financial or otherwise) of the Company or any Subsidiary, and no
event has occurred or circumstance exists that may result in such a material
adverse change.

         2.10 No Defaults. Except as set forth on Schedule 2.10 and except where
a default or event of default does not and would not constitute a Material
Adverse Event, no default or event of default by the Company or any Subsidiary
exists under this Agreement or any of the other Operative Documents, or under
any Applicable Contract, or other material instrument or agreement to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or its respective properties may be bound or, to the knowledge of the Company,
affected, and no event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of default
thereunder.

         2.11 Compliance With Law. The Company and any Subsidiary are in
compliance with all foreign, federal, state or local laws, regulations, decrees
and orders applicable to them (including but not limited to the Foreign Corrupt
Practices Act, occupational and health standards and controls, antitrust,
monopoly, restraint of trade or unfair competition) to the extent that
noncompliance. in the aggregate, cannot reasonably be expected to cause a
Material Adverse Event.

         2.12 Taxes. Except as set forth on Schedule 2.12, the Company and its
Subsidiaries have filed or caused to be filed all federal, state and local
income, excise and franchise tax returns required to be filed (except for
returns that have been appropriately extended), and have paid, or provided for
the payment of, all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges imposed on it by
any governmental authority, agency or instrumentality, prior to any delinquency
with respect thereto (other than taxes, impositions, assessments, fees and
charges currently being contested in good faith by appropriate proceedings, for
which appropriate amounts have been reserved), and the Company does not know of
any proposed assessment

                                       4
<PAGE>   5

for additional taxes or any basis therefor. No tax liens have been filed against
the Company, or its Subsidiaries or any of their properties. The Company's
federal income tax liability has been finally determined by the Internal Revenue
Service and satisfied for all taxable years up to and including the taxable year
ended December 31, 1993, or closed by applicable statutes of limitation.

         2.13 Certain Transactions. Except as set forth on Schedule 2.13(i) and
except as to indebtedness incurred in the ordinary course of business and
approved by the Board of Directors of the Company, neither the Company nor any
Subsidiary is indebted, directly or indirectly, to any of its officers or
directors, or to their respective spouses or children, or to any affiliate, in
excess of an aggregate amount as set forth on Schedule 2, and none of such
officers or directors or any members of their immediate families or affiliates,
are indebted to the Company or any Subsidiary in excess of an aggregate amount
of $25,000, or have any direct or indirect ownership interest in any firm or
corporation with which the Company or any Subsidiary is affiliated or with which
the Company has a business relationship, or any firm or corporation which
competes with the Company or any Subsidiary. Except as set forth in Schedule
2.13(ii), no officer or director of the Company or any Subsidiary or any member
of their immediate families is, directly or indirectly, interested in any
material contract with the Company or any Subsidiary. Except as set forth on
Schedule 2.13(iii), neither the Company nor any Subsidiary is a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.

         2.14 Title to Property. The Company and each Subsidiary has good and
marketable title to all of real and personal property owned by it, free and
clear of all liens, security interests, pledges, encumbrances, equities, claims
and restrictions of every kind and nature whatsoever, except as disclosed on
Schedule 2.14. Any real property and buildings held under lease by the Company
or any Subsidiary are held under valid existing and enforceable leases, and to
the best of the Company's knowledge no default has occurred or is continuing
thereunder which might result in any material adverse change in the business,
prospects, financial conditions or results of operations of the Company. The
Company enjoys peaceful and undisturbed possession under all such leases, except
as disclosed on Schedule 2.14 or which are not material and do not interfere
with the use to be made of such buildings or property by the Company.

         2.15 Intellectual Property. Except as set forth in Schedule 2.15, the
Company is the lawful owner or has a valid right to use the proprietary
information used in its business free and clear of any claim, right, trademark,
patent or copyright protection of any third party. As used herein, "proprietary
information" includes without limitation (i) any computer software and related
documentation, inventions, technical and nontechnical data related thereto, and
(ii) other documentation, inventions and data related to patterns, plans,
methods, techniques, drawings, finances, customer lists, suppliers, products,
special pricing and cost information, designs, processes, procedures, formulas,
research data owned or used by the Company or any Subsidiary or marketing
studies conducted by the Company, all of which the Company considers to be
commercially important and competitively sensitive and which generally has not
been disclosed to third parties other than customers in the ordinary course of
business. Except as set forth in Schedule 2.15, the Company has good and
marketable title to or has a valid right to use all patents, trademarks, trade
names, service marks, copyrights or other intangible property rights, and
registrations or applications for registration thereof, owned by the Company or
any Subsidiary or used or required by the Company or any Subsidiary in the
operation of its business as presently being conducted. The Company has no
knowledge of any infringements or conflict with asserted rights of others with
respect to copyrights, patents, trademarks, service marks, trade names, trade
secrets or other intangible property rights or know-how which could cause a
Material Adverse Event. To the Company's knowledge, no products or processes of
the Company infringe or conflict with any nights of patent or copyright, or any
discovery, invention product or process, that is the subject of a patent or
copyright application or registration known to the Company. The Company has
adopted and follows such procedures as the Company deems necessary or
appropriate to provide reasonable protection of the Company's trade secrets and
proprietary rights in intellectual property of all kinds. To the knowledge of
the Company, no person employed by or affiliated with the Company has employed
or proposes to employ any trade secret or any information or documentation
proprietary to any former employer, and to the knowledge of the Company, no
person employed by or affiliated with-the Company has violated any confidential
relationship that such person may have had with any third person, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of the Company.

         2.16 Debt. Schedule 2.16 sets forth (i) a complete and correct list of
all loans, credit agreements, indentures, purchase agreements, promissory notes
and other evidences of indebtedness, Guaranties,

                                       5
<PAGE>   6

capital leases and other instruments, agreements and arrangements presently in
effect providing for or relating to extensions of credit (including agreements
and arrangements for the issuance of letters of credit or for acceptance
financing) in respect of which the Company, any Subsidiary, or any of their
properties, is in any manner directly or contingently obligated; (ii) the
maximum principal or face amounts of the credits in question that are
outstanding and that can be outstanding are correctly stated; and (iii) all
liens, pledges or security interests of any nature given or agreed to be given
as security therefor or in connection therewith are correctly described or
indicated in such Schedule.

         2.17 Significant Contracts. Schedule 2.17 sets forth a complete and
correct list of all contracts, agreements and other documents pursuant to which
the Company or any Subsidiary either (i) receives revenues or (ii) makes payment
to any third Person(s), in excess of $ 100,000 per fiscal year. Each such
contract, agreement and other document is in full force and effect as of the
date hereof and the Company knows of no reason why such contracts, agreements
and other documents would not remain in full force and effect pursuant to the
terms thereof.

         2.18 Environmental Matters. The Company has duly complied in all
material respects with, and its business, operations, assets, equipment,
property, leaseholds or other facilities are in compliance in all material
respects with, the provisions of all federal, state and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder, except to the extent that the violation thereof would
not reasonably be expected to cause a Material Adverse Event. The Company has
been issued and will maintain all required material federal, state and local
permits, licenses, certificates and approvals relating to (i) air emissions;
(ii) discharges to surface water or groundwater; (iii) noise emissions; (iv)
solid or liquid waste disposal; (v) the use, generation, storage, transportation
or disposal of toxic or hazardous substances or wastes (which shall include any
and all such materials listed in any federal, state or local [???] code or
ordinance and all rules and regulations promulgated thereunder as hazardous or
potentially hazardous); or (vi) other environmental, health or safety matters,
except to the extent that the violation thereof would not reasonably be expected
to cause a Material Adverse Event. Except as Noted on Schedule 2.18, the Company
has not received notice of, does not know of, and does not suspect facts which
might constitute a material violation of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder with respect to its businesses, operations,
assets, equipment, property, leaseholds, or other facilities. Except in
accordance with a valid governmental permit, license, certificate or approval,
there has been no emission, spill, release or discharge into or upon (i) the
air; (ii) soils, or any improvements located thereon; (iii) surface water or
groundwater; or (iv) the sewer, septic system or waste treatment, storage or
disposal system servicing the premises, of any toxic or hazardous substances or
wastes at or from the premises, except to the extent that the violation thereof
would not reasonably be expected to cause a Material Adverse Event. There has
been no complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity with respect to (i) air
emissions; (ii) spills, releases or discharges to soils or improvements located
thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises; (iii) noise
emissions; (iv) solid or liquid waste disposal; (v) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or waste;
or (vi) other environmental, health or safety matters affecting the Company or
its business, operations, assets, equipment, property, leaseholds or other
facilities. The Company does not have any material indebtedness, obligation or
liability (absolute or contingent, matured or not matured), with respect to the
storage, treatment, cleanup or disposal of any solid wastes, hazardous wastes or
other toxic or hazardous substances (including without limitation any such
indebtedness, obligation, or liability with respect to any current regulation,
law or statute regarding such storage, treatment, cleanup or disposal).

         2.19 Accounting Matters. The books of account, minute books, stock
record books and other records of the Company and its Subsidiaries are complete
and correct, have been maintained in accordance with sound business practices,
and accurately and fairly reflect the transactions and dispositions of the
assets of the Company. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (1) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain accountability for the assets of the Company and each of its
Subsidiaries; (iii) access to the assets of the Company and each of its
Subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets of the
Company and each of its Subsidiaries are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any

                                       6
<PAGE>   7

differences.

         2.20 Distributions to Company. No Subsidiary of the Company is
currently prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distributions on such Subsidiary's capital stock,
from repaying to the Company any loans or advances to such Subsidiary, or from
transferring any of such Subsidiary's property or assets to the Company or any
other Subsidiary of the Company.

         2.21 Prior Sales. All offers and sales of the Company's capital stock
prior to the date hereof were at all relevant times (1) exempt from the
registration requirements of the Securities Act or were duly registered under
the Securities Act, and (ii) were duly registered or were the subject of an
available exemption from the registration requirements of all applicable state
securities or Blue Sky laws.

         2.22 Regulatory Compliance. Except as set forth on Schedule 2.22, the
conduct of the business and the ownership of the assets of the Company do not
require any license, permit approved, waiver or other authorization of any
federal, state or local governmental or regulatory body, and except as set forth
on Schedule 2.12 such business is not subject to the regulation of any federal,
state or local government or regulatory body by reason of the nature of the
business being conducted. All licenses, permits and authorizations set forth on
Schedule 2.22 are in full force and effect.

         2.23 Margin Regulations. The Company is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock. No
proceeds received pursuant to this Agreement will be used to purchase or carry
any equity security of a class which is registered pursuant to Section 12 of the
Exchange Act.

         2.24 1940 Act Compliance. The Company is an "eligible portfolio
company" as such term is defined in Section 2(a)(46) of the Investment Company
Act of 1940, as amended (the "Investment Company Act"), and the issuance and
sale by the Company of the Debentures does not constitute a "public offering" as
such term is used in Section 55(a)(1) thereof.

         2.25 Limited Offering. Subject in part to the truth and accuracy of
Purchaser's representations set forth in this Agreement, the offer, sale and
issuance of the Debentures and the Warrant are exempt from the registration
requirements of the Securities Act, and neither the Company nor any authorized
agent acting on its behalf has taken or will take any action hereafter that
would cause the loss of such exemption.

         2.26 Registration Obligations. Except as described in Schedule 2.26,
the Company is not under any obligation to register under the Securities Act or
the Trust Indenture Act of 1939, as amended, any of its presently outstanding
securities or any of its securities that are proposed to be subsequently issued.

         2.27 Insurance. The Company has maintained, and has caused each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers with respect to their respective properties and business in such forms
and amounts and against such risks, casualties and contingencies as are
customary for corporations of comparable size and condition (financial and
otherwise) engaged in the same or a similar business and owning and operating
similar properties.

         2.28 Governmental Consents. No consent, approval, qualification, order
or authorization of, or filing with, any local, state, or federal governmental
authority is required on the part of the Company in connection with the
Company's valid execution, delivery, or performance of this Agreement or the
offer, sale or issuance of the Debenture by the Company.

         2.29 Manufacturing Rights. Except as described on Schedule 2.29, the
Company has not granted rights to manufacture, produce, assemble, license,
market, or sell its products to any other person and is not bound by any
agreement that affects the Company's exclusive right to develop, manufacture,
assemble, distribute, market, or sell its products.

         2.30 Employees. Schedule 2.30 sets forth the number of
full-time employees and full-time equivalent employees of the Company and each
Subsidiary as of the most recent payroll date, which date is set forth therein.
To the best of the Company's knowledge, there is no strike, labor dispute or
union organization activities pending or threatened between it and its
employees. None of the Company's employees belongs to any union or

                                       7
<PAGE>   8

collective bargaining unit, except the employees of the Company's Hungarian
Subsidiary. The Company has complied in all material respects with all
applicable state and federal equal opportunity and other laws related to
employment. To the best of the Company's knowledge, no employee of the Company
is or will be in violation of any judgment, decree, or order, or any term of any
employment contract, patent disclosure agreement, or other contract or agreement
relating to the relationship of any such employee with the Company, or any other
party because of the nature of the business conducted or presently proposed to
be conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business the Company is not a party to or bound by
any employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement, except its employment contract with Ralph Black. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing. Subject
to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.

         2.31 ERISA. The Company is in compliance in all material respects with
all applicable provisions of Title IV of the Employee Retirement Income Security
Act of 1974, Pub. L. No. 93-406, September 2, 1974, 88 Stat. 829, 29 U.S.C.A. SS
1001 et seq. (1975), as amended from time to time ("ERISA"). Except as disclosed
in Schedule 2.31, neither a reportable event nor a prohibited transaction (as
defined in ERISA) has occurred and is continuing with respect to any t1pension
plan" (as such term is defined in ERISA, a "Plan"); no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the Pension Benefit
Guaranty Corporation (together with any entity succeeding to or all of its
functions, the "PBGC") to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Company nor any commonly controlled entity (as defined in ERISA) has
completely or partially withdrawn from a multiemployer plan (as defined in
ERISA). The Company and each commonly controlled entity has met its minimum
funding requirements under ERISA with respect to all of its Plans and the
present fair market value of all Plan property exceeds the present value of all
vested benefits under each Plan, as determined on the most recent valuation date
of the Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Company or any
commonly controlled entity to the PBGC or the Plan under Title IV or ERISA; AND
NEITHER THE COMPANY NOR any commonly controlled entity has incurred any
liability to the PBGC under ERISA.

         2.32 Fees/Commissions. The Company has not agreed to pay any finder's
fee, commission, origination fee or other fee or charge to any person or entity
with respect to or as a result of the consummation of the transactions
contemplated hereunder, except for the processing fee due to Purchaser under
Section 1,5.

         2.33 Disclosure. No representation or warranty made as of the date
hereof by the Company contained in this Agreement or any Schedule attached
hereto or any statement in any document, certificate or other instrument
furnished or to be furnished to the Purchaser pursuant hereto, taken as a whole,
contains or will (as of the time so furnished) contain any untrue statement of a
material fact, or omits or will (as of the time so furnished) omit to state any
material fact which is necessary in order to make the statements contained
herein or therein not misleading.

         2.34 Survival. The representations and warranties of the Company
contained in this Agreement shall survive until this Agreement terminates in
accordance with Section 12.5 hereof

         3.       REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser
hereby represents to the Company as follows:

         3.1 Corporate Status. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Tennessee
and has the corporate power to own and operate its properties, to carry on its
business as now conducted and to enter into and to perform its obligations under
this Agreement and any other document executed or delivered by Purchaser in
connection herewith.

         3.2 Authorization. Purchaser has full legal right, power and authority
to enter into and perform its obligations under this Agreement and any other
document executed and delivered by Purchaser in connection herewith, without the
consent or approval of any other person, firm, governmental agency or other
legal entity. The execution and delivery of this Agreement and any other
document executed and delivered by Purchaser

                                       8
<PAGE>   9

in connection herewith, and the performance by Purchaser of its obligations
hereunder and/or thereunder are within the corporate powers of Purchaser, have
received all necessary governmental approvals, if any were required, and do not
and will not contravene or conflict with (i) the Charter or Bylaws of Purchaser,
(ii) any material agreement to which Purchaser is a party or by which it or any
of its properties is bound, or constitute a default thereunder, or result in the
creation or imposition of any lien, charge, security interest or encumbrance of
any nature upon any of the property or assets of Purchaser pursuant to the terms
of any such agreement or instrument, or (iii) violate any provision of law or
any applicable judgment, ordinance, regulation or order of any court or
governmental agency. The officer(s) executing this Agreement and any other
document executed and delivered by Purchaser in connection herewith, is duly
authorized to act on behalf of Purchaser.

         3.3 Validity and Binding Effect. This Agreement and any other document
executed and delivered by Purchaser in connection herewith are the legal, valid
and binding obligations of the Purchaser, enforceable against it in accordance
with their respective terms.

         3.4 Accredited Investor, Investment Intent. Purchaser is a registered
company under the Investment Company Act and as such is an "accredited investor"
under Rule 501(u) under the Securities Act. Purchaser is acquiring the
Debentures for its own account, for investment, and not with a view to the
distribution or resale thereof in whole or in part, in violation of the
Securities Act or any applicable state securities law, and Purchaser has no
present intention of selling, negotiating or otherwise disposing of the
Debentures; it being understood that Purchaser intends to transfer and assign
the Debentures and all Purchaser's rights and obligations under this Agreement
to one or more wholly-owned Subsidiaries of Purchaser.

         3.5 Survival. The representations and warranties of the Purchaser
contained in this Agreement shall survive until this Agreement terminates in
accordance with Section 12.5 hereof

         4.       CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. The
obligation of Purchaser to purchase and pay for the Debentures on the Closing
Date shall be subject to the fulfillment on or before the Closing Date of each
of the following conditions:

         4.1 Representations and Warranties. The representations and warranties
of the Company contained in this Agreement and in any Schedule hereto or any
document or instrument delivered to Purchaser or its representatives hereunder,
shall have been true and correct when made and shall be true and correct as of
the Closing Date as if made on such date, except to the extent such
representations and warranties expressly relate to a specific date. The Company
shall have duly performed all of the covenants and agreements to be performed by
it hereunder on or prior to the Closing Date.

         4.2 Officer's Certificate. The Company shall have delivered to
Purchaser a certificate, dated the Closing Date, signed by the President of the
Company, substantially in the form attached hereto as Exhibit C.

         4.3 Secretary's Certificate. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary to
the consummation thereof, shall be satisfactory in form and substance to
Purchaser and Purchaser's counsel, and the Company shall have delivered to
Purchaser a certificate, dated the Closing Date, signed by the Secretary of the
Company, substantially in the form attached hereto as Exhibit D.

         4.4 Legal Opinion. Purchaser shall have received the opinion of Shefsky
& Froelich Ltd., counsel for the Company, dated the Closing Date, addressed to
Purchaser, in form and substance satisfactory to Purchaser's counsel, and
covering the matters set forth in Exhibit E hereto.

         4.5 Authorization Agreement. The Company shall have delivered to
Purchaser an Authorization Agreement for Pre-Authorized Payments (Debit), dated
the Closing Date, executed by a duly authorized officer(s) of the Company, in
the form attached hereto as Exhibit F.

         4.6 Existence and Authority. The Company shall have delivered to
Purchaser the following certificates of public officials, in each case as of a
date within ten days of the Closing Date:

                                       9
<PAGE>   10

                  (a) the certificate or articles of incorporation of the
Company and each of the Subsidiaries (except the Hungarian Subsidiary),
certified by the Secretary of State or other appropriate official in the
jurisdiction by which each such entity is incorporated;

                  (b) a certificate as to the legal existence and good standing
of the Company and each of the Subsidiaries issued by the Secretary of State or
other appropriate official of the jurisdiction by which each such entity is
incorporated; and

                  (c) a certificate as to the qualification to do business as a
foreign corporation and good standing of the Company and each of the
Subsidiaries, as appropriate, issued by the Secretary of State or other
appropriate official of each jurisdiction listed in Schedule 2.1 (a) and
Schedule 2.1

         4.7 Delivery of Operative Documents. The Company shall have delivered
to Purchaser the following documents, executed by the Company and dated the
Closing Date:

                  (a)      the Debenture;

                  (b)      the Initial Warrant;

                  (c)      the Registration Rights Agreement between the Company
 and the Purchaser; and

                  (d)      the Subordination Agreement between the Purchaser,
 LaSalle National Bank and the Company.

         4.8 Closing of Required Transaction. The closing of the Senior Credit
Facility shall have occurred simultaneously with the closing hereunder.

         4.9 Required Consents. Any consents or approvals required to be
obtained from any third party, including any holder of indebtedness or any
outstanding security of the Company, and any amendments of agreements which
shall be necessary to permit the consummation of the transactions contemplated
hereby on the Closing Date, including the consents set forth on Schedule 2.5,
shall have been obtained and all such consents or amendments shall be
satisfactory in form and substance to Purchaser and Purchaser's counsel.

         4.10 Waiver of Conditions. If on the Closing Date the Company fails to
tender to Purchaser the Debentures to be issued to Purchaser, or if the
conditions specified in this Article IV have not been fulfilled, Purchaser may
thereupon elect to be relieved of all further obligations under this Agreement
and (i) shall retain the processing fee provided by Section 1.5, and (ii) be
entitled to reimbursement for its expenses as provided by Section 12. 1. Without
limiting the foregoing, if the conditions specified in this Article IV have not
been fulfilled, Purchaser may waive compliance by the Company with any such
condition to such extent as Purchaser, in Purchaser's sole discretion, may
determine. Nothing in this Section 4.10 shall operate to relieve the Company of
any of its obligations hereunder or to waive any of Purchaser's rights against
the Company, provided, however Purchaser's sole remedy shall be to retain the
processing fee and its expense reimbursement as liquidated damages if for any
reason whatsoever the transactions contemplated hereby are not closed within 30
days after the scheduled Closing Date.

         5.       COVENANTS OF COMPANY. From and after the Closing Date and
continuing so long as any amount remains unpaid on any of the Debentures,

         5.1 Use of Proceeds. The Company shall use the proceeds of the
Debentures only for the purposes set forth on Schedule 5.1 attached hereto. Not
later than 90 days after the sale of the Debentures, the Company shall furnish
Purchaser a certificate, executed by the President of the Company, itemizing the
use of proceeds from the Debentures.

         5.2 Payment of Debentures. The Company shall pay the indebtedness
evidenced by the Debentures according to the terms thereof and shall timely pay
or perform all of the other obligations of the Company under this Agreement.

                                       10
<PAGE>   11

         5.3 Optional Redemptions of Debentures, Procedures.

                  (a) The Debentures may be redeemed, repaid or repurchased by
the Company or any Subsidiary or Affiliate, at the option of the Company, at any
time. The Debentures shall be subject to redemption, at the Company's option, in
whole at any time or in part from time to time, provided that in case of each
redemption at the Company's option hereunder, the Company will give written
notice thereof to each holder of a Debenture to be redeemed not less than 10 nor
more than 75 days prior to the date fixed for such redemption (the "Redemption
Date"), in each case specifying the Redemption Date, the aggregate principal
amount of the Debentures to be redeemed on such date and the principal amount of
Debentures held by such holder to be redeemed on such date.

                  (b) Neither the Company nor any Subsidiary or Affiliate,
directly or indirectly, may repurchase or make any offer to repurchase any
Debentures unless the offer has been made to repurchase Debentures, pro rata,
from all holders of the Debentures at the same time and upon the same terms and
in accordance with the provisions of Section 5.3(a). If the Company repurchases
or otherwise acquires any Debentures, such Debentures shall immediately
thereafter be canceled, and no Debentures shall be issued in substitution
therefor. Without limiting the foregoing, upon the purchase or other acquisition
of any Debentures by the Company or any Subsidiary or Affiliate, such Debentures
shall no longer be outstanding for purposes of any Section of this Agreement
relating to the taking by the holders of the Debentures of any actions with
respect hereto, including, without limitation, Sections 9.3 and 10.1.

         5.4 Corporate Existence, Etc. The Company will preserve and
keep in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its corporate existence and-good standing in the state of
incorporation thereof, its qualification and good standing as a foreign
corporation in each jurisdiction where such qualification is required by
applicable law except where the failure to so qualify would not have a Material
Adverse Effect on the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole, and all licenses and permits
necessary to the proper conduct of its business.

         5.5 Maintenance, Etc. The Company will maintain, preserve and keep, and
will cause each Subsidiary to maintain, preserve and keep, its properties and
assets which are necessary in the conduct of its business (whether owned in fee
or pursuant to a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.

         5.6 Nature of Business. Neither the Company nor any Subsidiary will
engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Subsidiaries would be substantially changed from the general nature of the
business engaged in by the Company and its Subsidiaries on the date of this
Agreement.

         5.7 Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers with respect to their respective properties and business in such forms
and amounts and against such risks, casualties and contingencies as are
customary for corporations of comparable size and condition (financial and
otherwise) engaged in the same or a similar business and owning and operating
similar properties.

         5.8 Taxes, Claims for Labor and Materials. The Company will promptly
pay and discharge, and will cause each Subsidiary promptly to pay and discharge,
(i) all lawful taxes, assessments and governmental charges or levies imposed
upon the property or business of the Company or such Subsidiary, respectively,
(ii) all trade accounts payable in accordance with usual and customary business
terms, and (iii) all claims for work, labor or materials, which if unpaid might
become a lien or charge upon any property of the Company or such Subsidiary;
provided the Company or such Subsidiary shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (i) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Company or such Subsidiary or any material interference with the use
thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books, reserves deemed by it to be adequate
with respect thereto, subject to the terms of Section 5.8 hereof.

                                       11
<PAGE>   12

         5.9 Compliance with Laws. Agreements, Etc. Except where failure to do
so does not and would not constitute a Material Adverse Event, the Company shall
maintain its business operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances, and such laws, regulations and ordinances of foreign
jurisdictions, governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises, indentures and
mortgages to which the Company is a party or by which the Company or any of its
properties is bound. Without limiting the foregoing, the Company shall pay all
of its indebtedness promptly and substantially in accordance with the terms
thereof, subject to the terms of Section 5.8.

         5.10 ERISA Matters. If the Company has in effect, or hereafter
institutes, a pension plan that is subject to the requirements of Title IV of
ERISA (a "Plan"), then the following covenants shall be applicable during such
period as any such Plan shall be in effect: (i) throughout the existence of the
Plan, the Company's contributions under the Plan will meet the minimum funding
standards required by ERISA and the Company will not institute a distress
termination of the Plan; and (ii) the Company will send to Purchaser a copy of
any notice of a reportable event (as defined in ERISA) required by ERISA to be
filed with the Labor Department or the PBGC, at the time that such notice is so
filed.

         5.11 Books and Records: Rights of Inspection. The Company will keep,
and will cause each Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of the Company or such Subsidiary, in
accordance with GAAP consistently maintained. The Company shall permit a
representative of Purchaser to visit any of its properties and inspect its
corporate books and financial records, and will discuss its accounts, affairs
and finances with a representative of Purchaser, during reasonable business
hours, at all such times as Purchaser may reasonably request.

         5.12 Reports. The Company will furnish to Purchaser the following:

                  (a) Monthly Statements. Within 20 days after the end of each
month, beginning the month of June, 1997, monthly internal financial reports
which at a minimum shall consist of a balance sheet of the Company as of the
close of such month and related statements of income and cash flows for the
one-month period then ended, as well as any additional financial reports for
such period routinely prepared with respect to the Company and the Subsidiaries;

                  (b) Quarterly Statements. As soon as available and in any
event within 20 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, copies of.

                           (i) consolidated and consolidating balance sheets of
         the Company and Subsidiaries as of the close of the three-month period
         then ended, setting forth in comparative form the consolidated figures
         at the end of the preceding fiscal year,

                           (ii) consolidated and consolidating statements of
         income and retained earnings of the Company and Subsidiaries for the
         three-month period then ended, setting forth in comparative form the
         consolidated figures for the corresponding period of the preceding
         fiscal year, and

                           (iii) consolidated and consolidating statements of
         cash flows of the Company and Subsidiaries for the portion of the
         fiscal year ending with such three-month period, setting forth in
         comparative form the consolidated figures for the corresponding period
         of the preceding fiscal year,

all in reasonable detail and accompanied by a certificate of an authorized
financial officer of the Company that such financial statements fairly present
the financial condition and results of operations and cash flows of the Company
at and for the periods presented, subject to normal year end adjustment;

                  (c) Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company, copies of.

                           (i) consolidated and consolidating balance sheets of
the Company and Subsidiaries

                                       12
<PAGE>   13

as of the close of such fiscal year, and

                           (ii) consolidated and consolidating statements of
income and retained earnings and cash flows of the Company and Subsidiaries for
such fiscal year,

in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of a firm of independent public accountants of
recognized national standing;

                  (d) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the books of
the Company or any Subsidiary;

                  (e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each periodic or
current report, and any registration statement or prospectus filed by the
Company to any Subsidiary with any securities exchange or the SEC or any
successor agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any governmental
agency, federal or state, having jurisdiction over the Company or any of its
Subsidiaries. The Company specifically covenants to timely file each such item
required to be filed with the SEC and each state requiring securities laws
filings; and

                  (f) Requested Information. With reasonable promptness, such
financial data and other information relating to the business of the Company as
Purchaser may from time to time reasonably request.

         5.13 Limitations on Debt and Obligations. Except as to (i) Indebtedness
existing on the date hereof and reflected on (a) the Company's unaudited balance
sheet as of May 31, 1997, and (b) Schedule 2.16 (which includes the Senior
Credit Facility), as the same Indebtedness may be extended or renewed (but not
increased); (ii) the Indebtedness incurred pursuant to the Debentures; (iii)
accounts payable and other trade payables incurred in the ordinary course of
business; (iv) purchase money indebtedness incurred by the Company in the
purchase of equipment and other property used by the Company in the ordinary
course of business, such purchase money indebtedness not to exceed an aggregate
amount of principal and accrued interest thereon of $1,000,000 at any time
outstanding; (v) obligations of the Company pursuant to capitalized leases; (vi)
Indebtedness that refinances secured Indebtedness under clause (i) above,
provided that the collateral for such new Indebtedness is the collateral for the
refinanced secured Indebtedness and the aggregate principal amount of such
Indebtedness does not exceed the principal amount outstanding under the
refinanced Indebtedness; (vii) Indebtedness incurred in connection with the
acquisition of a business (including the assets of a business), provided such
Indebtedness is secured solely by the assets of the business so acquired;
neither the Company nor any Subsidiary shall incur additional indebtedness in
excess of an aggregate amount of principal and interest thereon of $50,000 at
any time outstanding. Notwithstanding the foregoing, the aggregate principal
amount of any Indebtedness secured by the accounts receivable and/or inventory
of the Company and its Subsidiaries (whether such Indebtedness is permitted
under clause (i) or clause (vi)), may be increased based upon the amount of the
accounts receivable and/or inventory eligible as collateral, so long as the
ratio of the outstanding principal amount of such Indebtedness to "eligible
receivables" and/or "inventory" remains the same (howsoever such terms are
defined but provided such definitions remain consistent).

         5.14 Guaranties. Without the prior written consent of Purchaser, the
Company will not, and will not pen-nit any Subsidiary to, become or be liable in
respect of any Guaranty except Guaranties by Company which are limited in
maximum financial exposure to the amounts set forth in, and are incurred in
compliance with, the provisions of Section 5.13 of this Agreement.

         5.15 Limitation on Liens. Without the prior written consent of
Purchaser, the Company will not, and will not permit any Subsidiary to, create
or incur, or suffer to be incurred or to exist, any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (collectively, "Liens") on its
or their property or assets, whether now owned or hereafter acquired, or upon
any income or profits therefrom, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to the payment of
its or their general creditors, or acquire or agree to acquire, or permit any
Subsidiary to acquire, any property or assets upon conditional sales agreement
or other title retention devices, except those Liens which exist as of the date
hereof as set forth on Schedule 2.14, and except:

                                       13
<PAGE>   14

                  (a) purchase money liens on and security interests in
equipment hereafter acquired securing Indebtedness permitted by Section 5.13(iv)
of this Agreement, provided that such liens and security interests attach only
to the equipment so acquired and do not encumber any other property of the
Company or any Subsidiary;

                  (b) liens for taxes (excluding federal and state income taxes)
not yet payable or being contested in good faith by appropriate proceedings and
provided on the books of the Company or a Subsidiary; for which adequate
reserves have been

                  (c) mechanics', materialmen's, warehousemen's, carriers or
other like liens arising in the ordinary course of business of the Company or
any Subsidiary, if any, arising with respect to obligations which are not
overdue for a period longer than 30 days or which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided on the books of the Company or a Subsidiary;

                  (d) deposits or pledges to secure the performance of bids,
tenders, contracts, leases, public or statutory obligations, surety or appeal
bonds or other deposits or pledges for purposes of a like general nature or
given in the ordinary course of business by the Company or any Subsidiary; and

                  (e) other encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property or minor irregularities in
the title thereto, which do not arise in connection with the borrowing of, or
any obligation for the payment of, money and which, in the aggregate, do not
materially detract from the value of the premises or the business, properties or
assets of the Company or any Subsidiary; and

                  (f) the liens and security interests created or permitted by
the Senior Credit

         5.16 Restricted Payments. The Company will not, without the prior
written consent of Purchaser and except as hereinafter provided:

                  (a) declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class except dividends or other
distributions payable solely in shares of Common Stock of Company; or

                  (b) directly or Indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its capital
stock (other than in exchange for or out of the net proceeds to the Company from
the substantially concurrent issue or sale of other shares of capital stock of
the Company or warrants, rights or options to purchase or acquire any shares of
its capital stock), provided that the Company may redeem or repurchase its
capital stock (i) In settlement of the claims listed on .Schedule 5.16, with the
consent of Purchaser, which consent shall not be unreasonably withheld, and (ii)
if the purchase price to be paid by the Company is no greater than 75% of the
fair market value of such stock at the time of purchase; or

                  (c) make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock, provided,
that distributions from a Subsidiary to the Company, or from a Subsidiary to
another Subsidiary, shall be permitted.

         5.17 Investments. The Company will not, and will not permit any
Subsidiary to, make any Investments outside the ordinary course of business for
the Company or any Subsidiary, without the prior written consent of Purchaser,
except:

                  (a) Investments in direct obligations of the United States of
America, or any agency or instrumentality of the United States of America, the
payment or guaranty of which constitutes a full faith and credit obligation of
the United States of America, in either case maturing in twelve months or less
from the date of acquisition thereof,

                  (b) Investments in certificates of deposit maturing within one
year from the date of origin, issued by a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000 and whose long-term
certificates of deposit are, at

                                       14
<PAGE>   15

the time of acquisition thereof by Company or a Subsidiary, rated AA or better
by Standard & Poor's Corporation or AA or better by Moody's Investors Service,
Inc.;

                  (c) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the Company
or any Subsidiary, is accorded the highest rating by Standard & Poor's
Corporation, Moody's Investors Service, Inc. or another nationally recognized
credit rating agency of similar standing;

                  (d) loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of the
Company or any Subsidiary; and

                  (e) receivables arising from the sale of goods and services in
the ordinary course of business of the Company and its Subsidiaries.

                  (f) acquisitions, mergers and consolidations permissible under
 Section 5.18(a)(ii).

         5.18 Mergers. Consolidations and Sales of Assets.

                  (a) Without the prior written consent of Purchaser, the
Company will not, and will not permit any Subsidiary to (i) consolidate with or
be a party to a merger or share exchange with any other corporation, or (ii)
sell, lease or otherwise dispose of all or any substantial part (as defined in
paragraph (d) of this Section 5.18) of the assets of Company and its
Subsidiaries; provided, however, that:

                           (i) any Subsidiary may merge or consolidate with or
         into the Company or any Wholly-owned Subsidiary so long as in any
         merger or consolidation involving the Company, the Company shall be the
         surviving or continuing corporation; and

                           (ii) the Company may consolidate or merge with any
         other corporation, or acquire all or a substantial portion of the
         assets of any other entity, provided that such corporation or entity is
         engaged primarily in the Company's general line of business as
         conducted on the date hereof, and further provided that (A) Company
         shall be the surviving or continuing corporation, (B) at the time of
         such consolidation or merger and after giving effect thereto, no
         Default or Event of Default shall have occurred and be continuing, (C)
         such consolidation or merger shall be deemed in the good faith estimate
         of the Board of Directors to be a consolidation or merger that will be
         accretive to earnings per share not later than the third full quarter
         following the consolidation or merger, and (D) such consolidation or
         merger shall be unanimously approved by the Company's Board of
         Directors; and

                           (iii) any Subsidiary may sell, lease or otherwise
         dispose of all or any substantial part of its assets to the Company or
         any other Wholly-owned Subsidiary.

                  (b) Without the prior written consent of Purchaser, the
Company will not permit any Subsidiary to issue or sell any shares of stock of
any class (including as "stock" for the purposes of this Section 5.18, any
warrants, rights or options to purchase or otherwise acquire stock or other
Securities exchangeable for or convertible into stock) of such Subsidiary to any
Person other than the Company or a Wholly-owned Subsidiary, except for the
purpose of qualifying directors, or except in satisfaction of the validly
preexisting preemptive rights of minority shareholders in connection with the
simultaneous issuance of stock to the Company and/or a Subsidiary whereby the
Company and or such Subsidiary maintain their same proportionate interest in
such Subsidiary.

                  (c) Without the prior written consent of Purchaser, the
Company will not sell, transfer or otherwise dispose of any shares of stock in
any Subsidiary (except the Hungarian Subsidiary and except to qualify directors)
or any indebtedness of any Subsidiary, and will not permit any Subsidiary to
sell, transfer or otherwise dispose of (except to the Company or a Whollyowned
Subsidiary) any shares of stock or any indebtedness of any other Subsidiary,
unless all of the following conditions are met:

                           (i) simultaneously with such sale, transfer or
         disposition, all

                                       15
<PAGE>   16
         indebtedness of such Subsidiary at the time owned by the Company and by
         every other Subsidiary shall be sold, transferred or disposed of as an
         entirety;

                           (ii) the Board of Directors of the Company shall have
         determined, as evidenced by a resolution thereof, that the retention of
         such stock and indebtedness is no longer in the best interests of the
         Company;

                           (iii) such stock and Indebtedness is sold,
         transferred or otherwise disposed of to a Person, for a cash
         consideration and on terms reasonably deemed by the Board of Directors
         to be adequate and satisfactory;

                           (iv) the Subsidiary being disposed of shall not have
         any continuing investment in the Company or any other Subsidiary not
         being simultaneously disposed of, and

                           (v) such sale or other disposition does not Involve a
         substantial part (as hereinafter defined) of the assets of the Company
         and its Subsidiaries taken as a whole.

                  (d) As used in this Section 5.18, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of the assets
of the Company and its Subsidiaries only if the book value of such assets, when
added to the book value of all other assets sold, leased or otherwise disposed
of by the Company and its Subsidiaries (other than in the ordinary course of
business) during the same twelve month period ending on the date of such sale,
lease or other disposition, exceeds 25 percent of the consolidated net tangible
assets of the Company and its Subsidiaries determined as of the end of the
immediately preceding fiscal year.

         5.19 Transactions with Affiliates. Without the prior written consent of
Purchaser, the Company will not, and will not permit any Subsidiary to, enter
into or be a party to any transaction or arrangement with any officer, director
or Affiliate (including, without limitation, the purchase from, sale to, or
exchange of property with, or the rendering of any service by or for, any
Affiliate), except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than could
be obtained in an arm's-length transaction with a Person other than an
Affiliate, in each case as determined in good faith by a majority of the
disinterested directors of the Company; provided, that existing transactions
with Affiliates listed on Schedule 2.13, and renewals of such transactions on
substantially similar terms, shall be permitted.

         5.20 Notice. The Company shall promptly upon the discovery thereof give
written notice to Purchaser of (i) the occurrence of any default or Event of
Default or event which, with the passage of time, would constitute an Event of
Default, under this Agreement, (ii) the occurrence of any default or event of
default under any other agreement providing for Indebtedness of the Company or
any Subsidiary or under a capitalized lease obligation, (iii) any actions, suits
or proceedings instituted by any Person against the Company or a Subsidiary or
materially affecting any of the assets of the Company or any Subsidiary, or (iv)
any investigation initiated by, or any dispute between and any governmental
regulatory body, on the one hand, and the Company or any Subsidiary, on the
other hand, which dispute might interfere with the normal operations of the
Company or any Subsidiary; provided, however, that Purchaser shall not be
required by this Agreement to disclose any such information provided in (iii) or
(iv) above to any third party other than Purchaser's counsel and except to the
extent compelled by law or otherwise authorized by the Company.

         5.21 Board of Directors, Observer Rights.

                  (a) As soon as practicable, and in no case later than 30 days
after the Closing of the transactions contemplated hereby, (i) the size of the
Board of Directors of the Company shall be increased to nine directors, and (ii)
a nominee of Purchaser shall be elected a director. For so long, as the initial
Purchaser or any Affiliate owns Debentures representing at least 25 percent of
the original principal amount of the Debentures, the Company agrees to include a
nominee of the initial Purchaser in management's slate of nominees to be elected
to the Board of Directors and to recommend to the stockholders the election of
such nominee. Any nominee of Purchaser hereunder shall be reimbursed for all
reasonable expenses incurred as a director and shall be entitled to receive such
compensation as may be received by other non-employee directors of the Company,
including indemnity and

                                       16
<PAGE>   17
advancement of expenses to the fullest extent permitted under applicable law.

                  (b) For so long as the Purchaser or any Affiliate owns
Debentures representing at least 25% of the original principal amount of the
Debentures, provided that no nominee of the Purchaser is a director, the Company
shall invite one representative of Purchaser to attend, at the Company's
expense, all meetings of the Company's Board of Directors and all committees of
the Company's Board of Directors in a nonvoting observer capacity and, in this
respect, shall give such representative copies of all notices and meeting agenda
in advance of such meetings and shall permit such representative to review all
documents and other materials provided to directors at such meetings. The
Company shall also provide Purchaser, in advance, with copies of all actions
proposed to be taken by the Board of Directors in lieu of meeting.

         5.22 Annual Plan. The Board of Directors shall adopt and the Company
will furnish to Purchaser, in such manner and form as approved by the Board of
Directors of the Company, no later than the first day of each fiscal year, a
financial plan for the Company, which shall include at least a projection of
income and expenses (including capital expenditures) and a projected cash flows
statement for each month in such fiscal year, and a projected balance sheet as
of the end of each month in such fiscal year (the "Annual Plan"). The Annual
Plan may only be amended or revised, in any material manner, with the approval
of the Board of Directors. The Company shall furnish to Purchaser each amendment
or revision to the Annual Plan promptly upon approval by the Board of Directors.

         5.23 Further Assurances. The Company will take all actions reasonably
requested by Purchaser to effect the transactions contemplated by this Agreement
and the other Operative Documents.

         6.       SUBORDINATION OF DEBENTURES.

         6.1 Subordination. The indebtedness evidenced by the Debentures,
including principal and interest, shall be subordinate and junior to the prior
payment of the indebtedness of the Company for borrowed money only as set forth
in that certain revolving line of credit permitting borrowings of up to
$20,000,000 and term loan permitting borrowings of up to $4,450,000 issued by
LaSalle National Bank (the "[???] of Indebtedness"), and the indebtedness
evidenced by the Debentures shall be senior in right of payment to all other
Indebtedness of the Company which is expressly stated to be subordinate or
junior in any respect to other Indebtedness of the Company, including the
Debentures,

         6.2 Liquidation, Etc.

                  (a) Upon any distribution of assets of the Company in
connection with any dissolution, winding up, liquidation or reorganization of
the Company (whether in bankruptcy, insolvency, or receivership proceedings or
upon an assignment for the benefit of creditors or otherwise), the holders of
all Senior Indebtedness shall first be entitled to receive payment in full of
the principal thereof, premium, if any, and interest due thereon, and all costs
and expenses (including attorneys' fees) related thereto, before the holders of
the Debentures shall be entitled to receive any payment on account of the
principal of or interest on or any other amount owing with respect to the
Debentures (other than payment in shares of capital stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, which stock and
securities are subordinated to the payment of all Senior Indebtedness and
securities received in lieu thereof which may at the time be outstanding). Under
the circumstances provided herein, the holders of the Senior Indebtedness shall
have the right to receive and collect any distributions made with respect to the
Debentures until such time as the Senior Indebtedness is paid in full, and shall
have the further right to take such actions as may be deemed necessary or
required to so receive and collect such distributions including making or filing
any proofs of claim relating thereto.

                  (b) Without in any way modifying the provisions of this
Article VI or affecting the subordination effected hereby if such notice is not
given, the Company shall give prompt written notice to the Purchaser of any
dissolution, winding up, liquidation or reorganization of maker (whether in
bankruptcy, insolvency or receivership proceedings or upon an assignment for the
benefit of creditors or otherwise).

         6.3 Senior Indebtedness Default. The Company shall not declare or pay
any dividends or

                                       17
<PAGE>   18

make any distributions to the holders of capital stock of the Company, or
purchase or acquire for value, any of the Debentures if any default has occurred
and is continuing with respect to the payment of principal of premium if any or
interest on any Senior Indebtedness.

                  6.4 Subrogation. Upon the prior payment in full of all Senior
Indebtedness, the Purchaser shall be subrogated to the rights of the holders of
the Senior Indebtedness to receive payments or distributions of assets of the
Company applicable to the Senior Indebtedness until all amounts owing on the
Debentures shall be paid in fall, and for the purpose of such subrogation, no
payments or distributions to the Purchaser otherwise payable or distributable to
the holders of Senior Indebtedness shall, as between the Company, its creditors,
other than the holders of Senior Indebtedness, and Purchaser, be deemed to be
payment by the Company to or on account of the Debentures, it being understood
that the provisions of this Article VI are and are intended solely for the
purpose of defining the relative rights of Purchaser, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.

         6.5 Company's Obligations Not Impaired.

                  (a) Nothing contained in this Article VI or in the Debentures
is intended to or shall impair, as between the Company and Purchaser, the
obligation of the Company, which is absolute and unconditional, to pay the
Purchaser the principal of and interest on the Debentures as and when the same
shall become due and payable in accordance with the terms of the Debentures, or
is intended to or shall affect the relative rights of the Purchaser other than
with respect to the holders of the Senior Indebtedness, nor, except as expressly
provided in this Article VI, shall anything herein or therein prevent the
Purchaser from exercising all remedies otherwise permitted by applicable law
upon the occurrence of an Event of Default under this Agreement or under the
Debentures.

                  (b) If any payment or distribution shall be received in
respect of the Debentures in contravention of the terms of this Article VI, such
payment or distribution shall be held in trust for the holders of the Senior
Indebtedness, and shall be immediately delivered to such holders in the same
form as received.

         7.       INTENTIONALLY OMITTED.

         8.       RESTRICTION OF TRANSFER REGISTRATION RIGHTS.

         8.1 Legends: Restrictions on Transfer. Neither the Debentures nor the
shares of Common Stock issuable upon exercise of the Warrants have been
registered under the Securities Act or any state securities laws. Each Debenture
issued pursuant to this Agreement and each stock certificate issued upon
exercise of Warrants shall bear a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 AND SUCH APPLICABLE STATE SECURITIES
LAWS, OR (11) AN OPINION OF COUNSEL ACCEPTABLE TO THE [CONVANY] THAT SUCH
REGISTRATION IS NOT REQUIRED.

         8.2 Registration Rights. The Purchaser shall be entitled to register
Common Stock issuable upon exercise of the Warrants as provided in the
Registration Rights Agreement.

         9.       EVENTS OF DEFAULT: REMEDIES.

         9.1 Events of Default. The occurrence of any one of the following shall
constitute an "Event of Default" under this Agreement:

                  (a) Default shall occur in the payment of interest on any
Debenture when the same shall have become due; or

                  (b) Default shall occur in the making of any payment of the
principal of any Debenture or the premium, if any, by the Company thereon at the
expressed or any accelerated maturity date or at any date fixed by the Company
for prepayment; or

                                       18
<PAGE>   19

                  (c) Default shall be made in the payment of the principal of
or interest on any Indebtedness (other than the Debentures) of the Company or
any Subsidiary and such default shall continue beyond the period of grace, if
any, allowed with respect thereto; or

                  (d) Default or the happening of any event shall occur under
any contract, agreement, lease, indenture or other instrument under which any
Indebtedness (other than the Debentures) of the Company or any Subsidiary may be
issued and such default or event shall continue for a period of time sufficient
to permit the acceleration of the maturity of any such Indebtedness of the
Company or any Subsidiary outstanding thereunder; or

                  (e) Default shall occur in the observance or performance of
any covenant or agreement contained in Section 5.3 or Sections 5.13 through 5.22
hereof, or

                  (f) Default shall occur in the observance or performance of
any other provision of this Agreement which is not remedied within 30 days after
the earlier of (i) the date on which the Company first obtains knowledge of such
Default and (ii) the date on which written notice thereof is given to the
Company by the holder of any Debenture, provided, that such 30-day period shall
be extended to such longer period as is reasonably necessary to cure the
Default, as long as (A) the Company has taken substantial action to cure the
Default within such 30-day period, (B) the Company is proceeding diligently to
cure the Default, and (C) the Default can reasonably be expected to be cured
within 75 days after the earlier of (i) of (ii); or

                  (g) Any representation or warranty made by the Company herein,
or made by the Company in any statement or certificate furnished by the Company
in connection with the consummation of the issuance and delivery of the
Debentures or furnished by the Company pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof, or

                  (h) Final judgment or judgments for the payment of money
aggregating in excess of $100,000, is or are outstanding against the Company or
any Subsidiary or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 30 days from the date of its entry; or

                  (i) The Company or any Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any Subsidiary
applies for or consents to the appointment of a custodian, trustee, liquidator,
or receiver for the Company or such Subsidiary or for the major part of the
property of either; or

                  (j) A custodian, trustee, liquidator, or receiver is appointed
for the Company or any Subsidiary or for the major part of the property of
either and is not discharged within 60 days after such appointment; or

                  (k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against the Company or
any Subsidiary and, if instituted against the company or any Subsidiary, are
consented to or are not dismissed within 60 days after such institution.

         9.2 Notice to Holders. When any Event of Default has occurred, or if
the holder of any Debenture or of any other evidence of indebtedness of the
Company gives any notice or takes any other action with respect to a claimed
default, the Company agrees to give notice within three Business Days of such
event to all holders of the Debentures then outstanding.

         9.3 Acceleration of Maturities. When any Event of Default described in
paragraph (a), (b) or (c) of Section 9.1 has occurred and is continuing, any
holder of any Debenture may, and when any Event of Default described in
paragraphs (d) through (i), inclusive, of Section 9.1 has occurred and is
continuing, the holder or holders of 50% or more of the principal amount of
Debentures at the time outstanding may, by notice to the Company, declare the
entire principal and all interest accrued on all Debentures to be, and all
Debentures shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph 0) or
(k) of Section 9.1

                                       19
<PAGE>   20

has occurred, then all outstanding Debentures shall immediately become due and
payable without presentment, demand or notice of any kind, all of which are
hereby expressly waived. Upon the Debentures becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Debentures the entire principal and interest accrued on the
Debentures. No course of dealing on the part of any Debenture holder nor any
delay or failure on the part of any Debenture holder to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies. The Company further agrees, to the fullest extent permitted
by law, to pay to the holder or holders of the Debentures all costs and
expenses, including reasonable attorneys' fees, incurred by them in the
collection of any Debentures upon any default hereunder or thereon.

         10.      AMENDMENTS, WAIVERS AND CONSENTS.

         10.1 Consent Required. Any term, covenant, agreement or condition of
this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 50% in aggregate principal amount of
outstanding Debentures; provided that without the written consent of the holders
of all of the Debentures then outstanding, no such waiver, modification,
alteration or amendment shall be effective (i) which will change the time of
payment of the principal of or the interest on any Debenture or reduce the
principal amount thereof or change the rate of interest thereon, (ii) which will
change any of the provisions with respect to optional prepayments, or (iii)
which will change the percentage of holders of the Debentures required to
consent to any such amendment, modification or waiver of any of the provisions
of Article IX or Article X.

         10.2 Solicitation of Debenture Holders. The Company will not, directly
or indirectly, pay or cause to be paid, any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of the
Debentures as consideration for or as an inducement to the entering into by any
holder of the Debentures of any waiver or amendment of any of the terms and
provisions of this Agreement, unless such remuneration is concurrently paid, on
the same terms, ratably to the holders of all of the Debentures then
outstanding.

         10.3 Effect of Amendment or Waiver. Any such amendment or waiver shall
apply equally to all of the holders of the Debentures and shall be binding upon
them, upon each future holder of any Debenture, and upon the Company, whether or
not such Debenture shall have been marked to indicate such amendment or waiver.
No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.

         11.      INTERPRETATION OF AGREEMENT, DEFINITIONS.

         11.1 Definitions. As used herein.

         "Affiliate" means any Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with, the Company, (ii) which beneficially owns or holds 5 % or more of
any class of the Voting Stock of the Company or (iii) 5 % or more of the Voting
Stock (or in the case of a Person which is not a corporation, 5 % or more of the
equity interest) of which is beneficially owned or held by the Company or a
Subsidiary,

         "Business Day" means any day other than a Saturday, Sunday, or other
day on which banks in Tennessee are authorized to close.

         The term "control" (including the terms "controlling," "controlled by"
and "under common control") means the possession. directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of Voting Stock, by a contract, or
otherwise.

         "Default" means any event or condition, the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default as defined in Section 9.1.

                                       20
<PAGE>   21

         "Event of Default" shall have the meaning set forth in Section 9.1.

         "Guaranties" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (A) for the purchase or payment of such Indebtedness or obligation, (B) to
maintain working capital or other balance sheet condition or (C) otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.

         "Hazardous Substance" means any hazardous or toxic material, substance
or waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or Federal authority
having jurisdiction over the property of the Company and its Subsidiaries or its
use, including but not limited to any material, substance or waste which is: (i)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S. C. SS 1317. 1) as amended: (11) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. SS 6901 et seq.) as amended; (iii) defined as a hazardous substance under
Section 10 1 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. SS 9601 et seq.) as amended; or (iv) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.

                                       21

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