Document:

<PAGE>   1
                                                                     EXHIBIT 4.3
                                                                  EXECUTION COPY

                              AMENDED AND RESTATED

              NOTE, WARRANT AND PREFERRED STOCK PURCHASE AGREEMENT

                                  by and among

                              MCE COMPANIES, INC.,

                       HANIFEN IMHOFF MEZZANINE FUND, L.P.

                                       and

                        NATIONAL CITY CAPITAL CORPORATION

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

                            Dated as of July 21, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  Page
                                                                                  ----

<S>                                                                                <C>
ARTICLE 1
Definitions.......................................................................  2

ARTICLE 2
Purchase and Sale of Notes, Warrants and Preferred Stock.......................... 18

ARTICLE 3
Conditions to the Obligation of the Purchasers to Close........................... 19

ARTICLE 4
Conditions to the Obligation of the Company to Close.............................. 23

ARTICLE 5
Representations and Warranties of the Company as of Closing Date.................. 24

ARTICLE 6
Representations and Warranties of the Purchasers as of Closing Date............... 32

ARTICLE 7
Fees, Expenses and Indemnities; General Provisions Relating to Payments........... 33

ARTICLE 8
Affirmative Covenants............................................................. 35

ARTICLE 9
Negative Covenants................................................................ 44

ARTICLE 10
Defaults.......................................................................... 49

ARTICLE 11
Subordination..................................................................... 52

ARTICLE 12
Prepayment........................................................................ 58

ARTICLE 13
Miscellaneous..................................................................... 58

ARTICLE 14
Representations and Warranties as of Date Hereof.................................. 63

ARTICLE 15
Termination of Investors Subscription Agreements.................................. 65

</TABLE>

<PAGE>   3

SCHEDULES

<TABLE>
<CAPTION>
         Schedules to 1996 Agreement:

<S>                                         <C>
                  Schedule 3.19             -  Permitted Acquisition Documents Waiver
                  Schedule 5.06             -  Ownership of Property, Liens [see REVISED SCHEDULE
                                               5.06]
                  Schedule 5.07             -  Defaults
                  Schedule 5.13             -  Brokers
                  Schedule 5.18             -  Capitalization [see REVISED SCHEDULE 5.18]
                  Schedule 5.22             -  Environmental Matters
                  Schedule 9.01             -  Outstanding Debt
                  Schedule 9.07             -  Permitted Acquisitions

</TABLE>

EXHIBITS
<TABLE>
<CAPTION>
         Exhibits to 1996 Agreement:
<S>                                         <C>
                  Exhibit A                 -  NCCC Note
                  Exhibit B                 -  Hanifen Note
                  Exhibit C                 -  Warrant
                  Exhibit D                 -  Preferred Stock
                  Exhibit E                 -  Charter Amendment
                  Exhibit F                 -  Collateral Assignment of Life Insurance

</TABLE>

SCHEDULES

<TABLE>
<CAPTION>
         Schedules to this Agreement:

<S>                                                  <C>
                  REVISED SCHEDULE 5.06              Ownership of Property
                  REVISED SCHEDULE 5.09              Subsidiaries
                  REVISED SCHEDULE 5.18              Capitalization
                  REVISED SCHEDULE 5.22              Environmental Matters
                  REVISED SCHEDULE 9.04              Existing Indebtedness

</TABLE>

<PAGE>   4

                              AMENDED AND RESTATED

              NOTE, WARRANT AND PREFERRED STOCK PURCHASE AGREEMENT

                  This AMENDED AND RESTATED NOTE, WARRANT AND PREFERRED STOCK
PURCHASE AGREEMENT (the "Agreement"), dated as of July 21, 2000, by and among
MCE COMPANIES, INC., a Michigan corporation formerly known as Microwave
Components Enterprises, Inc. (the "Company"), and NATIONAL CITY CAPITAL
CORPORATION ("NCCC") and HANIFEN IMHOFF MEZZANINE FUND, L.P. ("Hanifen")
(collectively, with their respective successors and the permitted assignees and
transferees of its Notes, Warrants and Preferred Stock, the "Purchasers").

                                    RECITALS

                  A. The Company and the Purchasers previously entered into a
the Note, Warrant and Preferred Stock Purchase Agreement, dated as of July 23,
1996 (the "1996 Agreement"), pursuant to which the Company issued and sold to
the Purchasers (1) its 12% Promissory Notes due July 23, 2001 in the aggregate
principal amount of $3,500,000 dated as of July 23, 1996, as the same may be
amended, modified or supplemented from time to time (the "Notes"), (2) a warrant
or warrants to purchase 28,723 shares of its Common Stock, which Common Stock is
without par value, as the same may be amended, modified or supplemented from
time to time (the "Warrants"), and (3) an aggregate of 4,000 shares of its
redeemable Series A Preferred Stock, which Preferred Stock has a liquidation
value of $1,000 per share, as the same may be amended, modified or supplemented
from time to time (the "Preferred Stock"), in each case, pursuant to the terms
and subject to the conditions of the 1996 Agreement, the proceeds of which were
used by the Company to acquire substantially all of the assets of KDI/triangle
Electronics, Inc., a Delaware corporation, as described in the Acquisition
Documents, and to refinance the outstanding subordinated indebtedness of
Weinschel, as described in the Refinancing Documents. It is the intention of all
of the parties hereto that the Preferred Stock be characterized as equity for
purposes of the Code.

                  B. The 1996 Agreement has been amended, modified and
supplemented several times since July 23, 1996, including, without limitation,
the amendments effected pursuant to the First Amendment thereto, dated December
31, 1997, the Second Amendment thereto, dated June 30, 1998, and the Third
Amendment thereto, dated November 1, 1998.

                  C. The Company, NCCC, Great Lakes Capital Investments I, LLC,
a Delaware limited liability company ("GLCI"), and Rocky Mountain Mezzanine Fund
II, L.P., a Colorado limited partnership ("RMMF") entered into a Senior
Subordinated Note and Warrant Purchase Agreement, dated July 28, 1999 (the "1999
Purchase Agreement") pursuant to which the Company issued and sold to NCCC, GLCI
and RMMF (a) its 8% Promissory Notes due July

<PAGE>   5

28, 2004 in the aggregate principal amount of $4,000,000, dated as of July 28,
1999, as the same may be amended, modified or supplemented from time to time
(the "1999 Subordinated Notes"), and (b) a warrant or warrants to purchase
13,130 shares of its Common Stock, which Common Stock is without par value, as
the same may be amended, modified or supplemented from time to time (the "1999
Warrants"), in each case, pursuant to the terms and subject to the conditions of
the 1999 Purchase Agreement, the proceeds of which were used by the Company for
the payment of certain indebtedness to facilitate the continued growth of the
Company and for working capital.

                  D. The Purchasers, pursuant to that certain letter and
consent, dated July 28, 1999, agreed to amend, as appropriate, the 1996
Agreement so as to make it generally consistent with the terms, conditions and
covenants (affirmative and negative) as articulated in the 1999 Purchase
Agreement.

                  E. The Company and the Banks signatory thereto, Comerica Bank,
as agent for such Banks and the Company entered into a Credit Agreement, dated
July 29, 1999 (the "Credit Agreement") which replaced the Credit Agreement,
dated December 31, 1997, as amended, between the Company and Comerica Bank.

                  F. The Company and the Purchasers desire to further amend the
1996 Agreement in an effort to incorporate certain terms and conditions set
forth in the 1999 Purchase Agreement and in the Credit Agreement. In addition,
the Company and the Purchasers desire to amend and restated the 1996 Agreement,
as amended, modified and supplement through the date hereof, into a single
document.

                                   AGREEMENTS

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto amend and
restate the 1996 Agreement in its entirety as follows:

                                    ARTICLE 1
                                   Definitions

                  1.01.  Definitions.  As used in this Agreement the following
terms have the meanings indicated:

                  "Accredited Investors" has the meaning assigned to that term
under Rule 501 of the rules and regulations promulgated by the Commission under
the Securities Act.

                  "Acquisition" means all of the transactions contemplated by
the Acquisition Documents to be consummated on or before the Closing Date.

<PAGE>   6

                  "Acquisition Documents" means the Asset Purchase Agreement,
including the exhibits and schedules thereto, and all agreements, documents and
instruments executed and delivered pursuant thereto or in connection therewith,
as any of the foregoing agreements, documents and instruments may from time to
time be amended, modified or supplemented in accordance with the terms thereof
and hereof.

                  "Affiliate" means (i) any Person that, directly or indirectly
through one or more intermediaries, controls the Company (a "Controlling
Person") or (ii) any Person (other than the Company or any of its Subsidiaries)
which is controlled by or is under common control with a Controlling Person. As
used herein, except in the definition of "Investor Affiliate", the term
"control" of a Person means the possession, directly or indirectly, of the power
to vote 10% or more of any class of voting securities of such Person or to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

                  "Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.

                  "Asset Purchase Agreement" means the Asset Purchase Agreement,
dated as of May 31, 1996, as amended by Amendment Nos. 1, 2 and 3 thereto dated
June 23, 1996, July 12, 1996 and July 19, 1996, respectively, among KDI, KDI D/H
Corporation, a Delaware corporation, and the Seller, and as the same may be
further amended, supplemented or modified.

                  "Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan.

                  "Breakeven Adjustment" shall mean (i) if the date of
determination is December 31, 1999, $1,000,000, (ii) if the date of
determination is March 31, 2000, $1,000,000, (iii) if the date of determination
is June 30, 2000, $1,000,000, (iv) if the date of determination is September 30,
2000, $500,000, and (v) if the date of determination is after September 30,
2000, $0.

                  "Business Day" shall mean any day other than a Saturday,
Sunday, public holiday under the laws of the State of Ohio, or other day on
which banking institutions generally are authorized or obligated to close in
Cleveland, Ohio.

                  "Capital Expenditure" means, without duplication, any payment
made directly or indirectly for the purpose of acquiring or constructing fixed
assets, real property or equipment which in accordance with GAAP would be added
as a debit to the fixed asset account of the Person making such expenditure,
including, without limitation, amounts paid or payable under any conditional
sale or other title retention agreement or under any lease or other periodic
payment arrangement which is of such a nature that payment obligations of the
lessee or obligor thereunder would be required by GAAP to be capitalized and
shown as liabilities on the balance sheet of such lessee or obligor.

                  "Capital Lease" shall mean for any Person any lease of any
property (whether

<PAGE>   7

real, personal or mixed) by such Person as lessee which, in conformity with
GAAP, is, or is required to be accounted for as a capital lease on the balance
sheet of such Person, together with any renewals of such leases (or entry into
new leases) on substantially similar terms.

                  "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as
amended from time to time, and regulations promulgated thereunder.

                  "Change in Control" has the meaning assigned to that term in
Section 10.01(l).

                  "Charter Amendment" means the certificate of amendment (in the
form of a certificate of powers, designations, preferences and rights of Series
A Preferred Stock) of the Company's articles of incorporation to be filed with
the Department of Consumer and Industrial Services of the State of Michigan on
or before the Closing Date, substantially in the form of Exhibit E, to establish
and designate and provide for the issuance of a series of preferred stock,
designated "Series A Preferred Stock", consisting of 4,000 shares with a
liquidation value of $1,000 per share.

                  "Closing" has the meaning assigned to that term in Section
2.05.

                  "Closing Date" means July 23, 1996.

                  "Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.

                  "Collateral Agency Agreement" means the Collateral Agency
Agreement, dated as of the Closing Date among Hanifen and NCCC, for itself and
as Collateral Agent, as the same may be amended, modified and supplemented from
time to time.

                  "Collateral Agent" means NCCC in its capacity as collateral
agent under the terms of the Collateral Agency Agreement and any successor and
assign thereof as provided for in the Collateral Agency Agreement.

                  "Collateral Assignment of Life Insurance" means the Assignment
of Life Insurance Policy as Collateral, in the form of Exhibit F hereto with the
blanks appropriately completed, from the Company, and signed by John Smucker, to
the Collateral Agent, for the benefit of the Purchasers, as the same may from
time to time be supplemented, amended, restated or otherwise modified, relating
to the collateral assignment by the Company of the key-man life insurance policy
that the Company is required to purchase and maintain in accordance with Section
8.03.

                  "Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.

                  "Common Stock" means the Common Stock without par value of the
Company

<PAGE>   8

and any other capital stock into which such Common Stock is reclassified
or reconstituted.

                  "Company" means MCE Companies, Inc., a Michigan corporation
formerly known as Microwave Components Enterprises, Inc., together with its
successors.

                  "Company Account" means the account specified on the signature
pages hereof into which the Loans to the Company shall be made available, or
such other account as the Company shall from time to time specify by notice to
the Purchasers.

                  "Consolidated" or "Consolidating" shall mean, when used with
reference to any financial term in this Agreement, the aggregate for two or more
Persons of the amounts signified by such term for all such Persons determined on
a consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to Consolidated financial statements or data of the Company includes
consolidation with its Subsidiaries in accordance with GAAP.

                  "Consolidated Adjusted Net Worth" shall mean as of any date of
determination, stockholders' equity in the Company as of such date, plus, to the
extent not included in stockholders' equity, preferred stock and convertible and
redeemable warrants issued and outstanding as of such date, plus the outstanding
principal amount of the Subordinated Debt as of such date, all as determined in
accordance with GAAP.

                  "Consolidated EBITDA" shall mean for any period of
determination, Consolidated Net Income for such period, less the aggregate
amounts included in determining Consolidated Net Income for extraordinary gains
during such period, plus the aggregate amounts deducted in determining
Consolidated Net Income in respect of (a) income taxes for such period, (b)
interest expense for such period, (c) depreciation and amortization expense and
other non-cash charges for such period, and (d) extraordinary losses for such
period, in each case determined on a Consolidated basis in accordance with GAAP,
plus the EBITDA Adjustment, plus the Breakeven Adjustment.

                  "Consolidated Net Income" shall mean, for any period of
determination, the net income (but not loss) of the Company and its Consolidated
Subsidiaries for such period determined in accordance with GAAP including any
extraordinary gains during such period; provided, however, for purposes of
determining Consolidated Net Income for any period, if under GAAP any Subsidiary
is treated as a Consolidated Subsidiary for part of such period, such Subsidiary
shall be deemed to be a Consolidated Subsidiary for such entire period.

                  "Contractual Obligations" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property (now or
hereafter acquired) is bound.

                  "Credit Agreement" has the meaning set forth in the Recitals
to this Agreement, as the same may be amended, modified and supplemented from
time to time in accordance with the terms thereof.

<PAGE>   9

                  "Debt" means, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on a
balance sheet and any reimbursement obligations in respect of letters of credit,
obligations in respect of bankers acceptances, provided, however that for
purposes of calculating the aggregate Debt of such Person and its Subsidiaries
(if any), the direct and indirect and absolute and contingent obligations of
such Person (whether direct or contingent) shall be determined without
duplication.

                  "Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.

                  "Dollar," "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.

                  "EBITDA Adjustment" shall mean (i) if the date of
determination is September 30, 1999, that portion of actual Consolidated EBITDA
attributable to MCE Europe divided by 2 then multiplied by 10; (ii) if the date
of determination is December 31, 1999, that portion of actual Consolidated
EBITDA attributable to MCE Europe divided by 5 then multiplied by 7; (iii) if
the date of determination is March 31, 2000, that portion of actual Consolidated
EBITDA attributable to MCE Europe divided by 8 then multiplied by 4; (iv) if the
date of determination is June 30, 2000 that portion of actual Consolidated
EBITDA attributable to MCE Europe divided by 11 then multiplied by 1; and (v) if
the date of determination is after June 30, 2000, $0.

                  "Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Materials or wastes into the environment, including ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Materials or wastes or the clean-up or other
remediation thereof.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute.

                  "ERISA Group" means the Company and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the Code.

<PAGE>   10

                  "Event of Default" has the meaning assigned to such term in
Section 10.01.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.

                  "Financing Documents" means this Agreement, the Credit
Agreement, the Collateral Agency Agreement, the Senior Notes, the Notes, the
Security Documents and the Senior Security Documents.

                  "Fiscal Year" means a fiscal year of the Company, or of the
Company and its Subsidiaries, or of any Subsidiary of the Company, as the case
may be.

                  "Fixed Charge Coverage Ratio" shall mean as of any date of
determination a ratio the numerator of which shall equal Consolidated Net Income
for the four preceding fiscal quarters ending on such date, plus to the extent
deducted in determining Consolidated Net Income, (a) extraordinary losses during
such period, (b) depreciation, amortization and other non-cash charges for such
period, and (c) the EBITDA Adjustment, less the aggregate Capital Expenditures
by the Company and its Consolidated Subsidiaries during such period, less
dividends and distributions paid or declared by the Company during such period
and less, to the extent added in determining Consolidated Net Income,
extraordinary gains during such period, and the denominator of which shall equal
Fixed Charge Principal Payments.

                  "Fixed Charge Principal Payments" shall mean (i) if the date
of determination is September 30, 1999 or December 31, 1999, $3,000,000, (ii) if
the date of determination is March 31, 2000, June 30, 2000 or September 30,
2000, $3,500,000 and (iii) if the date of determination is after September 30,
2000, the sum of all principal payments which become due and payable by the
Company and its Consolidated Subsidiaries during the four quarter period ending
on such date on indebtedness for borrowed money.

                  "GAAP" shall have the meaning set forth in Section 1.02.

                  "Governmental Authority" shall mean any government or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of either, or any court, tribunal,
grand jury or public or private mediator or arbitrator, in each case whether
foreign or domestic.

                  "Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in
whole or in part),

<PAGE>   11

provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.

                  "Hazardous Materials" means (i) any "hazardous substance" as
defined in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv)
petroleum, its derivatives, by-products and other hydrocarbons; and (v) any
other toxic, radioactive, caustic or otherwise hazardous substance regulated
under Environmental Laws.

                  "Hazardous Materials Contamination" means contamination
(whether now existing or hereafter occurring) of the improvements, buildings,
facilities, personalty, soil, groundwater, air or other elements on or of the
relevant property by Hazardous Materials, or any derivatives thereof, or on or
of any other property as a result of Hazardous Materials, or any derivatives
thereof, generated on, emanating from or disposed of in connection with the
relevant property at levels or in amounts that could cause a violation of
Environmental Laws.

                  "Hedging Transaction" means each interest rate swap
transaction, basis swap transaction, forward rate transaction, commodity swap
transaction, equity transaction, equity index transaction, foreign exchange
transaction, cap transaction, floor transaction (including any option with
respect to any of these transactions and any combination of any of the
foregoing) entered into by the Borrowers from time to time; provided that such
transaction is entered into for risk management purposes and not for speculative
purposes.

                  "Indemnified Party" has the meaning set forth in Section 7.04.

                  "Inmet" means Inmet Corporation, a Michigan corporation and a
wholly-owned subsidiary of the Company, together with its successors.

                  "Inmet Cap Ex" shall mean Capital Expenditures during 1999 and
2000 incurred for the acquisition of land and the making of building
improvements for the addition to Inmet's plant located in Ann Arbor, Michigan
and the construction of a headquarters building for the Company to the extent
not exceeding $2,500,000 in the aggregate.

                  "Interest Rate Protection Agreement" means any Hedging
Transaction entered into between Company and any bank or an Affiliate of a bank;
provided that such transaction is entered into for risk management purpose and
not for speculative purposes.

                  "Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or otherwise.

                  "Investor Affiliate" means any Person that directly, or
indirectly, through one or more intermediaries, controls an Investor or is
controlled by or is under common control with any such Person. As used in this
definition, the term "control" of a Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

<PAGE>   12

                  "Investors" means Ronald D. Brooks, Michael J. Endres, David
R. Meuse and John L. Smucker.

                  "Investors Subscription Agreement" means collectively, each of
the four Subscription Agreements, each dated as of the date hereof, between one
of the Investors and the Company, as the same may be amended, modified and
supplemented from time to time in accordance with the provisions hereof and
thereof.

                  "KDI" means KDI/Triangle Corporation, a Michigan corporation,
and a wholly- owned subsidiary of the Company, together with its successors.

                  "KDI Plan" has the meaning assigned to that term in Section
9.12.

                  "Law" shall mean any law (including common law), constitution,
statute, treaty, convention, regulation, rule, ordinance, order, injunction,
writ, decree or award of any Governmental Authority.

                  "Lenders" means Comerica Bank, National City Bank of
Michigan/Illinois and each other Person that becomes a holder of a Senior Note
in accordance with the terms of the Credit Agreement and their respective
successors.

                  "Letters of Credit" means any standby or documentary letters
of credit issued by the Lender at the request of or for the account of the
Company, individually, and/or a Subsidiary (jointly and severally with the
Company) pursuant to Article 3 of the Credit Agreement and those existing
letters of credit issued by the Lender on behalf of the Company or any
Subsidiary, as identified on Schedule 2 of the Credit Agreement.

                  "Liabilities" has the meaning set forth in Section 7.04.

                  "Lien" means, any pledge, assignment, hypothecation, mortgage,
security interest, trust receipt, conditional sale or title retaining contract,
sale and leaseback transaction, financing statement or comparable notice or
other filing or recording, Capital Lease, subordination or any claim or right,
or any other type of lien, charge, encumbrance, preferential or priority
arrangement or other claim or right, whether based on common law or statute.

                  "Loans" means the loans to the Company evidenced by the Notes.

                  "Material Adverse Effect" means a material adverse effect on
(a) the business or financial condition of the Company and its Subsidiaries
taken as a whole, (b) the ability of the Company to perform its obligations
under any of the Transaction Documents, or (c) the validity or enforceability of
any of the Transaction Documents or the rights or remedies of the Purchasers
hereunder or thereunder.

                  "Material Plan" means at any time a Plan having unfunded
liabilities, which means the amount (if any) by which (i) the value of all
benefit liabilities under such Plan,

<PAGE>   13

determined on a plan termination basis using the assumptions prescribed by the
PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value
of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

                  "Material Subsidiary" shall mean each Subsidiary which has
assets having a fair market value of $100,000 or more or which has annual gross
income of $250,000 or more.

                  "MCE Europe" means MCE Europe, Inc., a Michigan corporation
and a wholly- owned subsidiary of the Company. As of the date of this Agreement,
MCE Europe is the sole shareholder of MCE Microwave Limited UK which, in turn,
is the sole shareholder of DML Microwave Limited; see REVISED SCHEDULE 5.09
attached hereto.

                  "Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA.

                  "Net Income" shall mean the net income (or loss) of the
Company and its Consolidated Subsidiaries for any period determined in
accordance with GAAP but excluding in any event any extraordinary gains or
losses and any taxes on the excluded gains and any tax deductions or credits on
account of any excluded losses.

                  "Notes" has the meaning assigned to that term in the recitals
of this Agreement.

                  "Officers' Certificate" means a certificate executed on behalf
of a Person by its chairman of the board (if an officer), chief executive
officer or president or one of its vice presidents or a senior financial officer
or treasurer.

                  "Operative Documents" means the Financing Documents, the
Acquisition Documents, the Senior Loan Documents, the Warrants, the Stockholder
Agreement, the Preferred Stock, the Security Agreement, the Collateral
Assignment of Life Insurance, and the Registration Rights Agreement and all
other Transaction Documents, as the same may be amended, modified, supplemented
from time to time in accordance with the terms thereof and hereof.

                  "Payment Account" means with respect to the Purchasers, the
account specified on the signature pages hereof into which all payments from the
Company, shall be made, or such other account as the Purchasers shall from time
to time specify by notice to the Company.

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

                  "Pension Plan(s)" shall mean all employee pension benefit
plans of Company or its Subsidiaries, as defined in Section 3(2) of ERISA.

<PAGE>   14

                  "Permitted Acquisitions" shall mean the Acquisition and any
acquisition by the Company or any of its Subsidiaries of assets, businesses or
business interests or shares of stock or other ownership interests of or in any
Person ("target") which operates in the United States in substantially the same
line of business as Company or the Subsidiary which is a party to the
acquisition and which is conducted in accordance with the following
requirements:

                           (a) not more than five days after the signing of any
         letter of intent for such proposed acquisition, the Company shall have
         provided a copy of such letter of intent to the Purchasers and promptly
         upon signing the definitive acquisition documents, the Company shall
         have provided copies thereof to the Purchasers;

                           (b) on the date of any such acquisition, all
         necessary or appropriate governmental, quasi-governmental, agency,
         regulatory or similar approvals of applicable jurisdictions (or the
         respective agencies, instrumentalities or political subdivisions, as
         applicable, of such jurisdictions) and all necessary or appropriate
         non-governmental and other third-party approvals which, in each case,
         are material to such acquisition have been obtained and are in effect,
         and the Company and its Subsidiaries are in full compliance therewith,
         and all necessary or appropriate declarations, registrations or other
         filings with any court, governmental or regulatory authority,
         securities exchange or any other person have been made;

                           (c) the total cash consideration of each such
         acquisition conducted while this Agreement remains in effect as
         Permitted Acquisitions (but excluding any acquisition conducted with
         the specific written approval of the Purchasers, and not as a Permitted
         Acquisition hereunder), computed on the basis of total acquisition
         consideration paid or incurred, or to be paid or incurred, by the
         Company or its Subsidiaries with respect thereto, including all
         indebtedness which is assumed or to which such assets, businesses or
         business or ownership interests or shares, or any Person so acquired,
         is subject, shall not exceed $5,000,000;

                           (d) within 30 days after any such acquisition has
         been completed Company shall deliver to the Purchasers executed copies
         of all material documents pertaining to such acquisition, and the
         Company, its Subsidiaries and any of the corporate entities involved in
         such acquisition shall execute or cause to be executed, and provide or
         cause to be provided to the Purchasers, such documents and instruments
         (including without limitation, the joinder agreement, security
         agreements and mortgages required by the Credit Agreement and mortgages
         of all real property acquired by the Company or any existing Domestic
         Subsidiary as a result of such acquisition, and opinions of counsel,
         amendments, acknowledgments, consents and evidence of approvals or
         filings) as reasonably requested by the Purchasers, if any;

                           (e) within 60 days prior to the effective date of the
         acquisition, the Company shall deliver to target, (i) a pro forma
         financial statement for the target, as of the effective date of the
         acquisition, (ii) a pro forma financial statement of the Company and
         its Consolidated Subsidiaries for the 12 month period ending on the
         effective date of

<PAGE>   15
         the acquisition prepared as if the acquisition became effective on the
         first day of such period; and (iii) financial projections for the three
         year period commencing on the effective date of the acquisition,
         including financial covenant compliance projections; and

                           (f) both immediately before and after such
         acquisition, no Potential Default or Event of Default (whether or not
         related to such acquisition), has occurred and is continuing and on the
         date of consummation of such acquisition, the Company shall have
         provided to the Purchasers a certificate of a Responsible Officer as to
         such effect.

                  "Permitted Contest" means a contest maintained in good faith
by appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge.

                  "Permitted Liens" means with respect to any Person:

                           (a) the Liens granted under or established by the
         Credit Agreement or the Loan Documents (as defined in the Credit
         Agreement) and described on REVISED SCHEDULE 5.06 attached to this
         Agreement

                           (b) Liens for taxes not yet delinquent or which are
         being contested in good faith by appropriate proceedings diligently
         pursued, provided that provision for the payment of all such taxes has
         been made on the books of such Person as may be required by GAAP;

                           (c) Mechanics', materialmen's, banker's, carriers',
         warehousemen's and similar Liens arising in the ordinary course of
         business and securing obligations of such Person that are not overdue
         for a period of more than 60 days or are being contested in good
         faith by appropriate proceedings diligently pursued, provided that in
         the case of any such contest (i) any proceedings commenced for the
         enforcement of such Liens shall have been duly suspended; and (ii) such
         provision for the payment of such Liens has been made on the books of
         such Person as may be required by GAAP;

                           (d) Liens arising in connection with worker's
         compensation, unemployment insurance, old age pensions and social
         security benefits and similar statutory obligations which are not
         overdue or are being contested in good faith by appropriate proceedings
         diligently pursued, provided that in the case of any such contest (i)
         any proceedings commenced for the enforcement of such Liens shall have
         been duly suspended; and (ii) such provision for the payment of such
         Liens has been made on the books of such Person as may be required by
         GAAP;

                           (e)(i) Liens incurred in the ordinary course of
         business to secure the performance of statutory obligations arising in
         connection with progress payments or advance payments due under
         contracts with the United States government or any agency

<PAGE>   16

          thereof entered into in the ordinary course of business and (ii) Liens
          incurred or deposits made in the ordinary course of business to secure
          the performance of statutory obligations, bids, leases, fee and
          expense arrangements with trustees and fiscal agents and other similar
          obligations (exclusive of obligations incurred in connection with the
          borrowing of money, any lease-purchase arrangements or the payment of
          the deferred purchase price of property), provided that full provision
          for the payment of all such obligations set forth in clauses (i) and
          (ii) has been made on the books of such Person as may be required by
          GAAP;

                           (f) minor survey exceptions or minor encumbrances,
         easements or reservations, or rights of others for rights-of-way,
         utilities and other similar purposes, or zoning or other restrictions
         as to the use of real properties, which do not materially interfere
         with the business of such Person, including, without limitation the
         matters disclosed in the surveys and title policies relating to the
         real property mortgaged to the Lenders; and

                           (g) interests of lessors in leased equipment,
         including filings for notification purposes.

                  "Person" means any natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, and any government agency or
political subdivision thereof.

                  "Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code.

                  "Potential Default" shall mean any event or condition which
with notice, passage of time, or both, would constitute an Event of Default.

                  "Preferred Stock" has the meaning ascribed to such term in the
recitals of this Agreement.

                  "Pro Forma Combined Projected Financial Information" shall
mean, as to any acquisition, pro forma combined projected financial information
for the Company and the acquisition candidate, consisting of projected
consolidated balance sheets as at the end of at least the next succeeding two
fiscal years of the Company following the acquisition and projected consolidated
statements of income for each of those years, including sufficient detail to
permit calculation of the amounts and ratios described in Sections 8.16 through
8.19, inclusive, as projected for those years and accompanied by (i) a statement
setting forth a calculation of the ratios described in Sections 8.16 through
8.19, inclusive, and (ii) a statement in reasonable detail specifying all
material assumptions underlying the projections.

                  "RCRA" means the Resource Conservation and Recovery Act of
1976 (42 U.S.C.

<PAGE>   17

Sections 6901 et seq.) as amended from time to time and the rules and
regulations promulgated thereunder.

                  "Refinancing" means the refinancing concurrently with the
purchase of the Securities of the subordinated indebtedness of Weinschel in the
principal amount of $1,000,000.

                  "Refinancing Documents" means all agreements, documents and
instruments executed and delivered pursuant to or in connection with the
Refinancing, as any of the foregoing may from time to time be amended, modified
or supplemented in accordance with the terms thereof and hereof.

                  "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties thereto, as the same may be amended, modified and supplemented from time
to time in accordance with the terms thereof.

                  "Requirements of Law" means as to any Person, the certificate
or articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any Law, right, privilege, qualification, license
or franchise or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property (now owned or hereafter acquired) or to which such Person or any of its
property is subject.

                  "Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility.

                  "Restricted Payment" means (i) any dividend or other
distribution on any shares of the Company's capital stock (except dividends
payable solely in shares of its capital stock of the same class) or (ii) any
payment on account of the purchase, redemption, retirement or acquisition of (A)
any shares of the Company's capital stock or (B) any option, warrant or other
right to acquire shares of the Company's capital stock.

                  "Securities" means, collectively, the Notes, the Warrants and
the Preferred Stock.

                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.

                  "Security Agreement" means the Security Agreement, Pledge and
Assignment dated as of the date hereof between the Company and the Purchasers,
as the same may be amended, modified and supplemented from time to time in
accordance with the terms thereof.

                  "Security Documents" means the Security Agreement and any
other agreement pursuant to which the Company or any of its Subsidiaries or
Affiliates provides a Lien on its assets in favor of the Purchasers, and all
supplementary assignments, security agreements, pledge

<PAGE>   18

agreements, acknowledgments or other documents delivered or to be delivered
pursuant to the terms hereof or of any other Security Document, including the
Collateral Assignment of Life Insurance when executed and delivered, and all
amendments, modifications and supplements made from time to time to any of the
foregoing.

                  "Seller" means KDI\triangle Electronics, Inc., a Delaware
corporation.

                  "Senior Debt" means as of any date of determination all Total
Debt as of such date less all Subordinated Debt as of such date.

                  "Senior Debt to EBITDA Ratio" shall mean, as of any date of
determination, a ratio, the numerator of which shall equal Senior Debt as of
such date and the denominator of which shall equal Consolidated EBITDA for the
four quarter period ending on such date.

                  "Senior Loan Documents" means, collectively, the Credit
Agreement, the Senior Notes and the Senior Security Documents.

                  "Senior Loans" means the revolving and term loans made by the
Lenders to the Company pursuant to the Credit Agreement, subject to the terms
hereof.

                  "Senior Notes" means the Revolving Credit Note and the Term
Note, each dated July 29, 1999, issued by the Company and payable to the order
of the Lenders (as those terms are defined in the Credit Agreement) issued by
the Company and payable to the order of the Lenders, as the same may be amended,
modified and supplemented from time to time in accordance with the terms thereof
and hereof.

                  "Senior Security Documents" means any agreement pursuant to
which the Company or any of its Subsidiaries or Affiliates provides a Lien on
its assets in favor of the Lenders, and all supplementary assignments, security
agreements, pledge agreements, guarantees, acknowledgments or other documents
delivered or to be delivered pursuant to the terms of the Credit Agreement or
any Senior Security Document, including, without limitation, the guarantee
provided to the Lenders by the Subsidiaries, and all amendments, modifications
and supplements made from time to time to any of the foregoing, in accordance
with the terms hereof and thereof.

                  "State Regulatory Laws" means the Laws of any Governmental
Authority of any state, including "blue sky" laws, for which any consent,
approval or expiration of any waiting period is necessary in connection with the
proposed purchase and sale of Securities contemplated hereby.

                  "Stockholder Agreement" means the Stockholder Agreement, dated
as of the date hereof, among the Company, the Purchasers, the other parties
thereto and any other Person who becomes a party thereto pursuant to the terms
thereof, as the same may be amended, modified or supplemented from time to time
in accordance with the terms thereof.
<PAGE>   19

                  "Subordinated Debt" means Debt of the Company or any of its
Subsidiaries that has been subordinated in right of payment and priority to such
Person's indebtedness to the Lenders, all on terms and conditions satisfactory
to the Lenders in the exercise of their sole discretion, including the Debt of
the Company evidenced by the Notes.

                  "Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Company. Unless otherwise
specified to the contrary herein, Subsidiary or Subsidiaries shall refer to the
Company's Subsidiary or Subsidiaries.

                  "Total Debt" means as of any date of determination, the sum,
without duplication, of (a) all indebtedness of the Company and its Consolidated
Subsidiaries for borrowed money or for the deferred purchase price of property
or services as of such date (other than trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices)
or which is evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of the Company and its Consolidated Subsidiaries under Capital
Leases as of such date, (c) without duplication, all obligations of the Company
and its Consolidated Subsidiaries in respect of Letters of Credit, acceptances
or similar obligations issued or created for the account of the Company or any
of its Consolidated Subsidiaries as of such date, (d) all liabilities secured by
any lien on any property owned by the Company and its Consolidated Subsidiaries
as of such date even though the Company or its Subsidiaries, as applicable, have
not assumed or otherwise become liable for the payment thereof, and (e) without
duplication, all guarantee obligations of the Company and its Consolidated
Subsidiaries as of such date. For purposes of determining Total Debt, the
Company's guaranty obligation to Densitron International Limited shall be
disregarded to the extent such obligation is secured by the Densitron Letter of
Credit (as defined in the Credit Agreement on the date that it is entered into
by the parties thereto).

                  "Total Debt to EBITDA Ratio" shall mean, as of any date of
determination, a ratio, the numerator of which shall equal Total Debt as of such
date and the denominator of which shall equal Consolidated EBITDA for the four
quarter period ending on such date.

                  "Transaction Documents" means collectively, this Agreement,
the Notes, the Warrants, the Preferred Stock, the Security Agreement, the
Collateral Agency Agreement, the Registration Rights Agreement, the Collateral
Assignment of Life Insurance, and the Stockholder Agreement, and all other
agreements, instruments, certificates and documents executed by the Company with
or in favor of or for the benefit of any of the Purchasers or the Collateral
Agent, as the same may be amended, modified, supplemented from time to time in
accordance with the terms thereof and hereof.

                  "Warrants" has the meaning ascribed to such term in the
recitals of this Agreement.

                  "Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.

<PAGE>   20

                  "Weinschel" means Weinschel Corporation, a Michigan
corporation and a wholly- owned subsidiary of the Company, together with its
successors.

                  1.02. Accounting Terms; Financial Statements. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time
("GAAP"), applied on a basis consistent (except for changes concurred in by the
Company's independent public accountants) with the most recent audited
consolidated financial statements of the Company and its Subsidiaries delivered
to the Purchasers; provided that, if the Company notifies the Purchasers that
the Company wishes to amend any covenant in Article 8 or any related definition
to eliminate the effect of any change in GAAP on the operation of such covenant
(or if the Purchasers notify the Company that the Purchasers wish to amend
Article 8 or any related definition for such purpose), then the Company's
compliance with such covenant, shall be determined on the basis of GAAP in
effect immediately before the relevant change in GAAP became effective, until
either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Company and the Purchasers.

                  1.03. Other Definitional Provisions. References in this
Agreement to "Articles" and "Sections" shall be to Articles and Sections of or
to this Agreement unless otherwise specifically provided and references in this
Agreement to "Schedules" and "Exhibits" shall be to Schedules and Exhibits of or
to the 1996 Agreement unless otherwise specifically provided. Any of the terms
defined in Section 1.01 may, unless the context otherwise requires, be used in
the singular or plural depending on the reference. "Include", "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing and other means of
reproducing words in a visible form. References to any agreement or contract are
to such agreement or contract as amended, modified or supplemented from time to
time in accordance with the terms hereof and thereof. References to any Person
include the successors and assigns of such Person. References "from" or
"through" any date mean, unless otherwise specified, "from and including" or
"through and including", respectively.

                                    ARTICLE 2
                     Purchase and Sale of Notes and Warrants

                  2.01. Purchase and Sale of Notes. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue, on the
Closing Date, to: (a) NCCC, and NCCC agrees that it will acquire from the
Company, on the Closing Date, Notes in the original principal amount of
$2,240,000, with such Notes being substantially in the form attached hereto as
Exhibit A, appropriately completed in conformity herewith; and (b) Hanifen, and
Hanifen agrees that it will acquire from the Company, on the Closing Date, Notes
in the original principal amount of $1,260,000, with such Notes being
substantially in the form attached hereto as Exhibit B, appropriately completed
in conformity herewith. At the Closing, the Company shall execute and

<PAGE>   21

deliver to each of the Purchasers a single Note in each such principal amount.
The obligations of the Company under the Notes shall be pari passu with the
obligations of the Company under the notes issued pursuant to the 1999 Purchase
Agreement.

                  2.02. Purchase and Sale of Warrants. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue to each of
the Purchasers, and each of the Purchasers agrees that it will acquire from the
Company, on the Closing Date, simultaneously with the purchase by the Purchasers
of the Notes, the number of Warrants set forth opposite such Purchaser's name on
the signature page hereof to purchase 28,723 shares of Common Stock, with each
Warrant being substantially in the form attached hereto as Exhibit C,
appropriately completed in conformity herewith. The Warrants shall be duly
executed and registered in the name or names of the Purchasers or one or more
Affiliates of the Purchasers and in such denominations as the Purchasers shall
have notified the Company.

                  2.03. Purchase and Sale of Preferred Stock. Subject to the
terms and conditions herein set forth, the Company agrees that it will issue to
each of the Purchasers, and each of the Purchasers agrees that it will acquire
from the Company, on the Closing Date, simultaneously with the purchase by the
Purchasers of the Notes and the Warrants, the number of shares of Preferred
Stock set forth opposite such Purchaser's name on the signature page hereof, for
an aggregate purchase price of $4,000,000 with each share of Preferred Stock
being substantially in the form attached hereto as Exhibit D, appropriately
completed in conformity herewith. The Preferred Stock shall be duly executed and
registered in the name or names of the Purchasers or one or more Affiliates of
the Purchasers and in such denominations as the Purchasers shall have notified
the Company.

                  2.04. Purchase Price Allocation. The Company and the
Purchasers hereby agree that for each $1,000.00 of the $3,500,000 paid by the
Purchasers to acquire the Notes and the Warrants hereunder, $37.91185714 shall
be allocated to the Company for the purchase of Warrants and that for each
$1,000.00 of the $4,000,000 paid by the Purchasers to acquire the Preferred
Stock and the Warrants hereunder, $187.979625 shall be allocated to the Company
for the purchase of Warrants. Consequently, of the aggregate total $7,500,000
purchase price for the Securities, $884,610 shall be allocated to the Warrants.

                  2.05. Closing. The closing (the "Closing") of this Agreement
shall be held at the offices of Baker & Hostetler, at 10:00 a.m., Cleveland,
Ohio Time, on July 23, 1996, or at such other time and place as the Company and
the Purchasers may agree in writing (the "Closing Date").

                  2.06 Several Obligations. The failure of any Purchaser to
purchase the Securities to be purchased by it on the Closing Date shall not
relieve the other Purchaser of its obligation to purchase Securities on the
Closing Date. No Purchaser shall be responsible for the failure of the other
Purchaser to purchase the Securities to be purchased by such other Purchaser,
and no Purchaser shall have any obligation to the other Purchaser for the
failure by such Purchaser to purchase the Securities required to be purchased by
such Purchaser.

<PAGE>   22

                                    ARTICLE 3
             Conditions to the Obligation of the Purchasers to Close

                  The obligation of each Purchaser to purchase the Securities,
to pay the purchase price therefor and to perform any obligations hereunder
shall be subject to the satisfaction as determined by, or waiver by, that
Purchaser of the following conditions on or before the Closing Date. No
Purchaser shall be obligated to purchase any Security unless the purchase and
sale of all the other Securities occurs simultaneously therewith.

                  3.01. Representations and Warranties. The representations and
warranties of the Company contained in this Agreement or made by the Company or
any Subsidiary in each other Operative Document shall be true and correct at and
as of the Closing Date as if made at and as of such date.

                  3.02. Corporate Proceedings. The Purchasers shall have
received certificates of the Secretary of the Company and each Subsidiary of the
Company dated as of the Closing Date as to (i) true copies of the certificate or
articles of incorporation and by-laws (or other constituent documents) of the
Company and each Subsidiary of the Company, as the case may be, in effect on
such date (which, in the case of certificates or articles of incorporation or
other constituent documents filed or required to be filed with the Secretary of
State or other Governmental Authorityin its jurisdiction of incorporation, shall
be certified to be true, correct and complete by such Secretary of State or
other Governmental Authority not more than 10 days before the Closing Date),
which, in each case, shall be in form and substance reasonably satisfactory to
the Purchasers, (ii) true copies of all corporate action taken by the Company,
and each Subsidiary, as the case may be, approving and otherwise relating to
this Agreement and the other Operative Documents, and (iii) the incumbency and
signature of the respective officers of the Company, and each Subsidiary, as the
case may be, executing this Agreement and the other Transaction Documents,
together with the satisfactory evidence of the incumbency of such Secretary or
Assistant Secretary. The Purchasers shall have received certificates from the
appropriate Secretaries of State or other applicable Governmental Authorities
dated not more than 10 days before the Closing Date showing the good standing of
the Company and each Subsidiary in its state of incorporation and each state in
which it does business.

                  3.03. No Defaults.  No Event of Default or Potential Default
shall have occurred and be continuing on the Closing Date or after giving effect
to the purchases and transactions required to be made on the Closing Date.

                  3.04. Legal Opinions. The Purchasers shall have received the
opinion, addressed to the Purchasers dated the Closing Date, of Dykema Gossett
PLLC, counsel to the Company and its Subsidiaries, as to such matters as may be
requested by the Purchasers and in form and substance satisfactory to the
Purchasers. In addition, the Purchasers shall have received all opinions of
counsel for the Company and its Subsidiaries required under or in connection
with the Acquisition Documents, the Refinancing Documents and the Credit
Agreements, which opinions must be in form and content reasonably acceptable to
the Purchasers and their counsel

<PAGE>   23

and permit the Purchasers to rely on the opinions expressed therein.

                  3.05. Fees, Expenses, etc. All fees and other compensation
required to be paid to the Purchasers or their counsel pursuant to this
Agreement and any other written agreement on or prior to the Closing Date shall
have been paid or received.

                  3.06. Material Adverse Change. The Purchasers shall be
satisfied in their sole good faith discretion as to the absence of any material
adverse change in any aspect of the business, operations, properties, prospects
or condition (financial or otherwise) of the Company or any of its Subsidiaries,
or any event or condition which is reasonably likely to result in such a
material adverse change.

                  3.07. Capitalization, etc. The corporate and capital structure
of each of the Company and its Subsidiaries, the certificates or articles of
incorporation and bylaws (or other constituent documents) of each of them, and
the terms, conditions, amounts and holders of all equity, debt and other
indebtedness, obligations and liabilities of each of them, shall be satisfactory
to the Purchasers. In addition, the Purchasers shall have received evidence
satisfactory to them in their sole good faith discretion that on the Closing
Date the Company has cash in an amount at least equal Three Hundred Thousand
Dollars ($300,000).

                  3.08. Documents. The Purchasers shall have received true,
complete and correct copies of such documents as they may reasonably request in
connection with or relating to the purchase and sale of the Securities and the
transactions contemplated hereby, all in form and substance satisfactory to the
Purchasers, and the Purchasers shall have received all documents they may
reasonably request relating to the existence of the Company and its
Subsidiaries, the corporate authority for and the validity of the Financing
Documents and the other Operative Documents, and any other matters relevant
hereto, all in form and substance satisfactory to the Purchasers in their sole
good faith discretion.

                  3.09. Purchase Permitted by Applicable Laws. The acquisition
of and payment for the Securities to be acquired by the Purchasers hereunder and
the consummation of the transactions contemplated hereby and by the Transaction
Documents (i) shall not be prohibited by any Requirement of Law and (ii) shall
not subject any Purchaser to any penalty or, in its reasonable judgment, other
onerous condition under or pursuant to any Requirement of Law.

                  3.10. Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of
Law, including without limitation with respect to those Contractual Obligations
of the Company and with respect to State Regulatory Laws, necessary or required
in connection with the execution, delivery or performance (including, without
limitation, the payment of interest on the Notes and the issuance of the
Preferred Stock and Common Stock upon exercise of the Warrants) by the Company
or enforcement against the Company of the Transaction Documents to which they
are parties shall have been obtained and be in full force and effect, and the
Purchasers shall have been furnished with appropriate evidence thereof, and all
waiting periods shall have lapsed without extension or the imposition of any
conditions or restrictions.

<PAGE>   24

                  3.11. Execution and Delivery of this Agreement.  The Company
shall have duly executed and delivered to the Purchasers this Agreement.

                  3.12. Registration Rights Agreement.  The Company and the
other parties thereto shall have duly executed and delivered to the Purchasers
the Registration Rights Agreement.

                  3.13. Stockholder Agreement.  The Company and the other
parties thereto shall have duly executed and delivered to the Purchasers the
Stockholder Agreement.

                  3.14. Notes, Warrants and Preferred Stock. The Company shall
have duly executed and delivered to the Purchasers the Notes in the form
provided for herein and the Warrants and Preferred Stock, all duly executed and
registered in such name or names and in such denominations as the Purchasers
shall have requested in accordance with the terms of the Transaction Documents
and the Financing Documents.

                  3.15. SBIC Certificates.  The Company shall have executed and
delivered to the Purchasers forms and information required by the rules and
regulations of the United States Small Business Administration and as reasonably
requested by the Purchasers, including, without limitation, a Size Status
Declaration on SBA Form 652, a certificate with respect to use of proceeds as
contemplated by 13 C.F.R. ss.107.305 and information necessary for the
preparation of a Portfolio Financing Report on SBA Form 1031.

                  3.16. Investors Subscription Agreement.  Each of the
Investors shall have duly executed and delivered to the Company and the
Purchasers the Investors Subscription Agreement to which it is a party in a form
satisfactory to the Purchasers.

                  3.17. Disbursement Instructions.  The Purchasers shall have
received written instructions from the Company to the Purchasers directing the
payment of the purchase price for the Notes, the Warrants and the Preferred
Stock that is to be paid on the Closing Date.

                  3.18. Refinancing. The Purchasers shall have received evidence
satisfactory to them in their sole good faith discretion of the satisfaction
(without waiver) of all other conditions to the closing of the Refinancing on
the Closing Date, and that all transactions contemplated by the Operative
Documents to be consummated on the Closing Date of the Refinancing will take
place prior to or simultaneously with the transactions hereunder contemplated to
take place on the Closing Date, and satisfaction of the Purchasers in their sole
good faith discretion with the terms and conditions of the Refinancing
Documents.

                  3.19. Acquisition. The Purchasers shall have received evidence
satisfactory to them in their sole good faith discretion of the satisfaction
(without waiver, except as described on Schedule 3.19) of all other conditions
to the closing of the Acquisition on the Closing Date, and that all transactions
contemplated by the Operative Documents to be consummated on the Closing Date of
the Acquisition will take place prior to or simultaneously with the transactions
hereunder contemplated to take place on the Closing Date, and satisfaction of
the Purchasers in

<PAGE>   25

their sole good faith discretion with the terms and conditions of the
Acquisition Documents.

                  3.20. Officer's Certificate. The Purchasers shall have
received a certificate signed by a senior financial officer or treasurer of the
Company to the effect that, both before and immediately after the making of the
Loans, the purchase of the Warrants and the Preferred Stock and the consummation
of the Acquisition and the Refinancing and the other transactions contemplated
to take place on the Closing Date, (i) no Default shall have occurred and be
continuing and (ii) the representations and warranties of the Company and the
Subsidiaries made in or pursuant to the Operative Documents are true, correct
and complete.

                  3.21. Financial Statements. The Purchasers shall have received
(i) the financial statements and pro forma balance sheet referred to in Sections
5.04(a), (b) and (c), (ii) a statement of sources and uses of funds covering all
payments reasonably expected to be made by the Company and the Subsidiaries in
connection with the transactions contemplated by the Operative Documents to be
consummated on the Closing Date, including an itemized estimate of all fees,
expenses and other closing costs, and (iii) payment instructions with respect to
each wire transfer to be made by the Purchasers or the Company on the Closing
Date setting forth the amount of such transfer, the purpose of such transfer,
the name and number of the account to which such transfer is to be made, the
name and ABA number of the bank or other financial institution where such
account is located and the name and telephone number of an individual that can
be contacted to confirm receipt of such transfer.

                  3.22. Charter Amendment. The Purchasers shall have received
evidence satisfactory to them that the Charter Amendment shall have been
approved by the requisite corporate action of the Company and shall have been
filed with the Department of Commerce and Industry Services of the State of
Michigan and shall have become effective.

                  3.23. Security Agreement.  The Company shall have been duly
executed and delivered the Security Agreement to the Purchasers.

                  3.24. Financing Statements.  The Company and all other
necessary parties shall have duly executed and delivered to the Purchasers UCC
financing statements in such form as is required to perfect the security
interest in the collateral subject to the Security Agreement.

                  3.25. Subordinated Notes and Purchase Agreements. KDI and
Weinschel shall have duly executed and delivered to the Company the Subordinated
Notes and the Purchase Agreements, and the Company shall have delivered the
Subordinated Notes, duly endorsed in blank, and executed copies of the Purchase
Agreements to the Collateral Agent in accordance with the provisions of the
Security Agreement.

                  3.26. Collateral Agency Agreement.  The Collateral Agency
Agreement shall have been duly executed and delivered by the Company.

                                    ARTICLE 4

<PAGE>   26

              Conditions to the Obligation of the Company to Close

                  The obligations of the Company to issue and sell the
Securities and to perform any other obligations hereunder shall be subject to
the satisfaction as determined by, or waiver by, the Company of the following
conditions on or before the Closing Date:

                  4.01. Representations and Warranties True.  The
representations and warranties of the Purchasers contained in Article 6 shall be
true and correct at and as of the Closing Date as if made at and as of
such date.

                  4.02. Compliance with This Agreement. The Purchasers shall
have performed and complied with all of their agreements and conditions set
forth or contemplated herein that are required to be performed or complied with
by the Purchasers on or before the Closing Date.

                  4.03. Issuance Permitted by Applicable Laws. The issuance of
the Securities to be issued by the Company hereunder and the consummation of the
transactions contemplated hereby (i) shall not be prohibited by any Requirement
of Law, and (ii) shall not subject the Company to any penalty or, in its
reasonable judgment, other onerous condition under or pursuant to any
Requirement of Law.

                  4.04. Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of Law
necessary or required in connection with the execution, delivery or performance
by the Purchasers or enforcement against the Purchasers of this Agreement shall
have been obtained and be in full force and effect, and the Company shall have
been furnished with appropriate evidence thereof.

                  4.05. Execution and Delivery of this Agreement.  The
Purchasers shall have executed and delivered to the Company this Agreement.

                                    ARTICLE 5
        Representations and Warranties of the Company as of Closing Date

                  The Company represents and warrants to the Purchasers as of
the Closing Date (including, in the case of any such representation and warranty
made or deemed made before the consummation of the Acquisition or the
Refinancing, at the time such representation and warranty is made or deemed made
and immediately after giving effect to the consummation of the Acquisition and
the Refinancing) that:

                  5.01. Existence and Power. The Company and its Subsidiaries
are corporations duly incorporated, validly existing and in good standing, under
the laws of the State of Michigan. The Company and its Subsidiaries are
qualified to do business as foreign corporations or other business entities, as
the case may be, in each jurisdiction in which they are required to be so
qualified, except where failure to be qualified would not have a Material
Adverse Effect.

<PAGE>   27

                  5.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Company and its
Subsidiaries of the Operative Documents to which each is a party are within the
Company's and its Subsidiaries' corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official other than the filing of the
Charter Amendment and the filing of UCC-1 financing statements (all of which
have been made and are in full force and effect), and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the articles of incorporation or bylaws of the Company and its Subsidiaries or
of any judgment, injunction, order or decree or of any material agreement or
other material instrument binding upon the Company and its Subsidiaries or
result in the creation or imposition of any Lien (other than the Permitted
Liens) on any asset of the Company and any of its Subsidiaries.
                  5.03. Binding Effect. Each of the Operative Documents to which
the Company or any of its Subsidiaries is a party constitutes a valid and
binding agreement of the Company or that Subsidiary, as the case may be, and
each of the Transaction Documents, when executed and delivered in accordance
with this Agreement, will constitute valid and binding obligations of the
Company and its Subsidiaries that are parties thereto, in each case enforceable
in accordance with its respective terms except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles of equity.
The Company has reserved and will keep available for issuance upon exercise of
the Warrants the total number of Warrant Shares deliverable upon exercise of all
Warrants from time to time outstanding. The issuance of the Warrant Shares has
been duly and validly authorized and, when issued and sold in accordance with
the Warrants, the Warrant Shares will be duly and validly issued, fully paid and
nonassessable and free of preemptive rights.

                  5.04.  Financial Information.

                           (a) The audited consolidated balance sheet of the
         Company and its Subsidiaries as of December 31, 1995, the audited
         balance sheet of Inmet as of December 31, 1995, and the audited balance
         sheet of Weinschel as of December 31, 1995, and the related statement
         of income for the Fiscal Year then ended, copies of which have been
         delivered to the Purchasers, fairly present, in conformity with GAAP
         the financial position of the Company and its Subsidiaries as of such
         date and its results of operations, for such period.

                           (b) The unaudited consolidated and consolidating
         balance sheet of the Company and its Subsidiaries as of May 31, 1996,
         and the related unaudited statement of income for the month and the
         portion of the Fiscal Year then ended, copies of which have been
         delivered to the Purchasers, fairly present, in conformity with GAAP
         (subject to (i) the absence of footnotes and (ii) year-end audit
         adjustments) applied on a basis consistent with the financial
         statements referred to in Section 5.04(a), the financial position of
         the Company and its Subsidiaries as of such date and its results of
         operations for the month and the five months then ended (subject to
         normal year-end adjustments).

<PAGE>   28

                           (c) The pro forma balance sheet of the Company and
         its Subsidiaries as of the June 30, 1996, copies of which have been
         delivered to the Purchasers, fairly presents in conformity with GAAP
         applied on a basis consistent with the financial statements referred to
         in Section 5.04(a), the consolidated financial position of the Company
         and its Subsidiaries as of such date, adjusted to give effect (as if
         such events had occurred on such date) to (i) the transactions
         contemplated by the Acquisition Documents and the Refinancing
         Documents, (ii) the making of the Loans and the issuance of the
         Warrants and the Preferred Stock, (iii) the application of the proceeds
         therefrom as contemplated by the Acquisition Documents, the Refinancing
         Documents and the Financing Documents, and (iv) the payment of all
         legal, accounting and other fees related thereto to the extent known at
         the time of the preparation of such balance sheet. As of the date of
         such balance sheet and the date hereof, the Company and its
         Subsidiaries had and have no material liabilities, contingent or
         otherwise, including liabilities for taxes, long-term leases or
         forward or long-term commitments, which are not properly reflected on
         such balance sheet.

                           (d) Since December 31, 1995, there has been no
         material adverse change in the business, operations, properties,
         prospects or condition (financial or otherwise) of the Company and its
         Subsidiaries, taken as a whole, except as reflected in the financial
         statements described in Section 5.04(b).

                  5.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Company, threatened against or
affecting, the Company or any of its Subsidiaries before any court or arbitrator
or any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could have a Material Adverse Effect.
There is no action, suit or proceeding pending against, or to the knowledge of
the Company threatened against or affecting, any party to any of the Operative
Documents (other than the Company) before any court or arbitrator or any
governmental body, agency or official which in any manner draws into question
the validity of any of the Operative Documents.

                  5.06. Ownership of Property. Except as set forth on Schedule
5.06, on and as of the Closing Date, the Company owns no property or assets
other than the Subordinated Notes and the common stock of its Subsidiaries, and
none of its properties and assets is subject to any Liens, except Permitted
Liens.

                  5.07. No Default. Except as set forth on Schedule 5.07, no
Default or Event of Default has occurred and is continuing. Neither the Company
nor any of its Subsidiaries is in default under or with respect to any contract,
agreement, lease or other instrument to which it is a party or by which its
property is bound or affected except for such defaults that in the aggregate
would not have a Material Adverse Effect.

                  5.08. No Burdensome Restrictions. No contract, lease,
agreement or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of its property is bound or affected, no charge,
corporate restriction, judgment, decree or order and no

<PAGE>   29

provision of applicable law or governmental regulation materially adversely
affects the business, operations, properties, prospects or condition (financial
or otherwise) of the Company or any of its Subsidiaries.

                  5.09. Subsidiaries; Other Equity Investments. The Company has
no Subsidiaries on the date hereof other than Inmet, KDI and Weinschel. Neither
the Company nor any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person, except for joint ventures or partnerships of
any Subsidiary of the Company related to the manufacture of products that are in
the same line of business as that Subsidiary so long as that Subsidiary's
investment in any such joint ventures or partnerships is not in excess of
$100,000 individually and not in excess of $500,000 in aggregate.

                  5.10. Investment Company Act. Neither the Company nor its
Subsidiaries is an "investment company" as defined in the Investment Company Act
of 1940, as amended. The consummation of the transactions contemplated by the
Operative Documents does not and will not violate any provision of such Act or
any rule, regulation or order issued by the Commission thereunder. Immediately
following the Closing and each purchase of Securities hereunder, after giving
effect to the transactions contemplated by the Transaction Documents, neither
the Company nor any Person controlling, controlled by or under common control
with the Company or the Company will be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. Neither the Company
nor any of its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate
Commerce Act, or any federal or state statute or regulation limiting its ability
to incur Indebtedness.

                  5.11. Margin Regulations. None of the proceeds from the Loans
have been or will be used, directly or indirectly, for the purpose of purchasing
or carrying any Margin Stock, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any Margin
Stock, or for any other purpose which might cause any of the loans under this
Agreement to be considered a "purpose credit" within the meaning of Regulations
G, U or X of the Board of Governors of the Federal Reserve Board.

                  5.12. Taxes. The Company's federal tax identification number
is 38-3260790. Weinschel's federal tax identification number is 38-3260794.
KDI's federal tax identification number is 38-3283270. Inmet's federal tax
identification number is 38-3178661. All federal, state and local tax returns,
reports and statements required to be filed by or on behalf of the Company and
its Subsidiaries have been filed with the appropriate governmental agencies in
all jurisdictions in which such returns, reports and statements are required to
be filed, and all taxes (including real property taxes) and other charges shown
to be due and payable have been timely paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for nonpayment
thereof, except to the extent such taxes are the subject of a Permitted Contest.
All state and local sales and use taxes required to be paid by the Company or
any of its Subsidiaries have been paid, except to the extent such taxes are the
subject of a Permitted Contest. All federal and state returns have been filed by
the Company and its Subsidiaries for all periods for which returns were due with
respect to employee income tax withholding, social

<PAGE>   30

security and unemployment taxes, and the amounts shown thereon to be due and
payable have been paid in full or adequate provisions therefor have been made,
except to the extent such taxes are the subject of a Permitted Contest.

                  5.13. Brokers. Except as set forth in Schedule 5.13, no
broker, finder or other intermediary engaged by the Company or any of its
Subsidiaries has brought about the obtaining, making or closing of the
transactions contemplated by the Operative Documents, and neither the Company,
its Subsidiaries nor the Purchasers has or will have any obligation to any
Person (other than Persons engaged by the Purchasers) in respect of any finders'
or brokerage fees in connection herewith or therewith.

                 5.14. Related Transactions. The closing of the Acquisition and
the Refinancing will occur simultaneously with the issuance of the Notes and
purchase of the Warrants and Preferred Stock hereunder and, except as disclosed
in Schedule 3.19, neither the Company nor any of its Subsidiaries has waived,
without the consent of the Purchasers, any condition precedent to their
respective obligations to close as set forth in the Acquisition Documents or the
Refinancing Documents. True and complete copies of all of the Acquisition
Documents or the Refinancing Documents have been delivered to the Purchasers,
together with a true and complete copy of each document to be delivered at the
closing of the Acquisition and the Refinancing. Neither the Company nor any of
its Subsidiaries is in default under any Acquisition Document or Refinancing
Document.

                  5.15. Full Disclosure. None of the information (financial or
otherwise) furnished by or on behalf of the Company or its Subsidiaries to the
Lender or the Purchasers in connection with the consummation of the transactions
contemplated by any of the Operative Documents, when taken as a whole, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading in
the light of the circumstances under which such statements were made. All
financial projections delivered to the Lender and the Purchasers have been
prepared on the basis of the assumptions stated therein. The most recent
projections delivered to the Purchasers represent the Company's best estimate
(as of their date) of the Company's and its Subsidiaries future financial
performance and such assumptions are believed by the Company to be fair in light
of current business conditions.

                  5.16. Representations and Warranties Incorporated from Other
Operative Documents. Each of the representations and warranties made in the
Operative Documents by the Company or any of its Subsidiaries and each of the
parties thereto is true and correct in all material respects as of the Closing
Date, and such representations and warranties are hereby incorporated herein by
reference with the same effect as though set forth in their entirety herein, as
qualified therein.

                  5.17. Private Offering. The Company, with the assistance of
Banc One Capital Corporation, prepared a Confidential Memorandum, dated February
1995, describing the Company (including the proposed acquisition of the Seller)
and inviting interested parties to contact the Company for purposes of
conducting due diligence activities and discussing relevant

<PAGE>   31

financing proposals, and distributed such Confidential Memorandum to
approximately twenty-seven (27) Accredited Investors, including each of the
Purchasers. Subject to the forgoing, neither the Company nor any Person acting
on its behalf has offered the Notes, the Warrants, the Preferred Stock or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, any Person
other than the Purchasers and Lincoln Investment Management, Inc. Neither the
Company nor any Person acting on its behalf has taken, or will take, any action
which would subject the issuance or sale of the Notes or the Warrants or Warrant
Shares or Preferred Stock to Section 5 of the Securities Act, other than as
provided in the Warrants. No form of general solicitation or general advertising
was used by the Company or any of its representatives in connection with the
offer or sale of the Securities. No registration of the ecurities pursuant to
the provisions of the Securities Act or any State Regulatory Law will be
required by the offer, sale or issuance of the Securities pursuant to this
Agreement.

                  5.18. Capitalization. Set forth on Schedule 5.18 is a schedule
of the capitalization of the Company as of the Closing Date, after giving effect
to the transactions contemplated to take place on the Closing Date and the
issuance of the Warrant Shares upon exercise of the Warrants, specifying each
class of interest held and the amount and holder thereof. The Warrant Shares are
equal in value to thirteen percent (13.0%) of the Common Stock (on a fully
diluted basis) as of the Closing Date. As of the Closing Date, all outstanding
shares of capital stock of the Company will be duly authorized and validly
issued, fully paid, nonassessable and free and clear of any Lien created by the
Company. Except as described in Schedule 5.18, (a) no other class of capital
stock or other ownership interests of the Company are authorized or outstanding
and (b) the Company has no outstanding rights (either preemptive or other) or
options to subscribe for or purchase from the Company, or any warrants or other
agreements providing for or requiring the issuance by the Company of, any of its
capital stock or any securities convertible into or exchangeable for its capital
stock.

                  5.19. Senior Loan Documents. The Company has delivered to the
Purchasers true, complete and correct copies of the Senior Loan Documents
together with all amendments, modifications and supplements thereto. Such
documents (including the schedules and exhibits thereto) comprise full and
complete copies of all material agreements between the parties thereto with
respect to the subject matter thereof and all transactions related thereto, and
there are no material agreements or understandings, oral or written, or material
side agreements not contained therein that relate to or modify the substance
thereof.

                  5.20. Operative Documents.  The Company has delivered to the
Purchasers true, complete and correct copies of the Operative Documents together
with all amendments, modifications and supplements thereto.

                  5.21. Small Business Matters. The Company, together with its
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
ss.121.103), is a "small business concern" within the meaning of Section
121.301(c)(1), Title 13, Code of Federal Regulations, and as otherwise required
by the applicable provisions of Part 121 thereof. The information regarding the
Company and its affiliates set forth in the Small Business Administration Form

<PAGE>   32

480, Form 652 and Part A of Form 1031 delivered at the Closing (or promptly
thereafter) is accurate and complete. Copies of such forms shall have been
completed and executed by the Company and delivered to the Purchasers at the
Closing together with a written statement of the Company regarding their planned
use of the proceeds from the sale of the Notes, the Preferred Stock and the
Warrants. Neither the Company nor any Subsidiary presently engages in, and it
shall not hereafter engage in, any activities, nor shall the Company or any
Subsidiary use directly or indirectly the proceeds from the sale of the Notes,
the Preferred Stock and the Warrants hereunder for any purpose, for which a
"small business investment company" is prohibited from providing funds by the
Small Business Investment Act of 1958 and the regulations thereunder (including
Title 13, Code of Federal Regulations, ss.107.720).

                  5.22.  Compliance with Environmental Requirements; No
Hazardous Materials. After giving effect to the Acquisition and except as
provided on Schedule 5.22:

                           (a) Other than in compliance in all material respects
         with all applicable Environmental Laws, no Hazardous Materials have
         been released into the environment, or deposited, discharged, placed or
         disposed of at, on, or under any properties now or previously owned,
         leased or operated by the Company or any of its Subsidiaries. No
         portion of any such property is being used, or has been used at any
         previous time, for the disposal, storage, treatment, processing or
         other handling of "hazardous wastes" as defined in RCRA (other than
         processing or handling incidental to the generation of such hazardous
         wastes or the storage of such wastes for a period of less than 180
         days, in each case in compliance in all material respects with all
         applicable Environmental Laws), nor is any such property affected by
         any Hazardous Materials Contamination.

                           (b) No asbestos or asbestos-containing materials are
         present on any of the properties now or previously owned, leased or
         operated by the Company or any of its Subsidiaries in a condition that
         would reasonably be expected to result in a material liability to the
         Company or its Subsidiaries.

                           (c) No polychlorinated biphenyls are located on or in
         any properties now or previously owned, leased or operated by the
         Company or any of its Subsidiaries, in the form of electrical
         transformers, fluorescent light fixtures with ballasts, cooling oils or
         any other device or form other than any polychlorinated biphenyls that
         would not reasonably be expected to result in a material liability to
         the Company or its Subsidiaries.

                           (d) No underground storage tanks are located on any
         properties now or previously owned, leased or operated by the Company
         or any of its Subsidiaries, or were located on any such property and
         subsequently removed or filled, other than any such tanks that would
         not reasonably be expected to result in a material liability to the
         Company or its Subsidiaries.

                           (e) No notice, notification, demand, request for
         information, complaint, citation, summons, investigation,
         administrative order, consent order and agreement, litigation or
         settlement with respect to Hazardous Materials or Hazardous

<PAGE>   33

         Materials Contamination (each, an "Environmental Claim") has been
         received by the Company, nor to the Company's knowledge, is any such
         Environmental Claim proposed, threatened or anticipated with respect
         to or in connection with the operation of any properties now or
         previously owned, leased or operated by the Company or any of its
         Subsidiaries. All such properties and their existing and prior uses
         comply and at all times have complied in all material respects with
         any applicable governmental requirements relating to environmental
         matters or Hazardous Materials. There is no condition on any of such
         properties which is in violation in any material respect of any
         applicable governmental requirements relating to Hazardous Materials,
         and neither the Company nor any of its Subsidiaries has received any
         communication from or on behalf of any governmental authority that any
         such condition exists. None of such properties nor any property to
         which the Company and or any of its Subsidiaries has, directly or
         indirectly, transported or arranged for the transportation of any
         material is listed or, to the Company's knowledge, proposed for listing
         on the National Priorities List promulgated pursuant to CERCLA, on
         CERCLIS (as defined in CERCLA) or on any similar federal, state or
         foreign list of sites requiring investigation or cleanup, nor, to the
         knowledge of the Company, is any such property anticipated or
         threatened to be placed on any such list.

                           (f) There has been no environmental investigation,
         study, audit, test, review or other analysis conducted of which the
         Company has knowledge in relation to the current or prior business of
         the Company or any of the Company's Subsidiaries or any property or
         facility now or previously owned, leased or operated by the Company or
         any of its Subsidiaries which has not been delivered to the Purchaser
         at least five days prior to the date hereof.

                           (g) For purposes of this Section 5.22, the terms
         "Company" and "Subsidiary" shall include any business or business
         entity (including a corporation) which is, in whole or in part, a
         predecessor of the Company or any Subsidiary.

                           (h) For purposes of this Section 5.22, any
         representation or warranty made with respect to properties not
         presently owned, leased or operated by the Company or any of its
         Subsidiaries (other than the representations and warranties made in the
         first sentence of clause (e) of this Section 5.22 and in clause (f) of
         this Section 5.22) shall be limited to conditions existing, activities
         occurring or compliance with governmental requirements during the
         period of such ownership, leasing or operation.

                  5.23. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any contribution or payment to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code, or
(iii) incurred any liability under Title IV of ERISA other

<PAGE>   34

than a liability to the PBGC for premiums under Section 4007 of ERISA.
<PAGE>   35
                                    ARTICLE 6
       Representations and Warranties of the Purchasers as of Closing Date

                  Hanifen represents and warrants that it was not formed for the
specific purpose of acquiring the Securities pursuant to this Agreement. In
addition, each Purchaser hereby severally, and not jointly, represents and
warrants as of the Closing Date with respect to itself as follows:

                  6.01. Existence; Authorization; No Contravention. Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. The execution, delivery
and performance by such Purchaser of this Agreement and the transactions
contemplated hereby: (i) is within such Purchaser's power and authority and has
been duly authorized by all necessary action of such Purchaser; (ii) does not
contravene the terms of such Purchaser's organizational documents (if any) or
any amendment thereof; (iii) will not violate, conflict with or result in any
breach or contravention of or the creation of any Lien under, any Contractual
Obligation of such Purchaser, or any order or decree directly relating to such
Purchaser; and (iv) will not violate any Requirement of Law or any Contractual
Obligation of such Purchaser.

                  6.02. Binding Effect. This Agreement has been duly executed
and delivered by such Purchaser, and this Agreement constitutes the legal, valid
and binding obligation of such Purchaser enforceable against it in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.

                  6.03. Investment Representation.

                           (a) Such Purchaser represents and warrants to the
         Company that such Purchaser is acquiring the Securities for investment,
         and not with a view to selling or otherwise distributing the
         Securities; provided, however, that the disposition of such Purchaser's
         property shall at all times be and remain in such Purchaser's control.

                           (b) Such Purchaser understands that the Securities
         have not been registered under the Securities Act, on the grounds that
         the offer and sale of the Securities to the Purchasers are exempt from
         the registration requirements of the Securities Act under Section 4(2)
         thereof as a transaction not involving any public offering of the
         Securities or under any State Regulatory Law. Such Purchaser
         understands that the Company's reliance on such exemption is predicated
         in part on the representations of such Purchaser which are contained
         herein.

                           (c) Such Purchaser understands that such Purchaser
         must bear the economic risk of its investment in the Securities for an
         indefinite period of time because the Securities have not been
         registered under the Securities Act and, therefore, cannot be sold
         unless they are subsequently registered under the Securities Act or an
         exemption from such registration is available.

<PAGE>   36

                  6.04.  Accredited Investor.  Such Purchaser represents and
warrants to the Company that it is an Accredited Investor.

                                    ARTICLE 7
     Fees, Expenses and Indemnities; General Provisions Relating to Payments

                  7.01.  Closing Fees.  On the Closing Date, the Company shall
pay to the Purchasers a fee in an aggregate amount equal to $150,000 less the
amount of the deposit fee previously paid by the Company to the Purchaser
($20,000).

                  7.02.  Computation of Interest.  All interest hereunder and
under the Notes shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.

                  7.03.  General Provisions Regarding Payments. All payments
(including prepayments) to be made by the Company under any Transaction
Document, including payments of principal of and premium (if any) and interest
on the Notes, fees, expenses and indemnities, shall be made without set-off or
counterclaim and in immediately available funds. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day and, with respect to payments of
principal, the interest thereon shall be payable at the then applicable rate
during such extension. The Company shall make all payments in immediately
available funds to each of the Purchaser's Payment Account before 2:00 p.m.
(Cleveland, Ohio Time) on the date when due.

                  7.04.  Indemnification.

                           (a) General. In addition to all other sums due
         hereunder or provided for in this Agreement, the Company agrees to
         indemnify and hold harmless each of the Purchasers and their affiliates
         and their respective officers, directors, agents, employees,
         subsidiaries, partners and controlling persons (each, an "Indemnified
         Party") to the fullest extent permitted by law from and against any and
         all losses, claims, damages, expenses (including reasonable fees,
         disbursements and other charges of counsel, including the reasonable
         allocation of the compensation, costs and expenses of in-house counsel,
         based upon time spent) or other liabilities (collectively,
         "Liabilities") resulting from or arising out of any breach of any
         representation or warranty, covenant or agreement of the Company in
         this Agreement, the Notes, the Warrants or the Preferred Stock,
         including, without limitation, the failure to make payment when due of
         amounts owing pursuant to the Notes on the due date thereof (whether at
         the scheduled maturity, by acceleration or otherwise) or any legal,
         administrative or other actions (including actions brought by the
         Purchasers or the Company or any equity holders of the Company or
         derivative actions brought by any Person claiming through or in the
         Company's name), proceedings or investigations (whether formal or
         informal), or written threats thereof, based upon, relating to or
         arising out of the Transaction Documents, the transactions contemplated
         thereby, or Indemnified Party's role therein or in the transactions
         contemplated thereby; provided, however, that the Company shall not be
         liable under this Section 7.04 to an

<PAGE>   37

         Indemnified Party: (a) for any amount paid in settlement of claims
         without the Company's consent (which consent shall not be unreasonably
         withheld), (b) to the extent that it is finally judicially determined
         that such Liabilities resulted from the willful misconduct or gross
         negligence of such Indemnified Party, or (c) to the extent that it is
         finally judicially determined that such Liabilities resulted from the
         material breach by such Indemnified Party of any representation,
         warranty, covenant or other agreement of such Indemnified Party
         contained in this Agreement; provided, further, that if and to the
         extent that such indemnification is unenforceable for any reason, the
         Company shall make the maximum contribution to the payment and
         satisfaction of such indemnified liability which shall be permissible
         under applicable laws. In connection with the obligation of the Company
         to indemnify for expenses as set forth above, the Company further
         agrees, upon presentation of appropriate invoices containing reasonable
         detail, to reimburse each Indemnified Party for all such expenses
         (including reasonable fees, disbursements and other charges of counsel)
         as they are incurred by such Indemnified Party; provided, however, that
         if an Indemnified Party is reimbursed hereunder for any expenses, such
         reimbursement of expenses shall be refunded to the extent it is finally
         judicially determined that the Liabilities in question resulted
         primarily from (i) the willful misconduct or gross negligence of such
         Indemnified Party or (ii) the material breach by such Indemnified Party
         of any representation, warranty, covenant or other agreement of such
         Indemnified Party contained in this Agreement.

                           (b) Notification. Each Indemnified Party under this
         Section 7.04 will, promptly after the receipt of notice of the
         commencement of any action, investigation, claim, or other proceeding
         against such Indemnified Party in respect of which indemnity may be
         sought from the Company under this Section 7.04, notify the Company in
         writing of the commencement thereof. The omission of any Indemnified
         Party so to notify the Company of any such action shall not relieve the
         Company from any liability which it may have to such Indemnified Party
         (a) other than pursuant to this Section 7.04 or (b) under this Section
         7.04 unless, and only to the extent that, such omission actually
         prejudices the Company's substantive rights or defenses. In case any
         such action, claim or other proceeding shall be brought against any
         Indemnified Party and it shall notify the Company of the commencement
         thereof, the Company shall be entitled to assume the defense thereof at
         its own expense, with counsel satisfactory to such Indemnified Party in
         its reasonable judgment; provided, however, that any Indemnified Party
         may, at its own expense, retain separate counsel to participate in such
         defense. Notwithstanding the foregoing, in any action, claim or
         proceeding in which the Company, on the one hand, and an Indemnified
         Party, on the other hand, is, or is reasonably likely to become, a
         party, such Indemnified Party shall have the right to employ separate
         counsel at the Company's expense and to control its own defense of such
         action, claim or proceeding if, in the reasonable opinion of counsel to
         such Indemnified Party, a conflict or potential conflict exists between
         the Company, on the one hand, and such Indemnified Party, on the other
         hand, that would make such separate representation advisable. The
         Company agrees that it will not, without the prior written consent
         (which consent shall not unreasonably be withheld) of any Indemnified
         Party, settle, compromise or consent to the entry of any judgment in
         any pending or threatened claim, action or proceeding relating to the
         matters

<PAGE>   38

         contemplated hereby (if such Indemnified Party is a party thereto or
         has been actually threatened to be made a party thereto) unless such
         settlement, compromise or consent includes an unconditional release of
         such Indemnified Party from all liability arising or that may arise out
         of such claim, action or proceeding. The Company shall not be liable
         for any settlement of any claim, action or proceeding effected against
         an Indemnified Party without its written consent, which consent shall
         not be unreasonably withheld. The rights accorded to Indemnified
         Parties hereunder shall be in addition to any rights that any
         Indemnified Party may have at common law, by separate agreement or
         otherwise.

                  7.05. Registration Rights Agreement. Notwithstanding anything
to the contrary in Section 7.04, the indemnification and contribution provisions
of the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.

                                    ARTICLE 8
                              Affirmative Covenants

                  Until the payment by the Company of all principal of and
interest on the Notes and all other amounts due at the time of payment of such
principal and interest to the Purchasers under this Agreement or the Notes,
including, without limitation, all fees, expenses and amounts due at such time
in respect of indemnity obligations under Article 7, and for so long as any of
the Warrants or the Preferred Stock remain outstanding, the Company hereby
covenants and agrees with the Purchasers as follows:

                  8.01. Financial Statements and Other Reports.  The Company
will furnish to the Purchasers:

                           (a) as soon as available, but in any event within 90
         days after the end of each fiscal year of the Company a copy of the
         audited Consolidated and unaudited Consolidating financial statements
         of the Company as at the end of such year and the related audited
         statements of income, accumulated earnings, and cash flows for such
         year, setting forth in each case in comparative form the figures for
         the previous year, certified as being fairly stated in all material
         respects by one of the "Big Five" certified public accounting firms or
         by another nationally recognized certified public accountant reasonably
         satisfactory to the Purchasers; such financial statements shall be
         complete and correct in all material respects and shall be prepared in
         reasonable detail and in accordance with GAAP throughout the periods
         reflected therein and with prior periods;

                           (b) as soon as available, but in any event not later
         than 30 days after the end of each month, the unaudited Consolidated
         and Consolidating financial statements of the Company as at the end of
         such month and the related unaudited statements of income, accumulated
         earnings and cash flows of the Company for the portion of the fiscal
         year through the end of such month, setting forth in each case in
         comparative form the figures for the previous year, and certified by a
         Responsible Officer

<PAGE>   39

         as being fairly stated in all material respects. Such financial
         statements shall be complete and correct in all material respects and
         shall be prepared in reasonable detail and in accordance with GAAP
         throughout the periods reflected therein and with prior periods
         (except as approved by such officer and disclosed therein), provided
         however that such financial statements will not be required to include
         footnotes and will be subject to year-end adjustments;

                           (c) not later than January 31 of each year, financial
         projections on a month by month basis for the then current calendar
         year in form reasonably acceptable to the Purchasers;

                           (d) such information as required by the terms
         and conditions of any Senior Security Documents;

                           (e) together with each delivery of financial
         statements pursuant to (a) above, a written statement by the
         independent public accountants giving the report thereon (i) stating
         that their audit examination has included a review of the terms of this
         Agreement as it relates to accounting matters, (ii) stating whether, in
         connection with their audit examination, any Default has come to their
         attention, and if such a condition or event has come to their
         attention, specifying the nature and period of existence thereof,
         provided that the failure to deliver the certificate described in this
         clause (ii) as to Defaults shall not be a default if the Company has
         used its best commercially reasonable efforts to obtain such a
         certification, and (iii) stating that based on their audit examination
         nothing has come to their attention which causes them to believe that
         the information contained in the certificates delivered therewith
         pursuant to Section 8.08 is not correct and that the matters set forth
         in the compliance certificate delivered therewith pursuant to clause
         (a) of Section 8.08 for the applicable Fiscal Year are not stated in
         accordance with the terms of this Agreement;

                           (f) promptly upon receipt thereof, copies of all
         reports submitted to the Company and any of its Subsidiaries by
         independent public accountants in connection with each annual, interim
         or special audit of the financial statements of the Company or any of
         its Subsidiaries made by such accountants, including the comment letter
         submitted by such accountants to management in connection with their
         annual audit;

                           (g) promptly upon their becoming available, copies of
         (i) all financial statements, reports, notices and proxy statements
         sent or made available generally by the Company or its Subsidiaries to
         all holders of any class of securities, (ii) all regular and periodic
         reports and all registration statements and prospectuses filed by the
         Company or any of its Subsidiaries with any securities exchange or with
         the Commission or any governmental authority succeeding to any of its
         functions, and (iii) all press releases and other statements made
         available generally by the Company or any of its Subsidiaries to the
         public concerning material developments in the business of the Company
         or any of its Subsidiaries;

<PAGE>   40

                           (h) within 30 days after the conclusion of each
         Fiscal Year, the Company's and each of its Subsidiaries' annual
         operating and Capital Expenditure budgets and cash flow forecast for
         the following Fiscal Year presented on a monthly basis, which shall be
         in a format reasonably consistent with projections, budgets and
         forecasts theretofore provided to the Purchasers;

                           (i) promptly after the Company's receipt of the same,
         a copy of each bona fide offer to purchase or sell any securities of
         the Company or any securities of any of the Company's Subsidiaries for
         an aggregate consideration greater than $100,000 or, in the case of
         securities of the Company, for a consideration per share less than the
         Exercise Price then in effect or less than the Fair Market Value of the
         Company per share of outstanding Common Stock on a Fully Diluted Basis
         (as the foregoing terms are defined in the Warrants), or the material
         assets of the Company or the material assets of any of the Company's
         Subsidiaries (which has assets having a fair market value of $100,000
         or more, or which has annual gross income of $250,000 or more) with
         respect to which the Company's management gives serious consideration;
         and

                           (j) promptly, and in form to be reasonably
         satisfactory to the Purchasers, such other information as the
         Purchasers may reasonably request from time to time.

                  8.02. Payment of Obligations. The Company shall pay, discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all of its material obligations, excluding taxes, of whatever
nature, except where the amount or validity thereof is subject to a Permitted
Contest and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company.

                  8.03. Insurance. The Company shall maintain, and cause the
Subsidiaries to maintain, insurance coverage on their physical assets and
against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature, and in the event of
acquisition of additional property, real or personal, or of incurrence of
additional risks of any nature, increase such insurance coverage in such manner
and to such extent as prudent business judgment and present practice would
dictate. The Company shall also furnish to the Purchasers from time to time upon
reasonable request the policies under which such insurance is issued,
certificates of insurance and such other information relating to such insurance
as the Purchasers may reasonably request. The Company shall maintain in effect
at all times a keyman life insurance policy naming the Company as the
beneficiary, insuring the life of John L. Smucker in an amount not less than
$3,000,000 in form and substance, and with an insurer, satisfactory to the
Purchasers.

                  8.04. Inspection of Property, Books and Records. The Company
shall permit, and cause the Subsidiaries to permit, the Purchasers at the
Purchaser's expense and through their respective authorized attorneys,
accountants and representatives, to examine the Company's and the Subsidiaries'
books, accounts, records, ledgers and assets of every kind and description at
all reasonable times upon reasonable prior oral or written request of a
Purchaser, and to discuss their respective affairs, finances and accounts with
their respective officers, employees and

<PAGE>   41

independent public accountants, all at such reasonable times and as often as
may reasonably be desired, provided that following the occurrence and during the
continuance of an Event of Default, such examinations shall be at the Company's
cost and expense. The Company will keep, and will cause each of its Subsidiaries
to keep, proper books of record and account in which full, true and correct
entries shall be made of all material dealings and transactions in relation to
its business and activities.

                  8.05.  Notice.  The Company shall promptly give notice to the
         Purchasers of:

                           (a) the occurrence of any Potential Default or
         Event of Default of which the Company or any Subsidiary has knowledge;

                           (b) any (i) default or event of default under any
         Contractual Obligation of the Company or any Subsidiary or (ii)
         litigation, investigation or proceeding which may exist at any time
         between the Company or any Subsidiary and any governmental authority or
         any other third party, which in the case of either (i) or (ii), if not
         cured or if it is reasonably likely to be adversely determined, as the
         case may be, would have a Material Adverse Effect;

                           (c) the following events, as soon as possible and in
         any event within thirty (30) days after the Company knows thereof and
         to the extent the same would have a Material Adverse Effect: (i) the
         occurrence of any "reportable event" as defined in ERISA with respect
         to any Pension Plan, or any withdrawal from or the termination,
         reorganization or insolvency of any Multiemployer Plan or (ii) the
         institution of proceedings or the taking of any other action by the
         Pension Benefit Guaranty Corporation or Borrowers or any Commonly
         Controlled Entity or any Multiemployer Plan with respect to the
         withdrawal from or the terminating, reorganization or insolvency of any
         Pension Plan;

                           (d) any event which is reasonably likely to have
         Material Adverse Effect;

                           (e) promptly after becoming aware of the taking by
         the Internal Revenue Service or any foreign taxing jurisdiction of a
         written tax position which could reasonably be expected to have a
         material adverse effect on the business or financial condition of the
         Company and its Subsidiaries (taken as a whole) (or any such tax
         position taken by the Company) setting forth the details of such
         position and the financial impact thereof; and

                           (f) not less than ten (10) days prior to the proposed
         effective date thereof, copies of any proposed material amendments,
         restatements or other modification to the Acquisition Documents.

                  Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what

<PAGE>   42

action the Company proposes to take with respect thereto.

                  8.06. Conduct of Business and Maintenance of Licenses.  The
Company will continue, and will cause each of the Subsidiaries to continue, to:

                        (a) preserve, renew and keep in full force and  effect
         its existence.

                        (b) take all reasonable action to maintain all rights,
         privileges and franchises necessary or desirable in the normal conduct
         of its business.

                  8.07. Compliance with Laws. The Company will comply, and cause
each of its Subsidiaries to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including Environmental Laws and ERISA and the rules and
regulations thereunder), except where the necessity of compliance therewith is
the subject of a Permitted Contest.

                  8.08. Certificates. The Company shall furnish to the
Purchasers concurrently with the delivery of each of the financial statements
required by Section 8.01(a) and (b) (and with respect to (b) for the months of
March, June, September and December) hereof, a statement prepared and certified
by the chief financial officer of the Company (or in such officer's absence, a
responsible senior officer of the Company) (a) setting forth all computations
necessary to show compliance by the Company with the financial covenants set
forth in Sections 8.16, 8.17, 8.18 and 8.19 as of the date of such financial
statements, (b) stating that as of the date thereof, no condition or event which
constitutes an Event of Default hereunder or which with the running of time
and/or the giving of notice would constitute an Event of Default hereunder has
occurred and is continuing, or if any such event or condition has occurred and
is continuing or exists, specifying in detail the nature and period of existence
thereof and any action taken with respect thereto taken or contemplated to be
taken by the Company and (c) stating that the signer has personally reviewed
this Agreement and that such certificate is based on an examination reasonably
sufficient to assure that such certificate is accurate.

                  8.09. Use of Proceeds. The Company will use the proceeds of
the Loans borrowed on the Closing Date solely to satisfy its existing Debt, for
payment of transaction fees and expenses incurred in connection with the
Transaction Documents and for working capital purposes.

                  8.10. Further Assurances.  The Company will, at its own cost
and expense, cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may from time to
time be necessary or as the Purchasers may from time to time reasonably request
in order to carry out the intent and purposes of the Transaction Documents and
the transactions contemplated thereby.

                  8.11. Board Meetings. The Company will hold at least four
regular meetings of the Board of Directors during each calendar year at such
times and at such places (or via telephone conference) as shall be determined by
the Board of Directors from time to time. The

<PAGE>   43

Company will notify the Purchasers of all meetings and actions by written
consent of its board of directors at the same time and in the same manner as
notice of any meetings of such board is required to be given to its directors
who do not waive such notice (or, if such action requires no notice, then (if
practicable) 10 days written notice thereof describing the matters upon which
action is to be taken). The Purchasers shall have the right to send two
representatives selected by them to each such meeting, who shall be permitted to
attend, at the expense of the Company, such meeting and any adjournments
thereof, provided that in no event shall the holders of the Securities be
entitled to send more than two representatives in the aggregate (in addition to
the number of Directors to which the Purchasers are entitled) pursuant to the
terms of this Agreement, the Warrants or the Stockholder Agreement.

                  8.12. SBIC Regulatory Provisions.

                           (a) The Company hereby acknowledges that each
         Purchaser has informed it that such Purchaser is a "small business
         investment company" under the Small Business Investment Act of 1958, as
         amended, and the regulations thereunder, including Title 13, Code of
         Federal Regulations, Part 107.

                           (b) At the same time the Company delivers its annual
         audited financial statements under Section 8.01(b) hereof and at any
         time an SBIC Holder (as defined below) may reasonably request, the
         Company shall deliver to such Purchaser and each other holder of Notes
         or underlying Common Stock which informs the Company in writing it is
         an SBIC (an "SBIC Holder") a written statement certified by its
         president or chief financial officer describing in reasonable detail
         the use of the proceeds of the financing hereunder by the Company and
         its Subsidiaries. In addition to any other rights granted hereunder,
         the Company shall grant each SBIC Holder and the United States Small
         Business Administration (the "SBA") access to its and its Subsidiaries'
         records for the purpose of verifying the use of such proceeds and the
         Company's status as a "small concern."

                           (c) Promptly after the end of each Fiscal Year (but
         in any event prior to 20 days thereafter), the Company shall deliver to
         each SBIC Holder, specifying the full-time equivalent jobs created or
         retained in connection with the investment, the impact of the
         investment on the businesses of the Company in terms of expanded
         revenue and taxes and other economic benefits resulting from the
         investment (including, but not limited to, technology development or
         commercialization, minority business development, urban or rural
         business development and expansion of exports).

                  8.13. Reservation of Shares. The Company shall at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue or delivery upon exercise of the Warrants as provided therein,
the maximum number of shares of Common Stock that may be issuable or deliverable
upon such exercise. Such shares of Common Stock shall, when issued and delivered
in accordance with the Warrants, be duly and validly issued and fully paid and
non-assessable. The Company shall issue such Common Stock in accordance with the
provisions of the Warrants and shall otherwise comply with the terms thereof.

<PAGE>   44

                  8.14.  Compliance with Agreements.  The Company shall comply,
        and shall cause  each of its Subsidiaries to comply, in all material
        respects with each Operative Document to which it is a party.

                  8.15.  Environmental Provisions.

                           (a) The Company shall comply, and cause its
         Subsidiaries to comply, in all material respects with all applicable
         Environmental Laws, except where the failure to so comply would not
         have a Material Adverse Effect.

                           (b) The Company shall provide to the Purchasers,
         promptly after receipt, copies of any correspondence, notice, pleading,
         citation, indictment, complaint, order, decree, or other document from
         any source asserting or alleging a circumstance or condition which
         requires or may require a financial contribution by the Company or any
         Subsidiary or a cleanup, removal, remedial action, or other response by
         or on the part of the Company or any Subsidiary under applicable
         Environmental Laws or which seeks damages or civil, criminal or
         punitive penalties from the Company for an alleged violation of
         Environmental Laws.

                           (c) The Company shall promptly notify the Purchasers
         in writing as soon as the Company becomes aware of any condition or
         circumstance which makes the environmental warranties contained in this
         Agreement incomplete or inaccurate in any material respect as of any
         date.

                           (d) In the event of any condition or circumstance
         that makes any environmental warranty, representation and/or agreement
         contained herein incomplete or inaccurate in any material respect as of
         any date regarding any real property owned or operated by the Company
         or any Subsidiary, the Company shall, at the reasonable request of the
         Purchasers, at the Company's sole expense, retain an environmental
         professional consultant, reasonably acceptable to the Purchasers, to
         conduct an environmental audit regarding the changed condition and/or
         circumstance and any environmental concerns arising from that changed
         condition and/or circumstance in form and scope recommended by such
         consultant in light of the relevant facts and circumstances. A copy of
         the environmental consultant's report will be promptly delivered to the
         Purchasers and the Company upon completion.

                           (e) If at any time the Company or any Subsidiary,
         directly or indirectly through any professional consultant or other
         representative, determines to undertake an environmental audit,
         assessment or investigation, then the Company shall promptly provide
         the Purchasers with written notice of the initiation of the
         environmental audit, fully describing the purpose and intended scope of
         the environmental audit. Upon receipt, the Company will promptly
         provide to the Purchasers copies of all final written findings and
         conclusions of any such environmental investigation. Preliminary
         written findings and conclusions shall be provided if final reports
         have not been completed and

<PAGE>   45

         delivered to the Purchasers within 60 days following completion of the
         preliminary findings and conclusions.

                           (f) The Company will promptly comply with any
         governmental requirements requiring the removal, treatment or disposal
         of any Hazardous Materials or Hazardous Materials Contamination and
         provide evidence satisfactory to the Purchasers of such compliance,
         except where such compliance is the subject of a Permitted Contest."

                  8.16. Maintain Consolidated Adjusted Net Worth.  Maintain as
of the end of each fiscal quarter a Consolidated Adjusted Net Worth of not less
than the following amounts during the periods specified below:

<TABLE>
<S>                                                              <C>
         from the Closing Date through December 30, 1999.......  $17,000,000
         from December 31, 1999 through December 30, 2000......  $17,000,000
         from December 31, 2000 through December 30, 2001......  $17,850,000
         from December 31, 2001 through December 30, 2002......  $19,550,000
         from December 31, 2002 through December 30, 2003......  $22,100,000
         from December 31, 2003 and thereafter.................  $25,075,000
</TABLE>

                  8.17. Maintain Total Debt to EBITDA Ratio.  Maintain as of the
end of each fiscal quarter a Total Debt to EBITDA Ratio of not more than the
following amounts during the periods specified below:

<TABLE>
<S>                                                              <C>
         from the Closing Date through December 30, 1999.......  4.6 to 1.0
         from December 31, 1999 through December 30, 2000......  4.6 to 1.0
         from December 31, 2000 through December 30, 2001......  4.31 to 1.0
         from December 31, 2001 through December 30, 2002......  4.03 to 1.0
         from December 31, 2002 through December 30, 2003......  4.03 to 1.0
         from December 31, 2003 and thereafter.................  4.03 to 1.0
</TABLE>

                  8.18. Maintain Fixed Charge Coverage Ratio.  Maintain as of
the end of each fiscal quarter of Company a Fixed Charge Coverage Ratio of not
less than the following amounts during the periods specified below:

<TABLE>
<S>                                                               <C>
         from the Closing Date through December 30, 1999.......   .89 to 1.0
         from December 31, 1999 through December 30, 2000......   .89 to 1.0
         from December 31, 2000 through December 30, 2001......   .89 to 1.0
         from December 31, 2001 through December 30, 2002......   .89 to 1.0
         from December 31, 2002 through December 30, 2003......   .94 to 1.0
         from December 31, 2003 and thereafter.................   .98 to 1.0
</TABLE>

                  8.19. Maintain Senior Debt to EBITDA Ratio.  Maintain as of
the end of each fiscal quarter a Senior Debt to EBITDA Ratio of not more than
the following during the periods specified below:

<PAGE>   46
<TABLE>
<S>                                                              <C>
         from the Closing Date through December 30, 1999.......  3.74 to 1.0
         from December 31, 1999 through December 30, 2000......  3.74 to 1.0
         from December 31, 2000 through December 30, 2001......  3.45 to 1.0
         from December 31, 2001 through December 30, 2002......  3.16 to 1.0
         from December 31, 2002 through December 30, 2003......  3.16 to 1.0
         from December 31, 2003 and thereafter.................  3.16 to 1.0
</TABLE>

                  8.20. [INTENTIONALLY OMITTED.]

                  8.21  Taxes. The Company shall pay and discharge, and cause
each of its Subsidiaries to pay and discharge, all taxes and other governmental
charges, before the same shall become overdue, unless and to the extent only
that such payment is the subject of a Permitted Contest.

                  8.22  ERISA Notices.  The Company shall promptly notify the
Purchasers after the occurrence thereof in writing of any of the following
events:

                           (a) the termination of a Pension Plan pursuant
         to Subtitle C of Title IV of ERISA or otherwise;

                           (b) the appointment of a trustee by a United
         States District Court to administer a Pension Plan;

                           (c) the commencement by the Pension Benefit
         Guaranty Corporation, or any successor thereto of any proceeding to
         terminate a Pension Plan;

                           (d) the failure of a Pension Plan to satisfy the
         minimum funding requirements for any plan year as established in
         Section 412 of the Internal Revenue Code of 1954, as amended or any
         similar provision under the Internal Revenue Code of 1986, as amended;

                           (e) the withdrawal of Company or any Subsidiary
         from a Pension Plan; or

                           (f) a reportable event, within the meaning of
         Title IV of ERISA.

                                    ARTICLE 9
                               Negative Covenants

                  Until the payment by the Company of all principal of and
interest on the Notes and all other amounts due at the time of payment of such
principal and interest to the Purchasers under this Agreement or the Notes,
including, without limitation, all fees, expenses and amounts due at such time
in respect of indemnity obligations under Article 7, and for so long as any of
the Warrants or the Preferred Stock remain outstanding, the Company hereby
covenants and agrees

<PAGE>   47

with the Purchasers as follows:

                  9.01. Capital Stock. The Company shall not purchase, acquire,
issue or redeem any of its capital stock or make any material change in its
capital structure, except for redemptions of stock if at the time of such
redemption or after giving effect thereto no Potential Default or Event of
Default shall exist and be continuing. Other than the Preferred Stock currently
issued and outstanding, the Company shall not issue any capital stock that under
its articles of incorporation is entitled to a preference over the Common Stock
as to payment of dividends or distributions.

                  9.02. Consolidations, Mergers and Sales of Assets. Except as
permitted under Section 9.05, the Company shall not, and shall not permit any
Subsidiary to, enter into any merger or consolidation or sell, lease, transfer,
or dispose of all, substantially all, or any material part of its assets, except
in the ordinary course of business and except mergers of which the Company is
the surviving entity.

                  9.03. Guarantees. The Company shall not, and shall not permit
any Subsidiary to, guarantee, endorse, or otherwise become secondarily liable
for or upon the obligations of others, except (a) by endorsement for deposit in
the ordinary course of business, (b) guarantees to the Lenders or the
Purchasers, (c) unsecured Guarantees by the Company of the obligations of its
Subsidiaries to the extent the underlying obligations are permitted under this
Agreement, and (d) the corporate guaranty of the Company relative to the
obligations of its wholly owned Subsidiary, Inmet, under the Bank of Ann Arbor
credit facility (as described in REVISED SCHEDULE 9.04 attached to this
Agreement) provided that in no event shall such obligations under the Bank of
Ann Arbor credit facility exceed $2,830,000.

                  9.04. Debt.  The Company shall not, and shall not permit any
Subsidiary to, become or remain obligated for any indebtedness for borrowed
money, or for any indebtedness incurred in connection with the acquisition of
any property, real or personal, tangible or intangible, except:

                           (a) indebtedness to the Purchasers;

                           (b) indebtedness to the Lenders under the Credit
         Agreement in the aggregate principal amount not to exceed the sum of
         (i) the product of (A) $25,000,000 of term Debt minus the sum of all
         scheduled principal payments (scheduled as of the date the Credit
         Agreement is entered into by the parties thereto) multiplied by (B)
         1.30, plus (ii) the product of (A) $12,000,000 of revolving Debt
         multiplied by (B) 1.30;

                           (c) current unsecured trade payables and accrued
         liabilities arising in the ordinary course of the Company's or any
         Subsidiary's business, deferred income tax and purchase accounting
         reserves;

                           (d) purchase money indebtedness for the acquisition
         of fixed assets in an amount not to exceed $500,000 in the aggregate
         during any fiscal year of the Company

<PAGE>   48

        (determined on a combined basis for the Company and its Subsidiaries).

                           (e) existing indebtedness listed in attached
        REVISED SCHEDULE 9.04 attached to this Agreement.

                           (f) unsecured indebtedness of the Company to its
        wholly owned Material Subsidiaries or a wholly owned Material Subsidiary
        to another wholly owned Material Subsidiary or a wholly owned Material
        Subsidiary to the Company.

                           (g) other unsecured indebtedness not exceeding
        $100,000 in the aggregate at any time outstanding.

                           (h) indebtedness under any Interest Rate
        Protection Agreements.

                           (i) unsecured indebtedness of Densitron
        Microwave Limited or DML Microwave Limited under an overdraft line of
        credit in an amount not exceeding 500,000 Pounds Sterling in the
        aggregate at any time outstanding.

                           (j) unsecured indebtedness of DML Microwave
        Limited to MCE Europe, Inc. in an amount not exceeding 3,000,000 Pounds
        Sterling incurred to consummate the Acquisition and until June 30, 2000
        unsecured indebtedness of Densitron Microwave Limited to MCE Europe,
        Inc. in an amount not to exceed 2,000,000 Pounds Sterling incurred for
        working capital purposes.

                  9.05. Purchase of Assets. The Company shall not, and shall not
permit any Subsidiary to, purchase or otherwise acquire or become obligated for
the purchase of all or substantially all of the assets or business interests of
any person, firm or corporation or any shares of stock of any corporation,
trusteeship or association or in any other manner effectuate or attempt to
effectuate an expansion of present business by acquisition, other than Permitted
Acquisitions.

                  9.06. Investments. The Company shall not, and shall not permit
any Subsidiary to, make or allow to remain outstanding any investment (whether
such investment shall be of the character of investment in shares of stock,
evidences of indebtedness or other securities or otherwise) in, or any loans or
advances or extensions of credit to, any person, firm, corporation or other
entity or association, except:

                           (a) the Company's investment in its wholly owned

        Material Subsidiaries;

                           (b) loans and advances permitted under Section
        9.04(f) and 9.04(j) hereof;

                           (c) investments (other than loans or advances)
        by a wholly owned Material Subsidiary in another wholly owned

<PAGE>   49

         Material Subsidiary or a wholly owned Material Subsidiary in the
         Company;

                           (d)  investments of surplus cash in cash equivalents;

                           (e)  loans and advances to management employees made
         to enable them to purchase an equity interest in the Company not to
         exceed $150,000 in aggregate amount at any time outstanding;

                           (f)  sales on open account or in the ordinary course
         of business;

                           (g)  other loans, advances and investments not
         exceeding $500,000 in the aggregate at any time outstanding;

                           (h)  deposits made in the ordinary course of business
         in order to obtain goods and services; and

                           (i)  investments which constitute or are part of a
         Permitted Acquisition, including the equity investment by MCE Europe,
         Inc. in DML Microwave Limited in an amount not exceeding 2,000,000
         Pounds Sterling incurred in connection with the Acquisition.

                  9.07.  Negative Pledge.  The Company shall not, and shall not
permit any Subsidiary to, affirmatively pledge or mortgage any of their assets,
whether now owned or hereafter acquired, or create, suffer or permit to exist
any Lien thereon, except:

                           (a)  for the indebtedness for borrowed money
         permitted by Section 9.04(b);

                           (b)  the Permitted Liens;

                           (c)  the Liens described in REVISED SCHEDULE 5.06 to
         this Agreement; and

                           (d)  Liens upon fixed assets acquired by Company or a
         Subsidiary after the date of this Agreement (including by virtue of a
         Capital Lease) provided that (i) any such Lien is created solely for
         the purpose of securing indebtedness representing, or incurred to
         finance, the cost of the item of property subject thereto; (ii) the
         principal amount of the indebtedness secured by such Lien is initially
         at least 70% and does not exceed 100% of the fair value of the property
         at the time it was acquired, (iii) the Lien does not cover any other
         property other than such item of property, and (iv) the incurrence of
         the indebtedness secured by such Lien is permitted by Section 9.04(d)
         hereof.

                  9.08. Security Interest. The Company shall not, and shall not
permit any Subsidiary to, sell, assign, transfer or confer a security interest
in any account, contract, note, trade acceptance or other receivable, except to
the Lenders as permitted in Section 9.07(a).

<PAGE>   50

                  9.09. Business Purposes.  The Company shall not, and shall
not permit any Subsidiary to, materially alter the character of its businesses
from that conducted as of the date of this Agreement.

                  9.10. Extensions of Credit. The Company shall not, and shall
not permit any Subsidiary to, make loans, advances of credit or extensions of
credit to any of its officers, directors or shareholders or any member of their
immediate families or entity controlled by any of the foregoing or to any other
person, except for sales on open account or in the ordinary course of business
and except for loans and advances permitted pursuant to the provisions of
Section 9.06.

                  9.11. Distributions. The Company shall not, and shall not
permit any Subsidiary to, declare or pay any Restricted Payments (whether by
reduction of capital or otherwise) with respect to any shares of its stock,
except for (a) dividends by Subsidiaries to the Company, (b) dividends paid
during any fiscal year of the Company to the extent not exceeding five percent
(5%) of Consolidated Net Income for such fiscal year if at the time such
dividends are declared and paid and after giving effect thereto, no Event of
Default or Potential Default shall exist and be continuing, and (c) dividends or
redemptions with respect to the Preferred Stock, and purchases or redemptions of
the Warrants.

                  9.12. ERISA. The Company shall not, and shall not permit any
Subsidiary to, enter into, maintain, or make contributions to, directly or
indirectly, any defined benefit pension plan that is subject to ERISA except for
the KDI/Triangle Corporation Defined Benefit Plan (the "KDI Plan"). The Company
shall not, and shall not permit any of its Subsidiaries to:

                           (a) engage in any transaction in connection with
         which the Company or any of its Subsidiaries could reasonably be
         expected to be subject to any material liability arising from either a
         civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
         imposed by Section 4975 of the Code;

                           (b) terminate any Plan in a manner, or take any
         other action, which could result in any material liability of any
         member of the ERISA Group to the PBGC;

                           (c) fail to make full payment when due of all amounts
         which, under the provisions of any Plan, it is required to pay as
         contributions thereto, or permit to exist any accumulated funding
         deficiency, whether or not waived, with respect to any Plan;

                           (d) except for the KDI Plan, which had an unfunded
         past service liability of $538,475 as of January 1, 1998, permit the
         present value of all benefit liabilities under all Plans to exceed the
         fair market value of the assets of such Plans; or

                           (e) fail to make any material payments to any
         Multiemployer Plan that it may be required to make under any agreement
         relating to such Multiemployer Plan or any law pertaining thereto.

<PAGE>   51

         In addition, no member of the ERISA Group shall (i) fail to pay when
due any amount that it shall have become liable to pay under Title IV of ERISA,
(ii) cause or permit to exist any event by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated, or (iii) cause or permit there to occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to one or more Multiemployer Plans which could cause one or
more members of the ERISA Group to incur a current payment obligation.

                  9.13. Transactions with Affiliates. The Company shall not, and
shall not permit any Subsidiary to, enter into any transaction or series of
transactions with any Affiliate other than on terms and conditions as favorable
to the Company or Subsidiary, as the case may be, as would be obtainable in a
comparable arm's-length transaction with a person other than an Affiliate,
except transactions between the Company and any wholly owned Subsidiary.

                  9.14. Fiscal Year.  The Company shall not change, and shall
not permit any of its Subsidiaries to change, its fiscal year from a fiscal year
ending December 31.

                  9.15. Amendments or Waivers. Without the prior written consent
of the Purchasers, the Company will not, and will not permit any Subsidiary to,
agree to (a) any amendment to or waiver of or in respect of any of the Operative
Documents, excluding the Credit Agreement, or (b) any amendment to or waiver of
or in respect of the certificate of incorporation of the Company.
Notwithstanding the foregoing, the Company shall not, and shall not permit any
Subsidiary to, enter into any modification or amendment to the Credit Agreement
or Senior Security Documents to which it is a party (or permit the amendment or
modification thereof) that (i) makes less restrictive the advance rates and
formulae applicable to the Debt thereunder, (ii) relates to the payment of
dividends or other distributions with respect to capital stock, or (iii) adds
any new covenant, prepayment event or event of default prohibiting or limiting,
as such, changes in ownership of capital stock of the Company, the effect of
which will directly prohibit the exercise of the Warrants in whole or in part.

                  9.16. No Inconsistent Agreements; Amendments. Except with
respect to Article 11 of this Agreement, the Company shall not, and shall not
permit any of its Subsidiaries to, enter into any loan or other agreement, or
enter into any amendment or other modification to any currently existing
agreement, which by its terms prevents (a) the Company from paying the principal
of or premium, if any, or interest on the Notes at the times or in the amounts
as provided therein; (b) the Company from paying dividends on the Preferred
Stock or redeeming the Preferred Stock at the times or in the amounts as
provided therein; or (c) the Company or any Subsidiaries from otherwise
observing or performing any of its obligations under the Transaction Documents
to which it is a party.

                  9.17. Capital Expenditures. Make any Capital Expenditure
during any single fiscal year the aggregate amount of all Capital Expenditures
made by Company and its Subsidiaries during such period would exceed $2,500,000
provided, that Company and its Subsidiaries may make additional Capital
Expenditures in any annual period commencing January 1 in each case in an amount
equal to the excess of the maximum amount of Capital

<PAGE>   52

Expenditures specified above for the immediately previous annual period over the
amount of Capital Expenditures actually made in such period; and provided,
further, in calculating the limitation for purposes of this Section 9.17, the
Inmet Cap Ex shall be excluded.

                  9.18. Prepayment of Debts. The Company shall not, and shall
not permit any Subsidiary to, prepay, purchase, redeem or defease any Debt for
money borrowed or any Capital Leases excluding, subject to the terms hereof, any
indebtedness or liabilities of the Company arising under this Agreement, the
1999 Purchase Agreement or the Credit Agreement.

                                   ARTICLE 10
                                    Defaults

                  10.01. Events of Default.  If any one or more of the following
events (each an "Event of Default") shall occur and be continuing for any reason
whatsoever (whether voluntary or involuntary, by operation of law or otherwise):

                           (a) the Company shall fail to pay when due any
         principal of any Note or shall fail to pay any dividend or redemption
         payment on the Preferred Stock on the scheduled payment date, or shall
         fail to pay within two Business Days of the due date thereof any
         interest or premium on any Note, or any fees or any other amount
         payable hereunder;

                           (b) the Company shall fail to pay when due any
         principal of any Senior Note, or shall fail to pay when due any
         interest or premium on any Senior Note, or any fees or any other amount
         payable thereunder;

                           (c) the Company shall fail to observe or perform any
         covenant in Sections 8.13, 8.16 through 8.20, inclusive, or in Article
         9, or shall fail to observe or perform for 10 days any of the covenants
         or agreements of the Company set forth in Sections 8.01(a) or (b),
         8.03, 8.04, 8.05 or 8.08;

                           (d) the Company shall fail to observe or perform any
         covenant or agreement contained in this Agreement or any other
         Transaction Document to which it is a party (other than those covered
         by clause (a), (b) or (c) above) for 30 days after the earlier of the
         date written notice of such failure has been given to the Company by
         any Purchaser and the date the Company first has knowledge of such
         failure;

                           (e) any Subsidiary shall fail to observe or perform
         any covenant or agreement contained in any Operative Agreement to which
         it is a party for 30 days after the earlier of the date written notice
         of such failure has been given to any Subsidiary by any Purchaser and
         the date the Company first has knowledge of such failure;

                           (f) any representation, warranty, certification or
         statement made by the Company or any Subsidiary in any Operative
         Document or in any certificate, financial

<PAGE>   53

         statement or other material document delivered pursuant to the
         Operative Documents shall prove to have been incorrect in any respect
         (or in any material respect if such representation, warranty,
         certification, or statement is not by its terms already qualified as to
         materiality) when made (or deemed made);

                           (g) the Company or any of its Subsidiaries shall fail
         to make any payment or payments in respect of any Debt (other than the
         Notes and Senior Notes) arising in one or more related or unrelated
         transactions, the amount of such payment or payments shall be in an
         aggregate amount exceeding $100,000 and such failure shall continue
         beyond any period of grace, if any, specified therein;

                           (h) any event or condition shall occur which (i)
         results in the acceleration of the maturity of (A) Senior Notes, or (B)
         any Debt (other than the Notes and the Senior Notes) of the Company or
         any of its Subsidiaries arising in one or more related or unrelated
         transactions, in an aggregate principal amount exceeding $100,000, or
         (ii) enables (or, with the giving of notice or lapse of time or both,
         would enable) the holder of such Debt (other than the Senior Notes) or
         any Person or Persons acting on behalf of such holder or holders to
         accelerate the maturity thereof, or (iii) results in a violation of, or
         a default under, any provision of the articles of incorporation of the
         Company;

                           (i) (i) the Company or any of its Subsidiaries shall
         commence a voluntary case or other proceeding seeking liquidation,
         reorganization or other relief with respect to itself or its debts
         under any bankruptcy, insolvency or other similar law now or hereafter
         in effect or seeking the appointment of a trustee, receiver,
         liquidator, custodian or other similar official of it or any
         substantial part of its property, or shall consent to any such relief
         or to the appointment of or taking possession by any such official in
         an involuntary case or other proceeding commenced against it, or shall
         make a general assignment for the benefit of creditors, or shall fail
         generally to pay its debts as they become due, or (ii) the Company or
         any of its Subsidiaries shall take any corporate action to authorize
         any of the foregoing;

                           (j) an involuntary case or other proceeding shall be
         commenced against the Company or any of its Subsidiaries seeking
         liquidation, reorganization or other relief with respect to it or its
         debts under any bankruptcy, insolvency or other similar law now or
         hereafter in effect or seeking the appointment of a trustee, receiver,
         liquidator, custodian or other similar official of it or any
         substantial part of its property, and such involuntary case or other
         proceeding shall remain undismissed and unstayed for a period of 60
         days; or an order for relief shall be entered against the Company or
         any of its Subsidiaries under the federal bankruptcy laws as now or
         hereafter in effect;

                           (k) one or more judgments or orders for the payment
         of money aggregating in excess of $100,000 shall be rendered against
         the Company or any of its Subsidiaries and such judgments or orders
         shall continue unsatisfied and unstayed for a period of 30 consecutive
         days; provided that any amounts that an insurer has

<PAGE>   54
         acknowledged an obligation to pay shall not be included in such
         aggregate amount; or notice of intent to terminate a Material Plan
         shall be filed under Title IV of ERISA by any member of the ERISA
         Group, any plan administrator or any combination of the foregoing; or
         the PBGC shall institute proceedings under Title IV of ERISA to
         terminate, to impose liability (other than for premiums under Section
         4007 of ERISA) in respect of, or to cause a trustee to be appointed to
         administer any Material Plan;

                           (l) any person or group of persons (within the
         meaning of Rule 13d-3 promulgated by the Commission under the Exchange
         Act), other than the Investors and Investor Affiliates, shall have
         acquired beneficial ownership (within the meaning of such Rule 13d-3)
         of 45% or more of the Common Stock; or the Investors and Investor
         Affiliates shall cease to be the beneficial owner of at least 45% of
         the Common Stock (each, a "Change in Control");

                           (m) the auditor's report or reports on the audited
         statements delivered pursuant to Section 8.01 shall include any
         material qualification (including with respect to the scope of audit)
         or exception and shall not have been replaced within 30 days after the
         delivery thereof by an auditor's report that does not include any
         material qualification (including with respect to the scope of audit)
         or exception;

                           (n) [INTENTIONALLY OMITTED];

                           (o) the Company shall be prohibited or otherwise
         materially restrained from conducting the business theretofore
         conducted by it by virtue of any determination, ruling, decision,
         decree or order of any court or regulatory authority of competent
         jurisdiction and such determination, ruling, decision, decree or order
         remains unstayed and in effect for any period of 10 days beyond any
         period for which any business interruption insurance policy; or

                           (p) any of the Operative Documents shall for any
         reason fail to constitute the valid and binding agreement of any party
         thereto, or any such party shall so assert in writing; provided that in
         the case of any Operative Document which is not a Transaction Document,
         such failure could reasonably be expected to have an adverse effect on
         the Purchasers;

then, and in every such event and at any time thereafter during the continuance
of such event, the Purchasers by notice to the Company shall declare the Notes
(together with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company;
provided that in the case of any of the Events of Default specified in clause
(i) or (j) above with respect to the Company, without any notice to the Company
or any other act by the Purchasers, all of the Notes (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company. The exercise by the Purchasers of one or more of its

<PAGE>   55
remedies upon the occurrence of an Event of Default shall in no way
preclude the Purchasers from exercising other remedies also available to it in
law or in equity.

                                   ARTICLE 11
                                  Subordination

                  The payment of the principal of and premium, if any, and
interest on the Subordinated Indebtedness (as defined below) shall be
subordinate and junior in right of payment to all Senior Indebtedness (as
defined below) to the extent and in the manner provided in this Article 11.

                           11.01.  Certain Definitions.  As used in this Article
11, the following terms shall have the following meanings:

                           "Junior Securities" means any debt or equity
         securities distributed to the holders of the Notes, but only if they
         are subordinated to at least the same extent as the Notes to Senior
         Indebtedness and any securities issued in exchange for Senior
         Indebtedness, and any such subordination shall include provisions
         relating to amortization and prepayment or, if applicable, redemption
         or repurchase to the effect that all payments of principal on the
         Senior Indebtedness or any securities issued in exchange for the Senior
         Indebtedness are to be made in full prior to any payment of principal
         under or redemption or repurchase of such securities distributed to the
         holders of the Notes.

                           "Post Petition Interest" means interest that accrues
         after the commencement of a case, proceeding or other action relating
         to the bankruptcy, insolvency or reorganization of the Company or any
         of its Subsidiaries or Affiliates, whether or not allowed or allowable
         as a claim in any such proceeding.

                           "Senior Default" means a Senior Payment Default or a
         Senior Event of Default.

                           "Senior Event of Default" means any default, other
         than a Senior Payment Default, that occurs and is continuing with
         respect to Senior Indebtedness that permits the holders of such Senior
         Indebtedness to accelerate the maturity of such Senior Indebtedness.

                           "Senior Indebtedness" means (i) the principal of and
         interest (including Post-Petition Interest) on the Senior Loans, (ii)
         any and all other costs, fees, expenses and other amounts payable by
         the Company under the Credit Agreement or any of the Senior Security
         Documents, and (iii) any other obligations or liabilities of the
         Company to the Lenders; provided that in no event shall the aggregate
         principal amount of loans or other obligations constituting Senior
         Indebtedness exceed the amount permitted by Section 9.04(b).

<PAGE>   56

                           "Senior Payment Default" means any default in the
         payment of any Senior Indebtedness that occurs and is continuing beyond
         any applicable period of grace.

                           "Subordinated Indebtedness" means (i) the principal
         of and interest (including Post-Petition Interest) on the Notes, (ii)
         all payments for the redemption of any Warrant pursuant to Article V of
         such Warrant or of any Preferred Stock, and (iii) any other monetary
         obligations of the Company arising out of or in connection with this
         Agreement or the Notes.

                   11.02.  General.  Subject to Section 11.03, the Company may
make and the holders of the Notes may receive payment on the Subordinated
Indebtedness, including, without limitation:

                           (a) payments of interest on account of the Notes on
         the regularly scheduled payment dates thereof in accordance with the
         terms of the Notes; and

                           (b) payment of the principal of the Notes on the
         regularly scheduled payment dates thereof, all in accordance with the
         terms of the Notes.

                   11.03.  Limitation on Payment and Remedies.

                           (a) If there shall be a Senior Payment Default, the
         Company shall not make any payment (in cash, property, securities or by
         setoff or otherwise) of or on account of the principal of or interest
         on the Notes or as a sinking fund for the Notes or on account of any
         other Subordinated Indebtedness or in respect of any redemption,
         retirement, purchase or other acquisition of the Notes until (i) such
         Senior Payment Default shall have been remedied or waived or shall have
         ceased to exist or (ii) the Senior Indebtedness in respect of which
         such Senior Payment Default shall have occurred shall have been paid or
         provided for in full.

                           (b) If there shall be a Senior Event of Default and
         the Lenders shall have delivered a Blockage Notice (as defined below)
         to the Company and the holders of the Notes, the Company shall not make
         any direct or indirect payment (in cash, property, securities or by
         setoff or otherwise) of or on account of the principal of or interest
         on the Notes or as a sinking fund for the Notes or on account of any
         other Subordinated Indebtedness or in respect of any redemption,
         retirement, purchase or other acquisition of the Notes prior to the
         earlier to occur of (i) the date all such Senior Events of Default that
         gave rise to the Blockage Notice shall have been remedied or waived or
         shall have ceased to exist or (ii) the 180th day after the Company's
         receipt of such Blockage Notice or such shorter period as determined in
         accordance with paragraph (c) below.

                           (c) For the purposes of this Article 11, (i) a
         "Blockage Notice" is a notice of a Senior Event of Default that in fact
         has occurred and is continuing, given to the Company and the holders of
         the Notes by the Lenders; provided, however, that (x) no such notice
         shall be effective as a Blockage Notice if an effective Blockage Notice
         shall

<PAGE>   57

         have been previously given within the most recent period of 360
         consecutive days, and (y) no such notice shall be effective as a
         Blockage Notice if such notice relates to a Senior Event of Default
         which existed or is continuing on the date a Blockage Notice was
         previously delivered within the most recent period of 360 consecutive
         days (it being understood and agreed that a Senior Default resulting
         from a breach of a covenant in one time period or at one determination
         date and a Senior Default resulting from a breach of the same covenant
         in the next succeeding time period or at the next succeeding
         determination date shall be deemed to be the same Senior Default); and
         (ii) a "Blockage Period" is the period during which the Company is
         restricted from making payments of or on account of the Subordinated
         Indebtedness pursuant to Section 11.03(a) or Section 11.03(b).
         Notwithstanding any provision in this Agreement to the contrary, in no
         event shall the Company be restricted from making payments of or on
         account of the Subordinated Indebtedness pursuant to Section 11.03(b)
         by reason of giving one or more Blockage Notices for a period which
         exceeds, in the aggregate, 180 days in any 360-consecutive-day period.
         Upon the expiration or termination of any Blockage Period, the holders
         of the Notes shall be entitled to be paid all sums due and owing on the
         Subordinated Indebtedness.

                           (d) As long as any Senior Indebtedness remains
         outstanding, upon the occurrence of an Event of Default under this
         Agreement, the holders of the Subordinated Indebtedness shall not
         declare or join in any declaration of the Notes to be due and payable
         by reason of such Event of Default or otherwise take any action against
         the Company prior to the expiration of 10 days (a "Remedy Standstill
         Period") after the written notice of intention to accelerate on account
         of the occurrence of such Event of Default (a "Remedy Notice") shall
         have been given by the holders of the Subordinated Indebtedness to the
         Company and the Lenders or the holders of the Senior Indebtedness
         unless the holders of any Senior Indebtedness shall have caused such
         Senior Indebtedness to become due prior to its stated maturity or any
         Event of Default pursuant to Section 10.01(i) or Section 10.01(j) of
         this Agreement shall have occurred; provided, however, that such Remedy
         Standstill Period shall be extended until the earliest of (x) the date
         such Event of Default shall have been remedied or waived or shall have
         ceased to exist or the date on which the holders of the Senior
         Indebtedness have caused such Senior Indebtedness to become due prior
         to its stated maturity, (y) the date that such Remedy Standstill Period
         shall cease to be effective in accordance with Section 11.03(e), and
         (z) 120 days from the date such Remedy Notice was given (if the Remedy
         Notice was given in respect of an Event of Default under Section
         10.01(a) or Section 10.01(b)) or 180 days from the date such Remedy
         Notice was given (if the Remedy Notice was given in respect of an Event
         of Default other than under Section 10.01(a) or Section 10.01(b)) if,
         at the time the Remedy Standstill Period would otherwise expire, (1)
         there exists any Senior Payment Default and (2) there exists any Senior
         Event of Default and an effective Blockage Notice is given in
         accordance with, and subject to the limitations of, this Section 11.03.
         Upon the expiration or termination of any Remedy Standstill Period, the
         holders of the Notes shall be entitled to exercise any of their rights
         with respect to the Notes other than any right to accelerate the
         maturity date of the Notes based upon the occurrence of any Event of
         Default which has been cured or otherwise remedied during

<PAGE>   58

         the Remedy Standstill Period.

                           (e) Notwithstanding any provision in this Agreement
         to the contrary (excluding the subordination provisions of Section
         11.03(a)), any Blockage Period or Remedy Standstill Period shall be
         inapplicable or cease to be effective if an Event of Default pursuant
         to Section 10.01(i) or Section 10.01(j) shall have occurred. In
         addition (subject to the subordination provisions of Section 11.03(a)),
         any Blockage Period or Remedy Standstill Period shall cease to be
         effective if at any time during such period: (i) all or substantially
         all of the assets of the Company are sold or otherwise disposed of
         outside of the ordinary course of business, or (ii) payment or any
         distribution of any character, whether in cash, securities or other
         property of the Company shall be made to or received by any creditor on
         any indebtedness for borrowed money which is on a parity with or
         subordinate in right of payment to the Notes.

                           (f) Section 11.03(d) shall not apply to any action
         taken by any holder of the Notes in filing lawsuits to prevent the
         running of any applicable statute of limitations or other similar
         restriction on claims, but in each case only to the extent reasonably
         necessary to prevent such running.

                           11.04. Subordination upon Certain Events. Upon the
         occurrence of any Event of Default under Section 10.01(i) or Section
         10.01(j) or, without duplication, upon a receivership, insolvency,
         liquidation or dissolution of the Company or in connection with an
         assignment for the benefit of its creditors or marshaling of its assets
         or liabilities:

                           (a) Upon any payment or distribution of assets of the
         Company to creditors of the Company, holders of Senior Indebtedness
         shall be entitled to receive payment of the Senior Indebtedness in full
         before the holders of the Notes shall be entitled to receive any
         payment in respect of the Subordinated Indebtedness, except that the
         holders of the Notes may receive Junior Securities.

                           (b) Until all Senior Indebtedness is paid in full,
         any distribution to which the holders of the Notes would be entitled
         but for this Article 11 shall be made to holders of Senior
         Indebtedness, as their interests may appear, except that the holders of
         the Notes may receive Junior Securities.

                           (c) For purposes of this Article 11, a distribution
         or payment may consist of cash, securities or other property, whether
         by setoff or otherwise.

                           (d) Notwithstanding the foregoing provisions of this
         Section 11.04, if payment or delivery by the Company of Junior
         Securities to the holders of the Subordinated Indebtedness is
         authorized by an order or decree giving effect, and stating in such
         order or decree that effect is given, to the subordination of the
         Subordinated Indebtedness to the Senior Indebtedness, and made by a
         court of competent jurisdiction in a proceeding under any applicable
         bankruptcy or reorganization law, payment or delivery by the Company of
         such Junior Securities shall be made to the holders of the

<PAGE>   59

         Subordinated Indebtedness in accordance with such order or decree.

                 11.05. Payments and Distributions Received. If the holders of
the Subordinated Indebtedness shall have received any payment from or
distribution of assets of the Company of any kind or character in respect of the
Subordinated Indebtedness in contravention of the terms of this Article 11
before all Senior Indebtedness is paid in full, then and in such event such
payment or distribution shall be received and held in trust for and shall be
paid over or delivered to the Lenders, as the holder of the Senior Indebtedness
(or its authorized agent) to the extent necessary to pay all such Senior
Indebtedness in full.

                 11.06. Subrogation. After all amounts payable under or in
respect of Senior Indebtedness are paid in full, the holders of the Subordinated
Indebtedness shall be subrogated to the rights of holders of Senior Indebtedness
to receive payments or distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Subordinated
Indebtedness have been applied to the payment of Senior Indebtedness. A
distribution made under this Section 11.06 to a holder of Senior Indebtedness
which otherwise would have been made to the holders of the Subordinated
Indebtedness is not, as between the Company and the holders of the Subordinated
Indebtedness, a payment by the Company on Senior Indebtedness.

                 11.07. Relative Rights. This Article defines the relative
rights of the holders of the Subordinated Indebtedness and the holders of Senior
Indebtedness. Nothing in this Article 11 shall: (i) impair, as between the
Company and the holders of the Subordinated Indebtedness, the obligation of the
Company, which is absolute and unconditional, to pay principal of and premium,
if any, and interest (including default interest) on the Notes in accordance
with their terms; or (ii) affect the relative rights of the holders of the
Subordinated Indebtedness and creditors of the Company other than holders of
Senior Indebtedness.

                 11.08. Subordination May Not Be Impaired by the Company. No
right of any holder of any Senior Indebtedness to enforce the subordination of
the Subordinated Indebtedness shall be impaired by any act or any failure to act
by the Company or by the failure of the Company to comply with this Agreement.

                 11.09. Payments. A payment with respect to principal of or
interest on the Subordinated Indebtedness shall include, without limitation,
payment of principal of and interest on the Notes and any payment on account of
mandatory prepayment or optional prepayment provisions.

                 11.10. Subordination Not to Prevent Events of Default. The
failure to make a payment on account of principal of or interest on or other
amounts constituting Subordinated Indebtedness by reason of any provision of
this Article 11 shall not be construed as preventing the occurrence of an Event
of Default under Article 10.

                 11.11. Subordination Not Impaired; Benefit of Subordination.
Each holder of Subordinated Indebtedness agrees and consents that, without
notice to or assent by such holder,

<PAGE>   60

and without affecting the liabilities and obligations of the Company and any
holder of Subordinated Indebtedness and the rights and benefits of the holders
of the Senior Indebtedness set forth in this Article 11:

                         (a) The holders of Senior Indebtedness, and any
         representative or representatives acting on behalf thereof, may
         exercise or refrain from exercising any right, remedy or power granted
         by or in connection with any agreements relating to the Senior
         Indebtedness; and

                         (b) Any balance or balances of funds with any holder
         of Senior Indebtedness at any time outstanding to the credit of the
         Company or any collateral under the Senior Loan Documents may from time
         to time, in whole or in part, be surrendered or released;

all as the holders of the Senior Indebtedness, and any representative or
representatives acting on behalf thereof, may deem advisable, and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Subordinated Indebtedness to the Senior Indebtedness provided for herein.

                  11.12. Miscellaneous.

                         (a) To the extent permitted by applicable law, the
         holders of the Subordinated Indebtedness and the Company hereby waive
         notice of acceptance hereof by the holders of the Senior Indebtedness.

                         (b) The Company and the holders of the Subordinated
         Indebtedness hereby expressly agree that the holders of the Senior
         Indebtedness may enforce any and all rights derived herein by suit,
         either in equity or law, for specific performance of any agreement
         contained in this Article 11 or for judgment at law and any other
         relief whatsoever appropriate to such action or procedure.

                                   ARTICLE 12
                                   Prepayment

                  The Company shall prepay outstanding principal (together with
accrued interest) on the Notes in accordance with the "Mandatory Prepayment"
provisions set forth in the Notes. The Company may prepay outstanding principal
of (together with accrued interest on) the Notes only if the Notes are prepaid
on a pro rata basis and in accordance with the "Optional Prepayment" provisions
set forth in the Notes.

                                   ARTICLE 13
                                  Miscellaneous

<PAGE>   61

                  13.01. Survival of Agreements, Representations and Warranties.
All of the agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement, any investigation by or on behalf
of the Purchasers, acceptance of the Securities and payment therefor, exercise
of the Warrants or termination of this Agreement.

                  13.02. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:

                            (a)   if to the Purchasers:

                                  National City Merchant Banking
                                  National City Capital Corporation
                                  1965 East Sixth Street
                                  Cleveland, Ohio 44114
                                  Attention:  Mr. Richard J. Martinko
                                       Managing Director

                                  Hanifen Imhoff Mezzanine Fund, L.P.
                                  c/o Rocky Mountain Capital Partners
                                  1125 17th Street, Suite 1820
                                  Denver, Colorado 80202
                                  Attention: Edward C. Brown
                                       Managing Partner

                         with a copy to:

                                  Baker & Hostetler
                                  3200 National City Center
                                  1900 East 9th Street
                                  Cleveland, Ohio 44114-3485
                                  Telecopier No.: (216) 696-0740
                                  Attention:  Gary R. Martz, Esq.

                           (b)    if to the Company:

                                  MCE Companies, Inc.
                                  310 Dino Drive
                                  Ann Arbor, Michigan 48103
                                  Telecopier No.: (313) 426-1510
                                  Attention:  John L. Smucker, President

                         with a copy to:

<PAGE>   62

                             Dykema Gossett PLLC
                             400 Renaissance Center
                             Detroit, Michigan 48243-1668
                             Telecopier No.:  (313) 568-6915
                             Attention: J. Michael Bernard, Esq.

                  All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, certified mail, return
receipt requested if mailed first class; and when receipt is acknowledged, if
telecopied.

                  13.03. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns and
permitted transferees of the parties hereto.

                  13.04. Assignments and Participations.

                        (a) The Company may not assign any of its rights or
         obligations under this Agreement without the prior written consent of
         the Purchasers.

                        (b) Subject to applicable securities laws and the
         applicable provisions of the Warrants and the Stockholder Agreement,
         the Purchasers may, at any time and from time to time assign or sell or
         otherwise transfer any of their interests in any of the Transaction
         Documents (i) to an Affiliate thereof, (ii) to any bank, insurance
         company, investment company, savings and loan association, mezzanine
         investment fund or other financial institution or any affiliate thereof
         or to any other Person (excluding a competitor of the Company or its
         Subsidiaries), with the prior written consent of the Company, which
         consent will not be unreasonably withheld.

                  13.05. Amendment and Waiver.

                        (a) No failure or delay on the part of the Company or
         the Purchasers in exercising any right, power or remedy hereunder shall
         operate as a waiver thereof, nor shall any single or partial exercise
         of any such right, power or remedy preclude any other or further
         exercise thereof or the exercise of any other right, power or remedy.
         The remedies provided for herein are cumulative and are not exclusive
         of any remedies that may be available to the Company or the Purchasers
         at law, in equity or otherwise.

                        (b) Any amendment, supplement or modification of or
         to any provision of this Agreement, any waiver of any provision of this
         Agreement, and any consent to any departure by the Company from the
         terms of any provision of this Agreement, shall be effective (i) only
         if it is made or given in writing and signed by the Company and the
         Purchasers, and (ii) only in the specific instance and for the specific
         purpose for which made or given.
<PAGE>   63

Except where notice is specifically required by this Agreement, no notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.

                  13.06. Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

                  13.07. Headings; Section References. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. References in this Agreement to "Articles" and
"Sections" shall be to Articles and Sections of or to this Agreement unless
otherwise specifically provided and references in this Agreement to "Schedules"
and "Exhibits" shall be to Schedules and Exhibits of or to the 1996 Agreement
unless otherwise specifically provided.

                  13.08. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without reference to
principles of conflicts of law.

                  13.09. Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
may be brought in the courts of the State of Ohio located in the City of
Cleveland or of the United States District Court for the Northern District of
Ohio and hereby expressly submits to the personal jurisdiction and venue of such
courts for the purposes thereof and expressly waives any claim of improper venue
and any claim that such courts are an inconvenient forum. Each party hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such suit, action or proceeding by the mailing (via first class
mail) of copies thereof by registered or certified mail, return receipt
requested, postage prepaid, to the address set forth in Section 13.02, such
service to become effective 10 days after such mailing.

                  13.10. Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.

                  13.11. Rules of Construction. Unless the context otherwise
requires, "or" is not exclusive, and references to sections or subsections refer
to sections or subsections of this Agreement.

                  13.12. Entire Agreement. This Agreement, together with the
exhibits and schedules hereto and the other Transaction Documents, is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the

<PAGE>   64

agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to
herein or therein. This Agreement, together with the exhibits and schedules
hereto and the other Transaction Documents, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

                  13.13. Certain Expenses. The Company will pay all reasonable
expenses of the Purchasers (including reasonable fees, charges and disbursements
of counsel) in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the Closing and each purchase of Securities and any amendment,
supplement, modification or waiver of or to any provision of this Agreement, the
Notes or any other Transaction Document, or any consent to any departure by the
Company from the terms of any provision of this Agreement, the Notes or any
other Transaction Document.

                  13.14. Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.

                  13.15. Waiver of Jury Trial. THE COMPANY AND THE PURCHASERS
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW
WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL
DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

                  13.16. Required Purchasers. Whenever any action is to be taken
or consent given, such action or consent shall be effective if approved in
writing and signed by the Holders of at least 66 2/3% in principal amount of the
Notes then outstanding or, if no Notes are then outstanding, the Holders of at
least 66 2/3% of the Warrants then outstanding; provided, however, that no
modification or waiver of any provision of this Agreement shall, unless in
writing and signed by the Holders of all Notes then outstanding, do any of the
following: (a) reduce the principal of, or interest on, the Notes, (b) postpone
any date fixed for any payment of principal of, or interest on, the Notes, or
(c) change the unpaid principal amount of the Notes or the principal percentage
of Holders required to take any action hereunder.

                  13.17. Confidentiality. Each Purchaser agrees to keep
confidential any information relating to the Company or any of its Subsidiaries
received by it pursuant to or in connection with this Agreement which is (a)
trade information which the Purchasers reasonably expect that the Company would
want to keep confidential, (b) technical information with respect to the
equipment or operations of the Company, (c) financial or environmental
information, and (d) any written information that is clearly and conspicuously
identified in writing by the

<PAGE>   65

Company as confidential; provided, however, that this Section 13.17 shall not be
construed to prevent any Purchaser from disclosing such information (i) to any
other Purchaser or any Purchaser's legal counsel, auditors, and accountants, or
any Affiliate that shall agree to be bound by this obligation of
confidentiality, (ii) upon the order of any court or administrative agency,
(iii) upon the request or demand or any regulatory agency or authority (whether
or not such request or demand has the force of law), (iv) that has been publicly
disclosed, other than from a breach of this provision by the Purchaser,
(v) that has been obtained from any Person that is neither a party to this
Agreement nor an Affiliate of any such party, (vi) in connection with the
exercise of any right or remedy hereunder or under any other Transaction
Documents, or (vii) to any purchaser of all or any part of the Notes or
Warrants or Preferred Stock owned by that Purchaser that agrees to be bound
by the obligation of confidentiality in this Agreement.

                                   ARTICLE 14
                    Additional Representations and Warranties

              14.01. Representations and Warranties of the Company.

                     (a) The Company hereby represents and warrants, as of
         the date hereof, that all representations and warranties set forth in
         the Financing Documents, as the same may be amended hereby, to which it
         is a party are true and correct in all material respects, and that this
         Agreement has been executed and delivered by its duly authorized
         officer and constitutes a legal, valid and binding obligation of it,
         enforceable against it in accordance with its terms, except as
         enforceability may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or similar laws affecting the rights of
         creditors generally and general principles of equity.

                     (b) Without limiting the generality of the foregoing,
         and notwithstanding anything herein to the contrary, the parties hereto
         expressly acknowledge and agree that the representations and warranties
         set forth in Article 5 hereof are revised and updated, as of the date
         of this Agreement (except as otherwise expressly provided herein or in
         the Revised Schedules), by the following representations and warranties
         made by the Company to the Purchasers:

                         (i)   Ownership of Property.  Section 5.06
               above is revised to read in its entirety as follows:

                         "5.06 Ownership of Property. Except as set forth on the
                     REVISED SCHEDULE 5.06 attached to this Agreement, except as
                     reflected in the financial statements provided to the
                     Purchasers from time to time in accordance with the terms
                     of the 1996 Agreement and this Agreement, and except for
                     items purchased in the ordinary course of business since
                     the date of such financial statements, on and as of the
                     date of this Agreement, the Company owns no property or
                     assets and other than the common stock of its Subsidiaries,
                     and none of its properties and assets is subject to any
                     Liens, except Permitted Liens."

<PAGE>   66

                         (ii)  Subsidiaries; Other Equity Investments.
               Section 5.09 above is revised to read in its entirety as follows:

                         "5.09 Subsidiaries; Other Equity Investments. Except as
                     described on REVISED SCHEDULE 5.09 attached to this
                     Agreement, the Company has no Subsidiaries on the date of
                     this Agreement. Neither the Company nor any of its
                     Subsidiaries is engaged in any joint venture or partnership
                     with any other Person, except for joint ventures or
                     partnerships of any Subsidiary of the Company related to
                     the manufacture of products that are in the same line of
                     business as that Subsidiary so long as that Subsidiary's
                     investment in any such joint ventures or partnerships is
                     not in excess of $500,000 individually and not in excess of
                     $1,000,000 in aggregate.

                         (iii)  Capitalization. The first and last sentences of
               Section 5.18 above are revised to read in their entirety as set
               forth in subparagraphs (A) and (B), respectively:

                               (A) "Set forth on REVISED SCHEDULE 5.18 attached
                         to this Agreement is a schedule of the capitalization
                         of the Company as of the date of this Agreement."

                               (B) "Except as described in REVISED SCHEDULE 5.18
                         attached to this Agreement, as of the date of this
                         Agreement (a) no other class of capital stock or other
                         ownership interests of the Company are authorized or
                         outstanding and (b) the Company has no outstanding
                         rights (either preemptive or other) or options to
                         subscribe for or purchase from the Company, or any
                         warrants or other agreements providing for or requiring
                         the issuance by the Company of, any of its capital
                         stock or any securities convertible into or
                         exchangeable for its capital stock."

                         (iv)  Compliance with Environmental Requirements; No
               Hazardous Materials. The references in Section 5.22 above to
               Schedule 5.22 refers to the REVISED SCHEDULE 5.22 attached to
               this Agreement.

                     (c)   The Company hereby represents and warrants, as of the
         date hereof, that the execution, delivery and performance by it of this
         Agreement and its performance of the Financing Documents, as the same
         may be amended hereby, to which it is a party (i) have been duly
         authorized by all necessary corporate action, (ii) do not contravene,
         or constitute a default under, any provision of applicable law or
         regulation or of the articles of incorporation or bylaws of the
         Company, or of any judgment, injunction, order or decree or of any
         material agreement or other material instrument binding upon the
         Company, and (iii) do not result in the creation or imposition of any
         Lien (other than

<PAGE>   67

         the Permitted Liens) on any asset of the Company.

                         (d)  Senior Loan Documents. The Company hereby
         represents and warrants that, prior to the date hereof, the Company
         delivered to the Purchasers (in the case of Hanifen, such delivery was
         made care of Rocky Mountain Capital Partners LLP) true and complete
         copies of the Senior Loan Documents in connection with the post-closing
         deliveries relative to the 1999 Purchase Agreement.

                  14.02. Representations and Warranties of the Purchasers. Each
of the Purchasers hereby severally, and not jointly, represents and warrants, as
of the date hereof, that this Agreement has been executed and delivered by its
duly authorized officer and constitutes a legal, valid and binding obligation of
it, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and general principles of equity.

                                   ARTICLE 15
                 Termination of Investor Subscription Agreements

                  Each of the Purchasers hereby agrees that the Company and the
Investors are authorized to terminate, effective as of the date hereof, each of
the Investors Subscription Agreements.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>   68

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective officers hereunto
duly authorized as of the date first above written.

                                    MCE COMPANIES, INC.

                                    By:      /s/ John L. Smucker
                                        ---------------------------------------
                                    John L. Smucker, President

<TABLE>
<CAPTION>

             Number of
Number of    Shares of
Warrant      Preferred
Shares         Stock
------       ---------

<S>          <C>                    <C>
                                    NATIONAL CITY CAPITAL CORPORATION
18,382.72      2,560

                                    By: /s/ Richard J. Martinko
                                        ---------------------------------------
                                    Richard J. Martinko, Managing Director

                                    HANIFEN IMHOFF MEZZANINE FUND, L.P.
10,340.28      1,440

                                    By:  Hanifen Imhoff Capital Partners, LLP,
                                           its General Partner
</TABLE>

                                    By: /s/ Stephen Sangalis
                                        ---------------------------------------
                                    Name:   Stephen Sangalis
                                    Title:  Attorney-in-Fact<PAGE>   1

                                                                     EXHIBIT 4.4

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

             SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT

                                  BY AND AMONG

                              MCE COMPANIES, INC.,

                     ROCKY MOUNTAIN MEZZANINE FUND II, L.P.

                     GREAT LAKES CAPITAL INVESTMENTS I, LLC

                                       and

                        NATIONAL CITY CAPITAL CORPORATION

                        ---------------------------------
                            Dated as of July 28, 1999

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

<PAGE>   2

<TABLE>
<CAPTION>

                                                 TABLE OF CONTENTS
                                                                                                               Page
<S>     <C>                                                                                                    <C>
ARTICLE 1.........................................................................................................1
         1.01.  Definitions.......................................................................................1
         1.02.  Accounting Terms; Financial Statements...........................................................14
         1.03.  Other Definitional Provisions....................................................................14

ARTICLE 2........................................................................................................14
         2.01.  Purchase and Sale of Notes.......................................................................15
         2.02.  Purchase and Sale of Warrants....................................................................15
         2.03.  Purchase Price Allocation........................................................................15
         2.04.  Closing..........................................................................................15
         2.05.  Several Obligations..............................................................................15

ARTICLE 3........................................................................................................16
         3.01.  Representations and Warranties...................................................................16
         3.02.  Corporate Proceedings............................................................................16
         3.03.  No Defaults......................................................................................16
         3.04.  Legal Opinions...................................................................................16
         3.05.  Fees, Expenses, etc..............................................................................17
         3.06.  Material Adverse Change..........................................................................17
         3.07.  Capitalization, etc..............................................................................17
         3.08.  Documents........................................................................................17
         3.09.  Purchase Permitted by Applicable Laws............................................................17
         3.10.  Consents and Approvals...........................................................................17
         3.11.  Execution and Delivery of this Agreement.........................................................17
         3.12.  Registration Rights Agreement....................................................................18
         3.13.  Stockholder Agreement............................................................................18
         3.14.  Notes and Warrants...............................................................................18
         3.15.  SBIC Certificates................................................................................18
         3.17.  Disbursement Instructions........................................................................18
         3.18.  [Intentionally Omitted.].........................................................................18
         3.20.  Officer's Certificate............................................................................18
         3.21.  Financial Statements.............................................................................18

ARTICLE 4........................................................................................................19
         4.01.  Representations and Warranties True..............................................................19
         4.02.  Compliance with This Agreement...................................................................19
         4.03.  Issuance Permitted by Applicable Laws............................................................19
         4.04.  Consents and Approvals...........................................................................19
         4.05   Execution and Delivery of this Agreement.........................................................19

ARTICLE 5........................................................................................................19
         5.01.  Existence and Power..............................................................................20

</TABLE>

                                     - i -
<PAGE>   3

<TABLE>
<CAPTION>

<S>     <C>                                                                                                     <C>

         5.02.  Corporate and Governmental Authorization; No Contravention.......................................20
         5.03.  Binding Effect...................................................................................20
         5.04.  Financial Information............................................................................20
         5.05.  Litigation.......................................................................................21
         5.06.  Ownership of Property............................................................................21
         5.07.  No Default.......................................................................................21
         5.08.  No Burdensome Restrictions.......................................................................22
         5.09.  Subsidiaries; Other Equity Investments...........................................................22
         5.10.  Investment Company Act...........................................................................22
         5.11.  Margin Regulations...............................................................................22
         5.12.  Taxes............................................................................................22
         5.13.  Brokers..........................................................................................23
         5.14.  Related Transactions.............................................................................23
         5.15.  Full Disclosure..................................................................................23
         5.16.  Representations and Warranties Incorporated from Other Operative
                 Documents.......................................................................................23
         5.17.  Private Offering.................................................................................23
         5.18.  Capitalization...................................................................................24
         5.19.  Senior Loan Documents............................................................................24
         5.20.  Operative Documents..............................................................................24
         5.21.  Small Business Matters...........................................................................24
         5.22.  Compliance with Environmental Requirements; No Hazardous Materials...............................24
         5.23.  Compliance with ERISA............................................................................26

ARTICLE 6........................................................................................................26
         6.01.  Existence; Authorization; No Contravention.......................................................26
         6.02.  Binding Effect...................................................................................27
         6.03.  Investment Representation........................................................................27
         6.04.  Accredited Investor..............................................................................27

ARTICLE 7........................................................................................................27
         7.01.  Closing Fees.....................................................................................27
         7.02.  Computation of Interest..........................................................................27
         7.03.  General Provisions Regarding Payments............................................................27
         7.04.  Indemnification..................................................................................28
         7.05.  Registration Rights Agreement....................................................................29

ARTICLE 8........................................................................................................29
         8.01.  Financial Statements and Other Reports...........................................................30
         8.02.  Payment of Obligations...........................................................................31
         8.03.  Insurance........................................................................................32
         8.04.  Inspection of Property, Books and Records........................................................32
         8.05.  Notice...........................................................................................32
         8.06.  Conduct of Business and Maintenance of Licenses..................................................33
         8.07.  Compliance with Laws.............................................................................33

</TABLE>

                                     - ii -
<PAGE>   4

<TABLE>
<CAPTION>
<S>     <C>                                                                                                     <C>

         8.08.  Certificates.....................................................................................33
         8.09.  Use of Proceeds..................................................................................34
         8.10.  Further Assurances...............................................................................34
         8.11.  Board Meetings...................................................................................34
         8.12.  SBIC Regulatory Provisions.......................................................................34
         8.13.  Reservation of Shares............................................................................35
         8.14.  Compliance with Agreements.......................................................................35
         8.15.  Environmental Provisions.........................................................................35
         8.16.  Maintain Consolidated Adjusted Net Worth.........................................................36
         8.17.  Maintain Total Debt to EBITDA Ratio..............................................................36
         8.18.  Maintain Fixed Charge Coverage Ratio.............................................................37
         8.19.  Maintain Senior Debt to EBITDA Ratio.............................................................37
         8.20.  Acquisition and Senior Loans.....................................................................37

ARTICLE 9........................................................................................................38
         9.01.  Capital Stock....................................................................................38
         9.02.  Consolidations, Mergers and Sales of Assets......................................................38
         9.03.  Guarantees.......................................................................................38
         9.04.  Debt.............................................................................................39
         9.05.  Purchase of Assets...............................................................................39
         9.06.  Investments......................................................................................40
         9.07.  Negative Pledge..................................................................................40
         9.08.  Security Interest................................................................................41
         9.09.  Business Purposes................................................................................41
         9.10.  Extensions of Credit.............................................................................41
         9.11.  Distributions....................................................................................41
         9.12.  ERISA............................................................................................41
         9.13.  Transactions with Affiliates.....................................................................42
         9.14.  Fiscal Year......................................................................................42
         9.15.  Amendments or Waivers............................................................................42
         9.16.  No Inconsistent Agreements; Amendments...........................................................42
         9.18.  Prepayment of Debts..............................................................................43

ARTICLE 10.......................................................................................................43
         10.01. Events of Default................................................................................43

ARTICLE 11.......................................................................................................46
         11.01. Certain Definitions..............................................................................46
         11.02. General..........................................................................................47
         11.03. Limitation on Payment and Remedies...............................................................47
         11.04. Subordination upon Certain Events................................................................49
         11.05. Payments and Distributions Received..............................................................49
         11.06. Subrogation......................................................................................49
         11.07. Relative Rights..................................................................................50
         11.08. Subordination May Not Be Impaired by the Company.................................................50

</TABLE>

                                    - iii -
<PAGE>   5

<TABLE>
<CAPTION>

<S>        <C>                                                                                                  <C>

         11.09.  Payments........................................................................................50
         11.10.  Subordination Not to Prevent Events of Default..................................................50
         11.11.  Subordination Not Impaired; Benefit of Subordination............................................50
         11.12.  Miscellaneous...................................................................................51

ARTICLE 12.......................................................................................................51

ARTICLE 13.......................................................................................................51
         13.01.  Survival of Agreements, Representations and Warranties..........................................51
         13.02.  Notices.........................................................................................51
         13.03.  Successors and Assigns..........................................................................53
         13.04.  Assignments and Participations..................................................................53
         13.05.  Amendment and Waiver............................................................................53
         13.06.  Counterparts....................................................................................53
         13.07.  Headings; Section References....................................................................53
         13.08.  Governing Law...................................................................................54
         13.09.  Jurisdiction....................................................................................54
         13.10.  Severability....................................................................................54
         13.11.  Rules of Construction...........................................................................54
         13.12.  Entire Agreement................................................................................54
         13.13.  Certain Expenses................................................................................54
         13.14.  Further Assurances..............................................................................54
         13.15.  Waiver of Jury Trial............................................................................55
         13.16.  Required Purchasers.............................................................................55
         13.17.  Confidentiality.................................................................................55

         Schedule 5.06     -  Ownership of Property, Liens
         Schedule 5.07              -  Defaults
         Schedule 5.09     -  Subsidiaries
         Schedule 5.18     -  Capitalization
         Schedule 5.22     -  Environmental Matters
         Schedule 9.01     -  Outstanding Debt

         Exhibit A         NCCC Note
         Exhibit B         GLCI Note
         Exhibit C         RMMF Note
         Exhibit D         Form of Warrant

</TABLE>

                                     - iv -

<PAGE>   6

             SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT

                  THIS AGREEMENT, dated as of July 28, 1999, by and among MCE
COMPANIES, INC., a Michigan corporation (the "COMPANY"), Great Lakes Capital
Investments I, LLC, a Delaware limited liability company ("GLCI"), National City
Capital Corporation, a Delaware corporation ("NCCC"), and Rocky Mountain
Mezzanine Fund II, L.P., a Colorado limited partnership ("RMMF") (GLCI, NCCC and
RMMF collectively, with their respective successors and the permitted assignees
and transferees, the "PURCHASERS").

                              STATEMENT OF PURPOSE

                  The Company proposes to issue and sell to the Purchasers (a)
its 8% Promissory Notes due July 28, 2004 in the aggregate principal amount of
$4,000,000, dated as of the date hereof, as the same may be amended, modified or
supplemented from time to time (the "NOTES"), and (b) a warrant or warrants to
purchase 13,130 shares of its Common Stock, which Common Stock is without par
value, as the same may be amended, modified or supplemented from time to time
(the "WARRANTS"), in each case, pursuant to the terms and subject to the
conditions of this Agreement, the proceeds of which are to be used by the
Company for the payment of certain indebtedness to facilitate the continued
growth of the Company and for working capital.

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:

ARTICLE 1
Definitions

1.01.  Definitions.

     As used in this Agreement the following terms have the meanings indicated:

     "1996 Agreement" has the meaning assigned to that term in Section 8.11.

     "Accredited Investor" has the meaning assigned to that term under Rule 501
of the rules and regulations promulgated by the Commission under the Securities
Act.

     "Acquisition" means all of the transactions contemplated by the Acquisition
Documents to be consummated on or before the Closing Date.

     "Acquisition Documents" means the Stock Purchase Agreement, including the
exhibits and schedules thereto, and all agreements, documents and instruments
executed and delivered pursuant thereto or in connection therewith, as any of
the foregoing agreements, documents and instruments may from time to time be
amended, modified or supplemented in accordance with the

                                      - 1 -

<PAGE>   7

terms thereof and hereof.

          "Affiliate" means (i) any Person that, directly or indirectly through
one or more intermediaries, controls the Company (a "Controlling Person") or
(ii) any Person (other than the Company or any of its Subsidiaries) which is
controlled by or is under common control with a Controlling Person. As used
herein, except in the definition of "Investor Affiliate", the term "control" of
a Person means the possession, directly or indirectly, of the power to vote 10%
or more of any class of voting securities of such Person or to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

          "Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.

          "Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan.

          "Business Day" means any day other than a Saturday, Sunday, public
holiday under the laws of the State of Ohio, or other day on which banking
institutions generally are authorized or obligated to close in Cleveland, Ohio.

          "Capital Expenditure" means, without duplication, any payment made
directly or indirectly for the purpose of acquiring or constructing fixed
assets, real property or equipment which in accordance with GAAP would be added
as a debit to the fixed asset account of the Person making such expenditure,
including, without limitation, amounts paid or payable under any conditional
sale or other title retention agreement or under any lease or other periodic
payment arrangement which is of such a nature that payment obligations of the
lessee or obligor thereunder would be required by GAAP to be capitalized and
shown as liabilities on the balance sheet of such lessee or obligor.

          "Capital Lease" means for any Person any lease of any property
(whether real, personal or mixed) by such Person as lessee which, in conformity
with GAAP, is, or is required to be accounted for as a capital lease on the
balance sheet of such Person, together with any renewals of such leases (or
entry into new leases) on substantially similar terms.

          "CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from
time to time, and regulations promulgated thereunder.

          "Change in Control" has the meaning assigned to that term in Section
10.01(l).

          "Closing" has the meaning assigned to that term in Section 2.04.

          "Closing Date" means July 28, 1999.

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

                                      - 2 -

<PAGE>   8

statute of similar import, and regulations thereunder, in each case as in effect
from time to time. References to sections of the Code shall be construed also to
refer to any successor sections.

                  "Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.

                  "Common Stock" means the Common Stock without par value of the
Company and any other capital stock into which such Common Stock is reclassified
or reconstituted.

                  "Company" is defined in the preamble to this Agreement.

                  "Company Account" means the account specified on the signature
pages hereof into which the Loans to the Company shall be made available, or
such other account as the Company shall from time to time specify by notice to
the Purchasers.

                  "Consolidated" or "Consolidating" shall mean, when used with
reference to any financial term in this Agreement, the aggregate for two or more
Persons of the amounts signified by such term for all such Persons determined on
a consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to Consolidated financial statements or data of Company includes
consolidation with its Subsidiaries in accordance with GAAP.

                 "Consolidated Adjusted Net Worth" shall mean as of any date of
determination, stockholders' equity in the Company as of such date, plus, to the
extent not included in stockholders' equity, preferred stock and convertible and
redeemable warrants issued and outstanding as of such date, plus the outstanding
principal amount of the Subordinated Debt as of such date, all as determined in
accordance with GAAP.

                 "Consolidated EBITDA" shall mean for any period of
determination, Consolidated Net Income for such period, less the aggregate
amounts included in determining Consolidated Net Income for extraordinary gains
during such period, plus the aggregate amounts deducted in determining
Consolidated Net Income in respect of (a) income taxes for such period, (b)
interest expense for such period, (c) depreciation and amortization expense and
other non-cash charges for such period, and (d) extraordinary losses for such
period, in each case determined on a Consolidated basis in accordance with GAAP
plus the EBITDA Adjustment.

                 "Consolidated Net Income" shall mean, for any period of
determination, the net income (but not loss) of Company and its Consolidated
Subsidiaries for such period determined in accordance with GAAP including any
extraordinary gains during such period; provided, however, for purposes of
determining Consolidated Net Income for any period, if under GAAP any Subsidiary
is treated as a Consolidated Subsidiary for part of such period, such Subsidiary
shall be deemed to be a Consolidated Subsidiary for such entire period.

                "Contractual Obligations" means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust

                                      - 3 -

<PAGE>   9

or other instrument to which such Person is a party or by which it or any of its
property (now or hereafter acquired) is bound.

          "Credit Agreement" means the Credit Agreement between the Company and
the Lenders, to be entered into no later than ten days from the date hereof, as
the same may be amended, modified and supplemented from time to time in
accordance with the terms thereof.

          "Debt" means, as of any applicable date of determination, all items of
indebtedness, obligation or liability of a Person, whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, joint or
several, that should be classified as liabilities in accordance with GAAP,
including without limitation, any items so classified on a balance sheet and any
reimbursement obligations in respect of letters of credit, obligations in
respect of bankers acceptances, provided, however that for purposes of
calculating the aggregate Debt of such Person and its Subsidiaries (if any), the
direct and indirect and absolute and contingent obligations of such Person
(whether direct or contingent) shall be determined without duplication.

          "Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.

          "Dollar," "Dollars" and the symbol "$" means lawful money of the
United States of America.

          "Domestic Subsidiary" shall mean those Subsidiaries of the Company
incorporated under the laws of the United States or any state thereof and such
other Subsidiaries of the Company that are treated as disregarded entities for
U.S. tax purposes. The term "Domestic Subsidiary" shall not include Densitron
Microwave Limited.

          "EBITDA Adjustment" shall mean (i) if the date of determination is
September 30, 1999, $1,000,000; (ii) if the date of determination is December
31, 1999, $700,000; (iii) if the date of determination is March 31, 2000,
$400,000; (iv) if the date of determination is June 30, 2000, $100,000; and (v)
if the date of determination is after June 30, 2000, $0.

          "Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Materials or wastes into the environment, including ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Materials or wastes or the clean-up or other
remediation thereof.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute.

                                   -4-

<PAGE>   10

          "ERISA Group" means the Company and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414 of the Code.

          "Event of Default" has the meaning assigned to such term in Section
10.01.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.

          "Financing Documents" means this Agreement, the Credit Agreement, the
Senior Notes, the Notes and the Senior Security Documents.

          "Fiscal Year" means a fiscal year of the Company, or of the Company
and its Subsidiaries, or of any Subsidiary of the Company, as the case may be.

          "Fixed Charge Coverage Ratio" shall mean as of any date of
determination a ratio the numerator of which shall equal Consolidated Net Income
for the four preceding fiscal quarters ending on such date, plus to the extent
deducted in determining Consolidated Net Income, (a) extraordinary losses during
such period, (b) depreciation, amortization and other non-cash charges for such
period, and (c) the EBITDA Adjustment, less the aggregate Capital Expenditures
by Company and its Consolidated Subsidiaries during such period, less dividends
and distributions paid or declared by Company during such period and less, to
the extent added in determining Consolidated Net Income, extraordinary gains
during such period, and the denominator of which shall equal Fixed Charge
Principal Payments.

          "Fixed Charge Principal Payments" shall mean (i) if the date of
determination is September 30, 1999 or December 31, 1999, $3,000,000, (ii) if
the date of determination is March 31, 2000, June 30, 2000 or September 30,
2000, $3,500,000 and (iii) if the date of determination is after September 30,
2000, the sum of all principal payments which become due and payable by Company
and its Consolidated Subsidiaries during the four quarter period ending on such
date on indebtedness for borrowed money.

          "GAAP" shall have the meaning set forth in Section 1.02.

          "Governmental Authority" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or public or
private mediator or arbitrator, in each case whether foreign or domestic.

          "Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or

                                      -5-
<PAGE>   11

payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

          "Hazardous Materials" means (i) any "hazardous substance" as
defined in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv)
petroleum, its derivatives, by-products and other hydrocarbons; and (v) any
other toxic, radioactive, caustic or otherwise hazardous substance regulated
under Environmental Laws.

          "Hazardous Materials Contamination" means contamination (whether now
existing or hereafter occurring) of the improvements, buildings, facilities,
personalty, soil, groundwater, air or other elements on or of the relevant
property by Hazardous Materials, or any derivatives thereof, or on or of any
other property as a result of Hazardous Materials, or any derivatives thereof,
generated on, emanating from or disposed of in connection with the relevant
property at levels or in amounts that could cause a violation of Environmental
Laws.

          "Hedging Transaction" means each interest rate swap transaction, basis
swap transaction, forward rate transaction, commodity swap transaction, equity
transaction, equity index transaction, foreign exchange transaction, cap
transaction, floor transaction (including any option with respect to any of
these transactions and any combination of any of the foregoing) entered into by
the Borrowers from time to time; provided that such transaction is entered into
for risk management purposes and not for speculative purposes.

          "Indemnified Party" has the meaning set forth in Section 7.04.

          "Inmet" means Inmet Corporation, a Michigan corporation and a wholly
owned subsidiary of the Company, together with its successors.

          "Inmet Cap Ex" shall mean Capital Expenditures during 1999 and 2000
incurred for the acquisition of land and the making of building improvements for
the addition to Inmet's plant located in Ann Arbor, Michigan and the
construction of a headquarters building for the Company to the extent not
exceeding $2,500,000 in the aggregate.

          "Interest Rate Protection Agreement" means any Hedging Transaction
entered into between Company and any bank or an Affiliate of a bank; provided
that such transaction is entered into for risk management purpose and not for
speculative purposes.

          "Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.

                                       -6-

<PAGE>   12

          "Investor Affiliate" means any Person that directly, or indirectly,
through one or more intermediaries, controls an Investor or is controlled by or
is under common control with any such Person. As used in this definition, the
term "control" of a Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.

          "Investors" means Ronald D. Brooks, Michael J. Endres, David R. Meuse
and John L. Smucker.

          "KDI Plan" has the meaning assigned to that term in Section 9.12.

          "Law" means any law (including common law), constitution, statute,
treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree
or award of any Governmental Authority.

          "Lenders" means Comerica Bank, National City Bank of Michigan/Illinois
and each other Person that becomes a holder of a Senior Note in accordance with
the terms of the Credit Agreement and their respective successors.

          "Letters of Credit" means any standby or documentary letters of credit
issued by the Lender at the request of or for the account of the Company,
individually, and/or a Subsidiary (jointly and severally with the Company)
pursuant to Article 3 of the Credit Agreement and those existing letters of
credit issued by the Lender on behalf of the Company or any Subsidiary, as
identified on Schedule 2 of the Credit Agreement.

          "Liabilities" has the meaning set forth in Section 7.04.

          "Lien" means, any pledge, assignment, hypothecation, mortgage,
security interest, trust receipt, conditional sale or title retaining contract,
sale and leaseback transaction, financing statement or comparable notice or
other filing or recording, Capital Lease, subordination or any claim or right,
or any other type of lien, charge, encumbrance, preferential or priority
arrangement or other claim or right, whether based on common law or statute.

          "Loans" means the loans to the Company evidenced by the Notes.

          "Material Adverse Effect" means a material adverse effect on (a) the
business or financial condition of the Company and its Subsidiaries taken as a
whole, (b) the ability of the Company to perform its obligations under any of
the Transaction Documents, or (c) the validity or enforceability of any of the
Transaction Documents or the rights or remedies of the Purchasers hereunder or
thereunder.

          "Material Plan" means at any time a Plan having unfunded liabilities,
which means the amount (if any) by which (i) the value of all benefit
liabilities under such Plan, determined on a plan termination basis using the
assumptions prescribed by the PBGC for purposes of Section 4044 of

                                   -7-

<PAGE>   13

ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.

          "Material Subsidiary" means each Domestic Subsidiary of the Company
that has assets having a fair market value of $100,000 or more or that has
annual gross income of $250,000 or more.

          "Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA.

          "Net Income" means the net income (or loss) of the Company and its
Consolidated Subsidiaries for any period determined in accordance with GAAP but
excluding in any event any extraordinary gains or losses and any taxes on the
excluded gains and any tax deductions or credits on account of any excluded
losses.

          "Notes" has the meaning assigned to that term in the recitals of this
Agreement.

          "Officers' Certificate" means a certificate executed on behalf of a
Person by its chairman of the board (if an officer), chief executive officer or
president or one of its vice presidents or a senior financial officer or
treasurer.

          "Operative Documents" means the Financing Documents, the Acquisition
Documents, the Senior Loan Documents, the Warrants, the Stockholder Agreement,
and the Registration Rights Agreement and all other Transaction Documents, as
the same may be amended, modified, supplemented from time to time in accordance
with the terms thereof and hereof.

          "Payment Account" means with respect to the Purchasers, the account
specified on the signature pages hereof into which all payments from the
Company, shall be made, or such other account as the Purchasers shall from time
to time specify by notice to the Company.

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

          "Pension Plan(s)" shall mean all employee pension benefit plans of
Company or its Subsidiaries, as defined in Section 3(2) of ERISA.

          "Permitted Acquisitions" shall mean the Acquisition and any
acquisition by the Company or any of its Subsidiaries of assets, businesses or
business interests or shares of stock or other ownership interests of or in any
Person ("target") which operates in the United States in substantially the same
line of business as Company or the Subsidiary which is a party to the
acquisition and which is conducted in accordance with the following
requirements:

          (a) not more than five days after the signing of any letter of intent
for such

                                      -8-
<PAGE>   14

proposed acquisition, the Company shall have provided a copy of such letter of
intent to the Purchasers and promptly upon signing the definitive acquisition
documents, the Company shall have provided copies thereof to the Purchasers;

     (b) on the date of any such acquisition, all necessary or appropriate
governmental, quasi-governmental, agency, regulatory or similar approvals of
applicable jurisdictions (or the respective agencies, instrumentalities or
political subdivisions, as applicable, of such jurisdictions) and all necessary
or appropriate non-governmental and other third-party approvals which, in each
case, are material to such acquisition have been obtained and are in effect, and
the Company and its Subsidiaries are in full compliance therewith, and all
necessary or appropriate declarations, registrations or other filings with any
court, governmental or regulatory authority, securities exchange or any other
person have been made;

     (c) the total cash consideration of each such acquisition conducted while
this Agreement remains in effect as Permitted Acquisitions (but excluding any
acquisition conducted with the specific written approval of the Purchasers, and
not as a Permitted Acquisition hereunder), computed on the basis of total
acquisition consideration paid or incurred, or to be paid or incurred, by the
Company or its Subsidiaries with respect thereto, including all indebtedness
which is assumed or to which such assets, businesses or business or ownership
interests or shares, or any Person so acquired, is subject, shall not exceed
$5,000,000;

     (d) within 30 days after any such acquisition has been completed Company
shall deliver to the Purchasers executed copies of all material documents
pertaining to such acquisition, and the Company, its Subsidiaries and any of the
corporate entities involved in such acquisition shall execute or cause to be
executed, and provide or cause to be provided to the Purchasers, such documents
and instruments (including without limitation, the joinder agreement, security
agreements and mortgages required by the Credit Agreement and mortgages of all
real property acquired by the Company or any existing Domestic Subsidiary as a
result of such acquisition, and opinions of counsel, amendments,
acknowledgments, consents and evidence of approvals or filings) as reasonably
requested by the Purchasers, if any;

     (e) within 60 days prior to the effective date of the acquisition, the
Company shall deliver to target, (i) a pro forma financial statement for the
target, as of the effective date of the acquisition, (ii) a pro forma financial
statement of the Company and its Consolidated Subsidiaries for the 12 month
period ending on the effective date of the acquisition prepared as if the
acquisition became effective on the first day of such period; and (iii)
financial projections for the three year period commencing on the effective date
of the acquisition, including financial covenant compliance projections; and

     (f) both immediately before and after such acquisition, no Potential
Default or Event of Default (whether or not related to such acquisition), has
occurred and is continuing

                                      -9-
<PAGE>   15

     and on the date of consummation of such acquisition, the Company shall have
     provided to the Purchasers a certificate of a Responsible Officer as to
     such effect.

          "Permitted Contest" means a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge.

          "Permitted Liens" means with respect to any Person:

               (a) the Liens granted under or established by the Credit
Agreement or the Loan Documents (as defined in the Credit Agreement) and
described on SCHEDULE 5.06;

               (b) Liens for taxes not yet delinquent or which are being
contested in good faith by appropriate proceedings diligently pursued, provided
that provision for the payment of all such taxes has been made on the books of
such Person as may be required by GAAP;

               (c) Mechanics', materialmen's, banker's, carriers',
warehousemen's and similar Liens arising in the ordinary course of business and
securing obligations of such Person that are not overdue for a period of more
than 60 days or are being contested in good faith by appropriate proceedings
diligently pursued, provided that in the case of any such contest (i) any
proceedings commenced for the enforcement of such Liens shall have been duly
suspended; and (ii) such provision for the payment of such Liens has been made
on the books of such Person as may be required by GAAP;

               (d) Liens arising in connection with worker's compensation,
unemployment insurance, old age pensions and social security benefits and
similar statutory obligations which are not overdue or are being contested in
good faith by appropriate proceedings diligently pursued, provided that in the
case of any such contest (i) any proceedings commenced for the enforcement of
such Liens shall have been duly suspended; and (ii) such provision for the
payment of such Liens has been made on the books of such Person as may be
required by GAAP;

               (e)(i) Liens incurred in the ordinary course of business to
secure the performance of statutory obligations arising in connection with
progress payments or advance payments due under contracts with the United States
government or any agency thereof entered into in the ordinary course of business
and (ii) Liens incurred or deposits made in the ordinary course of business to
secure the performance of statutory obligations, bids, leases, fee and expense
arrangements with trustees and fiscal agents and other similar obligations
(exclusive of obligations incurred in connection with the borrowing of money,
any lease-purchase arrangements or the payment of the deferred purchase price of
property), provided that full provision for the payment of all such obligations
set forth in clauses (i) and (ii) has been made on the books of such Person as
may be required by GAAP;
                                      -10-

<PAGE>   16

               (f) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which do not materially interfere with the business of such Person, including,
without limitation the matters disclosed in the surveys and title policies
relating to the real property mortgaged to the Lenders; and

               (g) interests of lessors in leased equipment, including filings
for notification purposes.

          "Person" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any government agency or political
subdivision thereof.

          "Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code.

          "Post-Closing Documents" means the Acquisition Documents, other than
the Stock Purchase Agreement, and the Senior Loan Documents.

          "Potential Default" means any event or condition which with notice,
passage of time, or both, would constitute an Event of Default.

          "Preferred Stock" means the Company's Series A Preferred Stock, with
$1,000 liquidation value per share.

          "Pro Forma Combined Projected Financial Information" means, as to any
acquisition, pro forma combined projected financial information for the Company
and the acquisition candidate, consisting of projected consolidated balance
sheets as at the end of at least the next succeeding two fiscal years of the
Company following the acquisition and projected consolidated statements of
income for each of those years, including sufficient detail to permit
calculation of the amounts and ratios described in Sections 8.16 through 8.19,
inclusive, as projected for those years and accompanied by (i) a statement
setting forth a calculation of the ratios described in Sections 8.16 through
8.19, inclusive, and (ii) a statement in reasonable detail specifying all
material assumptions underlying the projections.

          "RCRA" means the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Sections 6901 et seq.) as amended from time to time and the rules and
regulations promulgated thereunder.

          "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the
Purchasers, as the same may be amended, modified and supplemented from time to
time in accordance with the terms thereof.

                                      -11-

<PAGE>   17

          "Requirements of Law" means as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any Law, right, privilege, qualification, license
or franchise or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property (now owned or hereafter acquired) or to which such Person or any of its
property is subject.

          "Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility.

          "Restricted Payment" means (i) any dividend or other distribution on
any shares of the Company's capital stock (except dividends payable solely in
shares of its capital stock of the same class) or (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (A) any shares of the
Company's capital stock or (B) any option, warrant or other right to acquire
shares of the Company's capital stock.

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

               "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.

               "Seller" means Densitron International, plc, a public limited
company registered in England and Wales (company number 1982726).

               "Senior Debt" means as of any date of determination all Total
Debt as of such date less all Subordinated Debt as of such date.

               "Senior Debt to EBITDA Ratio" shall mean, as of any date of
determination, a ratio, the numerator of which shall equal Senior Debt as of
such date and the denominator of which shall equal Consolidated EBITDA for the
four quarter period ending on such date.

               "Senior Loans" means the revolving and term loans made by the
Lenders to the Company pursuant to the Credit Agreement, subject to the terms
hereof.

               "Senior Loan Documents" means, collectively, the Credit
Agreement, the Senior Notes and the Senior Security Documents.

               "Senior Notes" means the Revolving Credit Note and the Term Note
each dated within five days of the date hereof, issued by the Company and
payable to the order of the Lenders (as those terms are defined in the Credit
Agreement) to be issued by the Company and payable to the order of the Lenders,
as the same may be amended, modified and supplemented from time to time in
accordance with the terms thereof and hereof.

                                      -12-

<PAGE>   18

               "Senior Security Documents" means any agreement pursuant to which
the Company or any of its Subsidiaries or Affiliates provides a Lien on its
assets in favor of the Lenders, and all supplementary assignments, security
agreements, pledge agreements, guarantees, acknowledgments or other documents
delivered or to be delivered pursuant to the terms of the Credit Agreement or
any Senior Security Document, including, without limitation, the guarantee
provided to the Lenders by the Subsidiaries, and all amendments, modifications
and supplements made from time to time to any of the foregoing, in accordance
with the terms hereof and thereof.

               "State Regulatory Laws" means the Laws of any Governmental
Authority of any state, including "blue sky" laws, for which any consent,
approval or expiration of any waiting period is necessary in connection with the
proposed purchase and sale of Securities contemplated hereby.

               "Stock Purchase Agreement" means the Sale and Purchase Agreement,
dated as of June 29, 1999, among the Company, DML Microwave Limited, a private
limited company registered in England and Wales (company number 3719966), and
the Seller.

               "Stockholder Agreement" means the Stockholder Agreement, dated as
July 23, 1996, as amended as of the date hereof, among the Company, the
Purchasers, the other parties thereto and any other Person who becomes a party
thereto pursuant to the terms thereof, as the same may be amended, modified or
supplemented from time to time in accordance with the terms thereof.

               "Subordinated Debt" means Debt of the Company or any of its
Subsidiaries that has been subordinated in right of payment and priority to such
Person's indebtedness to the Lenders, all on terms and conditions satisfactory
to the Lenders in the exercise of their sole discretion, including the Debt of
the Company evidenced by the Notes.

               "Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Company. Unless otherwise
specified to the contrary herein, Subsidiary or Subsidiaries shall refer to the
Company's Subsidiary or Subsidiaries.

               "Total Debt" means as of any date of determination, the sum,
without duplication, of (a) all indebtedness of the Company and its Consolidated
Subsidiaries for borrowed money or for the deferred purchase price of property
or services as of such date (other than trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices)
or which is evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of the Company and its Consolidated Subsidiaries under Capital
Leases as of such date, (c) without duplication, all obligations of the Company
and its Consolidated Subsidiaries in respect of Letters of Credit, acceptances
or similar obligations issued or created for the account of the Company or any
of its Consolidated Subsidiaries as of such date, (d) all liabilities secured by
any lien on any property owned by the Company and its Consolidated Subsidiaries
as of such date even though the Company or its Subsidiaries, as applicable, have
not assumed or otherwise become liable for the payment thereof, and

                                      -13-

<PAGE>   19

(e) without duplication, all guarantee obligations of the Company and its
Consolidated Subsidiaries as of such date. For purposes of determining Total
Debt, the Company's guaranty obligation to Densitron International Limited shall
be disregarded to the extent such obligation is secured by the Densitron Letter
of Credit (as defined in the Credit Agreement on the date that it is entered
into by the parties thereto).

               "Total Debt to EBITDA Ratio" shall mean, as of any date of
determination, a ratio, the numerator of which shall equal Total Debt as of such
date and the denominator of which shall equal Consolidated EBITDA for the four
quarter period ending on such date.

               "Transaction Documents" means collectively, this Agreement, the
Notes, the Warrants, the Registration Rights Agreement, and the Stockholder
Agreement, and all other agreements, instruments, certificates and documents
executed by the Company with or in favor of or for the benefit of any of the
Purchasers, as the same may be amended, modified, supplemented from time to time
in accordance with the terms thereof and hereof.

               "Warrants" has the meaning ascribed to such term in the recitals
of this Agreement.

               "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.

1.02. Accounting Terms; Financial Statements. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time ("GAAP"), applied on a
basis consistent (except for changes concurred in by the Company's independent
public accountants) with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered to the Purchasers;
provided that, if the Company notifies the Purchasers that the Company wishes to
amend any covenant in Article 8 or any related definition to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the
Purchasers notify the Company that the Purchasers wish to amend Article 8 or any
related definition for such purpose), then the Company's compliance with such
covenant, shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Company
and the Purchasers.

1.03. Other Definitional Provisions. References in this Agreement to "Articles",
"Sections", "Schedules" or "Exhibits" shall be to Articles, Sections, Schedules
or Exhibits of or to this Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.01 may, unless the context otherwise requires,
be used in the singular or plural depending on the reference. "Include",
"includes" and "including" shall be deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import. "Writing", "written" and comparable terms refer to printing, typing
and other means of reproducing words in a visible form. References to any
agreement or contract are to such agreement or contract as amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof.
References to any

                                      -14-

<PAGE>   20

Person include the successors and assigns of such Person. References "from" or
"through" any date mean, unless otherwise specified, "from and including" or
"through and including", respectively.

ARTICLE 2
Purchase and Sale of Notes and Warrants

2.01. Purchase and Sale of Notes. Subject to the terms and conditions herein set
forth, the Company agrees that it will issue to: (a) NCCC, and NCCC agrees that
it will acquire from the Company, on the Closing Date, Notes in the original
principal amount of $2,176,000, with such Notes being substantially in the form
attached hereto as EXHIBIT A, appropriately completed in conformity herewith;
(b) GLCI, and GLCI agrees that it will acquire from the Company, on the Closing
Date, Notes in the original principal amount of $384,000, with such Notes being
substantially in the form attached hereto as EXHIBIT B, appropriately completed
in conformity herewith and (c) RMMF, and RMMF agrees that it will acquire from
the Company, on the Closing Date, Notes in the original principal amount of
$1,440,000, with such Notes being substantially in the form attached hereto as
EXHIBIT C, appropriately completed in conformity herewith. At the Closing, the
Company shall execute and deliver to each of the Purchasers a single Note in
each such principal amount. The obligations of the Company under the Notes shall
be pari passu with the obligations of the Company under the notes issued
pursuant to the 1996 Agreement.

2.02. Purchase and Sale of Warrants. Subject to the terms and conditions herein
set forth, the Company agrees that it will issue to each of the Purchasers, and
each of the Purchasers agrees that it will acquire from the Company, on the
Closing Date, simultaneously with the purchase by the Purchasers of the Notes, a
warrant to purchase the number of shares of Common Stock set forth opposite such
Purchaser's name on the signature page hereof, with each Warrant being
substantially in the form attached hereto as EXHIBIT D, appropriately completed
in conformity herewith. The Warrants shall be duly executed and registered in
the name or names of the Purchasers or one or more Affiliates of the Purchasers
and in such denominations as the Purchasers shall have notified the Company.

2.03. Purchase Price Allocation. Unless agreed to otherwise by the Company and
the Purchasers prior to October 31, 1999, the Company and the Purchasers hereby
agree that for each $1,000 of the $4,000,000 paid by the Purchasers to acquire
the Notes and the Warrants hereunder, $187.50 shall be allocated to the Company
for the purchase of Warrants; consequently, of the aggregate total $4,000,000
purchase price for the Securities, $750,000 shall be allocated to the Warrants.

2.04. Closing. The closing (the "CLOSING") of this Agreement shall be held at
the offices of Baker & Hostetler LLP, at 10:00 a.m., Cleveland, Ohio Time, on
the Closing Date, or at such other time and place as the Company and the
Purchasers may agree in writing.

2.05. SEVERAL OBLIGATIONS. The failure of any Purchaser to purchase the
Securities to be purchased by it on the Closing Date shall not relieve the other
Purchaser of its obligation to purchase Securities

                                      -15-

<PAGE>   21

on the Closing Date. No Purchaser shall be responsible for the failure of the
other Purchaser to purchase the Securities to be purchased by such other
Purchaser, and no Purchaser shall have any obligation to the other Purchaser for
the failure by such Purchaser to purchase the Securities required to be
purchased by such Purchaser.

ARTICLE 3
Conditions to the Obligation Of the Purchasers to Close

               The obligation of each Purchaser to purchase the Securities, to
pay the purchase price therefor and to perform any obligations hereunder shall
be subject to the satisfaction as determined by, or waiver by, that Purchaser of
the following conditions on or before the Closing Date. No Purchaser shall be
obligated to purchase any Security unless the purchase and sale of all the other
Securities occurs simultaneously therewith.

3.01. Representations and Warranties. The representations and warranties of the
Company contained in this Agreement or made by the Company or any Subsidiary in
each other Operative Document shall be true and correct at and as of the Closing
Date as if made at and as of such date.

3.02. Corporate Proceedings. The Purchasers shall have received certificates of
the Secretary of the Company as of the Closing Date as to (i) true copies of the
certificate or articles of incorporation and by-laws (or other constituent
documents) of the Company in effect on such date (which, in the case of
certificates or articles of incorporation or other constituent documents filed
or required to be filed with the Secretary of State or other Governmental
Authority in its jurisdiction of incorporation, shall be certified to be true,
correct and complete by such Secretary of State or other Governmental Authority
not more than 10 days before the Closing Date), which, in each case, shall be in
form and substance reasonably satisfactory to the Purchasers, (ii) true copies
of all corporate action taken by the Company approving and otherwise relating to
this Agreement and the other Operative Documents, and (iii) the incumbency and
signature of the officers of the Company executing this Agreement and the other
Transaction Documents, together with the satisfactory evidence of the incumbency
of such Secretary or Assistant Secretary. The Purchasers shall have received
certificates from the appropriate Secretaries of State or other applicable
Governmental Authorities dated not more than 10 days before the Closing Date
showing the good standing of the Company in its state of incorporation and each
state in which it does business.

3.03. No Defaults. No Event of Default or Potential Default shall have occurred
and be continuing on the Closing Date or after giving effect to the purchases
and transactions required to be made on the Closing Date.

3.04. Legal Opinions. The Purchasers shall have received the opinion, addressed
to the Purchasers dated the Closing Date, of Dykema Gossett PLLC, counsel to the
Company and its Subsidiaries, as to such matters as may be requested by the
Purchasers and in form and substance satisfactory to the Purchasers. In
addition, the Purchasers shall have received all opinions of counsel for the
Company and its Subsidiaries required under or in connection with the Credit
Agreement,
                                      -16-

<PAGE>   22

which opinions must be in form and content reasonably acceptable to
the Purchasers and their counsel and permit the Purchasers to rely on the
opinions expressed therein.

3.05. Fees, Expenses, etc. All fees and other compensation required to be paid
to the Purchasers or their counsel pursuant to this Agreement and any other
written agreement on or prior to the Closing Date shall have been paid or
received.

3.06. Material Adverse Change. The Purchasers shall be satisfied in their sole
good faith discretion as to the absence of any material adverse change in any
aspect of the business, operations, properties, prospects or condition
(financial or otherwise) of the Company or any of its Subsidiaries, or any event
or condition which is reasonably likely to result in such a material adverse
change.

3.07. Capitalization, etc. The corporate and capital structure of each of the
Company and its Subsidiaries, the certificates or articles of incorporation and
bylaws (or other constituent documents) of each of them, and the terms,
conditions, amounts and holders of all equity, debt and other indebtedness,
obligations and liabilities of each of them, shall be reasonably satisfactory to
the Purchasers.

3.08. Documents. The Purchasers shall have received true, complete and correct
copies of such documents as they may reasonably request in connection with or
relating to the purchase and sale of the Securities and the transactions
contemplated hereby, all in form and substance satisfactory to the Purchasers,
and the Purchasers shall have received all documents they may reasonably request
relating to the existence of the Company and its Subsidiaries, the corporate
authority for and the validity of the Operative Documents (other than the
Post-Closing Documents), the most current drafts of the Post-Closing Documents,
and any other matters relevant hereto, all in form and substance satisfactory to
the Purchasers in their sole good faith discretion.

3.09. Purchase Permitted by Applicable Laws. The acquisition of and payment for
the Securities to be acquired by the Purchasers hereunder and the consummation
of the transactions contemplated hereby and by the Transaction Documents (i)
shall not be prohibited by any Requirement of Law and (ii) shall not subject any
Purchaser to any penalty or, in its reasonable judgment, other onerous condition
under or pursuant to any Requirement of Law.

3.10. Consents and Approvals. All consents, exemptions, authorizations, or other
actions by, or notices to, or filings with, Governmental Authorities and other
Persons in respect of all Requirements of Law, including without limitation with
respect to those Contractual Obligations of the Company and with respect to
State Regulatory Laws, excluding any state securities laws, necessary or
required in connection with the execution, delivery or performance (including,
without limitation, the payment of interest on the Notes and the issuance of the
Common Stock upon exercise of the Warrants) by the Company or enforcement
against the Company of the Transaction Documents to which they are parties shall
have been obtained and be in full force and effect, and the Purchasers shall
have been furnished with appropriate evidence thereof, and all waiting periods
shall have lapsed without extension or the imposition of any conditions or
restrictions.

                                      -17-

<PAGE>   23

3.11. Execution and Delivery of this Agreement. The Company shall have duly
executed and delivered to the Purchasers this Agreement.

3.12. Registration Rights Agreement. The Company shall have duly executed and
delivered to the Purchasers the Registration Rights Agreement.

3.13. Stockholder Agreement. The Company and the other parties thereto shall
have duly executed and delivered to the Purchasers the second amendment to the
Stockholder Agreement.

3.14. Notes and Warrants. The Company shall have duly executed and delivered to
the Purchasers the Notes in the forms provided for herein and the Warrants in
the form provided herein, all duly executed and registered in such name or names
and in such denominations as the Purchasers shall have requested in accordance
with the terms of the Transaction Documents and the Financing Documents.

3.15. SBIC Certificates. The Company shall have executed and delivered to the
Purchasers forms and information required by the rules and regulations of the
United States Small Business Administration and as reasonably requested by the
Purchasers, including, without limitation, a Size Status Declaration on SBA Form
480, a certificate by the Company that it will not illegally discriminate on SBA
Form 652, a certificate with respect to the intended use of the proceeds and
information necessary for the preparation of a Portfolio Financing Report on SBA
Form 1031.

3.16. [Intentionally Omitted.]

3.17. Disbursement Instructions. The Purchasers shall have received written
instructions from the Company to the Purchasers directing the payment of the
purchase price for the Notes and the Warrants that is to be paid on the Closing
Date.

3.18. [Intentionally Omitted.]

3.19. [Intentionally Omitted.]

3.20. Officer's Certificate. The Purchasers shall have received a certificate
signed by a senior financial officer or treasurer of the Company to the effect
that, both before and immediately after the making of the Loans and the purchase
of the Warrants and the consummation of the Acquisition and the other
transactions contemplated to take place on the Closing Date, (i) no Default
shall have occurred and be continuing and (ii) the representations and
warranties of the Company and the Subsidiaries made in or pursuant to the
Operative Documents are true, correct and complete.

3.21. Financial Statements. The Purchasers shall have received (i) the financial
statements and pro forma balance sheet referred to in Sections 5.04(a), (b) and
(c), (ii) a statement of sources and uses of funds covering all payments
reasonably expected to be made by the Company and the Subsidiaries in connection
with the transactions contemplated by the Operative Documents to be consummated
on or within 10 days after the Closing Date, including an itemized estimate of
all fees, expenses and other closing costs, and (iii) payment instructions with
respect to each wire transfer to
                                      -18-

<PAGE>   24

be made by the Purchasers or the Company on the Closing Date setting forth the
amount of such transfer, the purpose of such transfer, the name and number of
the account to which such transfer is to be made, the name and ABA number of the
bank or other financial institution where such account is located and the name
and telephone number of an individual that can be contacted to confirm receipt
of such transfer.

ARTICLE 4
Conditions to the Obligation of the Company to Close

                  The obligations of the Company to issue and sell the
Securities and to perform any other obligations hereunder shall be subject to
the satisfaction as determined by, or waiver by, the Company of the following
conditions on or before the Closing Date:

4.01. Representations and Warranties True. The representations and warranties of
the Purchasers contained in Article 6 shall be true and correct at and as of the
Closing Date as if made at and as of such date.

4.02. Compliance with This Agreement. The Purchasers shall have performed and
complied with all of their agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Purchasers on
or before the Closing Date.

4.03. Issuance Permitted by Applicable Laws. The issuance of the Securities to
be issued by the Company hereunder and the consummation of the transactions
contemplated hereby (i) shall not be prohibited by any Requirement of Law, and
(ii) shall not subject the Company to any penalty or, in its reasonable
judgment, other onerous condition under or pursuant to any Requirement of Law.

4.04. Consents and Approvals. All consents, exemptions, authorizations, or other
actions by, or notices to, or filings with, Governmental Authorities and other
Persons in respect of all Requirements of Law necessary or required in
connection with the execution, delivery or performance by the Purchasers or
enforcement against the Purchasers of this Agreement shall have been obtained
and be in full force and effect, and the Company shall have been furnished with
appropriate evidence thereof.

4.05 EXECUTION AND DELIVERY OF THIS AGREEMENT. The Purchasers shall have
executed and delivered to the Company this Agreement.

ARTICLE 5
Representations and Warranties of the Company

                  The Company represents and warrants to the Purchasers
(including, in the case of any such representation and warranty made or deemed
made before the consummation of the Acquisition,

                                  -19-
<PAGE>   25
at the time such representation and warranty is made or deemed made and
immediately after giving effect to the consummation of the Acquisition) that:

5.01. Existence and Power. Each of the Company and its Subsidiaries is a
corporation duly incorporated, validly existing and in good standing, under the
laws of the jurisdiction of its organization. The Company and its Subsidiaries
are qualified to do business as foreign corporations or other business entities,
as the case may be, in each jurisdiction in which they are required to be so
qualified, except where failure to be qualified would not have a Material
Adverse Effect.

5.02. Corporate and Governmental Authorization; No Contravention. The
execution, delivery and performance by the Company and its Subsidiaries of the
Operative Documents to which each is a party are within the Company's and its
Subsidiaries' corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official (all of which have been made and are in
full force and effect), and do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the articles of
incorporation or bylaws of the Company and its Subsidiaries or of any judgment,
injunction, order or decree or of any material agreement or other material
instrument binding upon the Company and its Subsidiaries or result in the
creation or imposition of any Lien (other than the Permitted Liens) on any asset
of the Company and any of its Subsidiaries.

5.03. Binding Effect. Each of the Operative Documents to which the Company or
any of its Subsidiaries is a party when executed and delivered will constitute a
valid and binding agreement of the Company or that Subsidiary, as the case may
be, and each of the Transaction Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company and its Subsidiaries that are parties thereto, in each case
enforceable in accordance with its respective terms except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by general
principles of equity. The Company has reserved and will keep available for
issuance upon exercise of the Warrants the total number of Warrant Shares
deliverable upon exercise of all Warrants from time to time outstanding. The
issuance of the Warrant Shares has been duly and validly authorized and, when
issued and sold in accordance with the Warrants, the Warrant Shares will be duly
and validly issued, fully paid and nonassessable and free of preemptive rights.

5.04.  Financial Information.

         (a) The audited consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1998, December 31, 1997, and December 31, 1996,
and the related statement of income for the Fiscal Year then ended, copies of
which have been delivered to the Purchasers, fairly present, in conformity with
GAAP the financial position of the Company and its Subsidiaries as of such date
and its results of operations, for such period.

         (b) The unaudited consolidated and consolidating balance sheet of the
Company and its Subsidiaries as of May 31, 1999, and the related unaudited
statement of income for the month and the portion

                                      -20-

<PAGE>   26

of the Fiscal Year then ended, copies of which have been delivered to the
Purchasers, fairly present, in conformity with GAAP (subject to (i) the absence
of footnotes and (ii) year-end audit adjustments) applied on a basis consistent
with the financial statements referred to in Section 5.04(a), the financial
position of the Company and its Subsidiaries as of such date and its results of
operations for the month and the five months then ended (subject to normal
year-end adjustments).

    (c) The pro forma balance sheet of the Company and its Subsidiaries as of
June 30, 1999, copies of which have been delivered to the Purchasers, fairly
presents in conformity with GAAP applied on a basis consistent with the
financial statements referred to in Section 5.04(a), the consolidated financial
position of the Company and its Subsidiaries as of such date, adjusted to give
effect (as if such events had occurred on such date) to (i) the transactions
contemplated by the Acquisition Documents, (ii) the making of the Loans and the
issuance of the Warrants, (iii) the application of the proceeds therefrom as
contemplated by the Acquisition Documents and the Financing Documents, and (iv)
the payment of all legal, accounting and other fees related thereto to the
extent known at the time of the preparation of such balance sheet. As of the
date of such balance sheet and the date hereof, the Company and its Subsidiaries
had and have no material liabilities, contingent or otherwise, including
liabilities for taxes, long-term leases or forward or long-term commitments,
which are not properly reflected on such balance sheet.

    (d) Since December 31, 1998, there has been no material adverse change in
the business, operations, properties, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, except as
reflected in the financial statements described in Section 5.04(a) and (b).

5.05. Litigation. There is no action, suit or proceeding pending against, or to
the knowledge of the Company, threatened against or affecting, the Company or
any of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could have a Material Adverse Effect. There is no action, suit or
proceeding pending against, or to the knowledge of the Company threatened
against or affecting, any party to any of the Operative Documents (other than
the Company) before any court or arbitrator or any governmental body, agency or
official which in any manner draws into question the validity of any of the
Operative Documents.

5.06. Ownership of Property. Except as set forth on SCHEDULE 5.06, as reflected
in the financial statements described in Section 5.04(a) or (b), and for items
purchased in the ordinary course of business since the date of such financial
statements, on and as of the Closing Date, the Company owns no property or
assets and other than the common stock of its Subsidiaries, and none of its
properties and assets is subject to any Liens, except Permitted Liens.

5.07. No Default. No Default or Event of Default has occurred and is continuing.
Neither the Company nor any of its Subsidiaries is in default under or with
respect to any contract, agreement, lease or other instrument to which it is a
party or by which its property is bound or affected except for such defaults
that in the aggregate would not have a Material Adverse Effect.

5.08. No Burdensome Restrictions. No contract, lease, agreement or other
instrument to which the Company or any of its Subsidiaries is a party or by
which any of its property is bound or

                                      -21-
<PAGE>   27

affected, no charge, corporate restriction, judgment, decree or order and no
provision of applicable law or governmental regulation materially adversely
affects the business, operations, properties, prospects or condition (financial
or otherwise) of the Company or any of its Subsidiaries.

5.09. Subsidiaries; Other Equity Investments. Except as described on SCHEDULE
5.09, the Company has no Subsidiaries on the date hereof. Neither the Company
nor any of its Subsidiaries is engaged in any joint venture or partnership with
any other Person, except for joint ventures or partnerships of any Subsidiary of
the Company related to the manufacture of products that are in the same line of
business as that Subsidiary so long as that Subsidiary's investment in any such
joint ventures or partnerships is not in excess of $500,000 individually and not
in excess of $1,000,000 in aggregate.

5.10. Investment Company Act. Neither the Company nor any of its Subsidiaries is
an "investment company" as defined in the Investment Company Act of 1940, as
amended. The consummation of the transactions contemplated by the Operative
Documents does not and will not violate any provision of such Act or any rule,
regulation or order issued by the Commission thereunder. Immediately following
the Closing and each purchase of Securities hereunder, after giving effect to
the transactions contemplated by the Transaction Documents, neither the Company
nor any Person controlling, controlled by or under common control with the
Company or the Company will be an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act, or
any federal or state statute or regulation limiting its ability to incur
Indebtedness.

5.11. Margin Regulations. None of the proceeds from the Loans have been or will
be used, directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any Margin Stock, or for any other
purpose which might cause any of the loans under this Agreement to be considered
a "purpose credit" within the meaning of Regulations G, U or X of the Board of
Governors of the Federal Reserve Board.

5.12. Taxes. The Company's federal tax identification number is 38-3260790. All
federal, state and local tax returns, reports and statements required to be
filed by or on behalf of the Company and its Subsidiaries have been filed with
the appropriate governmental agencies in all jurisdictions in which such
returns, reports and statements are required to be filed, and all taxes
(including real property taxes) and other charges shown to be due and payable
have been timely paid prior to the date on which any fine, penalty, interest,
late charge or loss may be added thereto for nonpayment thereof, except to the
extent such taxes are the subject of a Permitted Contest. All state and local
sales and use taxes required to be paid by the Company or any of its
Subsidiaries have been paid, except to the extent such taxes are the subject of
a Permitted Contest. All federal and state returns have been filed by the
Company and its Subsidiaries for all periods for which returns were due with
respect to employee income tax withholding, social security and unemployment
taxes, and the amounts shown thereon to be due and payable have been paid in
full or adequate provisions therefor have been made, except to the extent such
taxes are the subject of a Permitted Contest.

                                      -22-
<PAGE>   28

5.13. Brokers. No broker, finder or other intermediary engaged by the Company or
any of its Subsidiaries has brought about the obtaining, making or closing of
the transactions contemplated by the Operative Documents, and neither the
Company, its Subsidiaries nor the Purchasers has or will have any obligation to
any Person (other than Persons engaged by the Purchasers) in respect of any
finders' or brokerage fees in connection herewith or therewith.

5.14. Related Transactions. A true and complete copy of the Stock Purchase
Agreement has been delivered to the Purchasers. True and complete copies of the
most current drafts of the Acquisition Documents (other than the Stock Purchase
Agreement), have been delivered to the Purchasers. Neither the Company nor any
of its Subsidiaries is in default under the Stock Purchase Agreement.

5.15. Full Disclosure. None of the information (financial or otherwise)
furnished by or on behalf of the Company or its Subsidiaries to the Purchasers
in connection with the consummation of the transactions contemplated by any of
the Operative Documents, when taken as a whole, contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements were made. All financial projections
delivered to the Lenders and the Purchasers have been prepared on the basis of
the assumptions stated therein. The most recent projections delivered to the
Purchasers represent the Company's best estimate (as of their date) of the
Company's and its Subsidiaries future financial performance and such assumptions
are believed by the Company to be fair in light of current business conditions.

5.16. Representations and Warranties Incorporated from Other Operative
Documents. Each of the representations and warranties made in the Operative
Documents by the Company or any of its Subsidiaries and, to the knowledge of the
Company, each of the parties thereto is true and correct in all material
respects as of the Closing Date, and such representations and warranties are
hereby incorporated herein by reference with the same effect as though set forth
in their entirety herein, as qualified therein.

5.17. Private Offering. Neither the Company nor any Person acting on its behalf
has offered the Notes, the Warrants, or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any Person other than the Purchasers.
Neither the Company nor any Person acting on its behalf has taken, or will take,
any action which would subject the issuance or sale of the Notes or the Warrants
or Warrant Shares to Section 5 of the Securities Act, other than as provided in
the Warrants or in the Registration Rights Agreement. No form of general
solicitation or general advertising was used by the Company or any of its
representatives in connection with the offer or sale of the Securities. No
registration of the Securities pursuant to the provisions of the Securities Act
or any State Regulatory Law will be required by the offer, sale or issuance of
the Securities pursuant to this Agreement.

5.18. Capitalization. Set forth on SCHEDULE 5.18 is a schedule of the equity
capitalization of the Company as of the Closing Date, after giving effect to the
transactions contemplated to take place on the Closing Date and the issuance of
the Warrant Shares upon exercise of the Warrants,

                                  -23-

<PAGE>   29

specifying each class of interest held and the amount and holder thereof. The
Warrant Shares are equal in value to five percent (5.0%) of the Common Stock (on
a fully diluted basis) as of the Closing Date, subject to adjustment after the
date hereof as provided in Article VI of the Warrants. As of the Closing Date,
all outstanding shares of capital stock of the Company will be duly authorized
and validly issued, fully paid, nonassessable and free and clear of any Lien
created by the Company. Except as described in SCHEDULE 5.18, (a) no other class
of capital stock or other ownership interests of the Company are authorized or
outstanding and (b) the Company has no outstanding rights (either preemptive or
other) or options to subscribe for or purchase from the Company, or any warrants
or other agreements providing for or requiring the issuance by the Company of,
any of its capital stock or any securities convertible into or exchangeable for
its capital stock.

5.19. Senior Loan Documents. The Company has delivered to the Purchasers true,
complete and correct copies of the most current drafts of the Senior Loan
Documents. Such documents (including the schedules and exhibits thereto), once
executed and delivered by the parties thereto, shall be delivered to the
Purchasers and once delivered to the Purchasers shall comprise full and complete
copies of all material agreements between the parties thereto with respect to
the subject matter thereof and all transactions related thereto, and there are
no material agreements or understandings, oral or written, or material side
agreements not contained therein that relate to or modify the substance thereof.

5.20. Operative Documents. The Company has delivered to the Purchasers true,
complete and correct copies of the Operative Documents (other than the
Post-Closing Documents) together with all amendments, modifications and
supplements thereto.

5.21. Small Business Matters. The Company, together with its "affiliates" (as
that term is defined in Title 13, Code of Federal Regulations, ss.121.103), is a
"small business concern" within the meaning of Section 121.301(c)(1), Title 13,
Code of Federal Regulations, and as otherwise required by the applicable
provisions of Part 121 thereof. The information regarding the Company and its
affiliates set forth in the Small Business Administration Form 480, Form 652 and
Part A of Form 1031 delivered at the Closing (or promptly thereafter) is
accurate and complete. Copies of such forms shall have been completed and
executed by the Company and delivered to the Purchasers at the Closing together
with a written statement of the Company regarding their planned use of the
proceeds from the sale of the Notes and the Warrants.

5.22. Compliance with Environmental Requirements; No Hazardous Materials.  After
giving effect to the Acquisition and except as provided on SCHEDULE 5.22:

     (a) Other than in compliance in all material respects with all applicable
Environmental Laws, no Hazardous Materials have been released into the
environment, or deposited, discharged, placed or disposed of at, on, or under
any properties now or previously owned, leased or operated by the Company or
any of its Subsidiaries. No portion of any such property is being used, or has
been used at any previous time, for the disposal, storage, treatment, processing
or other handling of "hazardous wastes" as defined in RCRA (other than
processing or handling incidental to the generation of such hazardous wastes or
the storage of such wastes for a period of less than 180 days, in each case in
compliance in all material respects with all

                                      -24-

<PAGE>   30

applicable Environmental Laws), nor is any such property affected by any
Hazardous Materials Contamination.

     (b) No asbestos or asbestos-containing materials are present on any of the
properties now or previously owned, leased or operated by the Company or any of
its Subsidiaries in a condition that would reasonably be expected to result in a
material liability to the Company or its Subsidiaries.

     (c) No polychlorinated biphenyls are located on or in any properties now or
previously owned, leased or operated by the Company or any of its Subsidiaries,
in the form of electrical transformers, fluorescent light fixtures with
ballasts, cooling oils or any other device or form other than any
polychlorinated biphenyls that would not reasonably be expected to result in a
material liability to the Company or its Subsidiaries.

     (d) No underground storage tanks are located on any properties now or
previously owned, leased or operated by the Company or any of its Subsidiaries,
or were located on any such property and subsequently removed or filled, other
than any such tanks that would not reasonably be expected to result in a
material liability to the Company or its Subsidiaries.

     (e) No notice, notification, demand, request for information, complaint,
citation, summons, investigation, administrative order, consent order and
agreement, litigation or settlement with respect to Hazardous Materials or
Hazardous Materials Contamination (each, an "Environmental Claim") has been
received by the Company, nor to the Company's knowledge, is any such
Environmental Claim proposed, threatened or anticipated with respect to or in
connection with the operation of any properties now or previously owned, leased
or operated by the Company or any of its Subsidiaries. All such properties and
their existing and prior uses comply and at all times have complied in all
material respects with any applicable governmental requirements relating to
Environmental Laws. There is no condition on any of such properties which is in
violation in any material respect of any applicable governmental requirements
relating to Environmental Laws, and neither the Company nor any of its
Subsidiaries has received any communication from or on behalf of any
governmental authority that any such condition exists. None of such properties
nor any property to which the Company and or any of its Subsidiaries has,
directly or indirectly, transported or arranged for the transportation of any
material is listed or, to the Company's knowledge, proposed for listing on the
National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined
in CERCLA) or on any similar federal, state or foreign list of sites requiring
investigation or cleanup, nor, to the knowledge of the Company, is any such
property anticipated or threatened to be placed on any such list.

     (f) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has knowledge in
relation to the current or prior business of the Company or any of the Company's
Subsidiaries or any property or facility now or previously owned, leased or
operated by the Company or any of its Subsidiaries which has not been delivered
to the Purchaser at least five days prior to the date hereof.

     (g) For purposes of this Section 5.22, the terms "Company" and "Subsidiary"
shall include any business or business entity (including a corporation) which
is, in whole or in part, a predecessor of the Company or any Subsidiary.

                                      -25-

<PAGE>   31

     (h) For purposes of this Section 5.22, any representation or warranty made
with respect to properties not presently owned, leased or operated by the
Company or any of its Subsidiaries (other than the representations and
warranties made in the first sentence of clause (e) of this Section 5.22 and in
clause (f) of this Section 5.22) shall be limited to conditions existing,
activities occurring or compliance with governmental requirements during the
period of such ownership, leasing or operation.

5.23. Compliance with ERISA. Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to each Plan.
No member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Code, or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.

ARTICLE 6
Representations and Warranties of the Purchasers

                  Each of NCCC, GLCI and RMMF, severally, and not jointly,
represents and warrants that it was not formed for the specific purpose of
acquiring the Securities pursuant to this Agreement. In addition, each Purchaser
hereby severally, and not jointly, represents and warrants with respect to
itself as follows:

6.01. Existence; Authorization; No Contravention. Such Purchaser is an entity
duly organized or formed, as the case may be, validly existing and in good
standing or in full force and effect, as the case may be, under the laws of the
jurisdiction of its organization. The execution, delivery and performance by
such Purchaser of this Agreement and the transactions contemplated hereby: (i)
is within such Purchaser's power and authority and has been duly authorized by
all necessary action of such Purchaser; (ii) does not contravene the terms of
such Purchaser's organizational documents (if any) or any amendment thereof;
(iii) will not violate, conflict with or result in any breach or contravention
of or the creation of any Lien under, any Contractual Obligation of such
Purchaser, or any order or decree directly relating to such Purchaser; and (iv)
will not violate any Requirement of Law or any Contractual Obligation of such
Purchaser.

6.02. Binding Effect. This Agreement has been duly executed and delivered by
such Purchaser, and this Agreement constitutes the legal, valid and binding
obligation of such Purchaser enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.

6.03.  Investment Representation.

                                      -26-
<PAGE>   32

     (a) Such Purchaser represents and warrants to the Company that such
Purchaser is acquiring the Securities for investment, and not with a view to
selling or otherwise distributing the Securities; provided, however, that the
disposition of such Purchaser's property shall at all times be and remain in
such Purchaser's control.

     (b) Such Purchaser understands that the Securities have not been registered
under the Securities Act, on the grounds that the offer and sale of the
Securities to the Purchasers are exempt from the registration requirements of
the Securities Act under Section 4(2) thereof as a transaction not involving any
public offering of the Securities or under any State Regulatory Law. Such
Purchaser understands that the Company's reliance on such exemption is
predicated in part on the representations of such Purchaser which are contained
herein.

     (c) Such Purchaser understands that such Purchaser must bear the economic
risk of its investment in the Securities for an indefinite period of time
because the Securities have not been registered under the Securities Act and,
therefore, cannot be sold unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.

6.04. ACCREDITED INVESTOR. Such Purchaser represents and warrants to the Company
that it is an Accredited Investor.

ARTICLE 7
Fees, Expenses and Indemnities; General Provisions Relating to Payments

7.01. Closing Fees. On the Closing Date, the Company shall pay to the Purchasers
a fee in an aggregate amount equal to $80,000.

7.02. Computation of Interest. All interest hereunder and under the Notes shall
be calculated on the basis of a 360-day year for the actual number of days
elapsed.

7.03. General Provisions Regarding Payments. All payments (including
prepayments) to be made by the Company under any Transaction Document, including
payments of principal of and premium (if any) and interest on the Notes, fees,
expenses and indemnities, shall be made without set-off or counterclaim and in
immediately available funds. If any payment hereunder becomes due and payable on
a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day and, with respect to payments of principal, the interest
thereon shall be payable at the then applicable rate during such extension. The
Company shall make all payments in immediately available funds to each of the
Purchaser's Payment Account before 2:00 p.m. (Cleveland, Ohio Time) on the date
when due.

7.04. Indemnification. In addition to all other sums due hereunder or provided
for in this Agreement, the Company agrees to indemnify and hold harmless each of
the Purchasers and their affiliates and their respective officers, directors,
agents, employees, subsidiaries, partners and

                                      -27-

<PAGE>   33

controlling persons (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel,
including the reasonable allocation of the compensation, costs and expenses of
in-house counsel, based upon time spent) or other liabilities (collectively,
"LIABILITIES") resulting from or arising out of any breach of any representation
or warranty, covenant or agreement of the Company in this Agreement, the Notes
or the Warrants, including, without limitation, the failure to make payment when
due of amounts owing pursuant to the Notes on the due date thereof (whether at
the scheduled maturity, by acceleration or otherwise) or any legal,
administrative or other actions (including actions brought by the Purchasers or
the Company or any equity holders of the Company or derivative actions brought
by any Person claiming through or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of the Transaction Documents, the transactions
contemplated thereby, or Indemnified Party's role therein or in the transactions
contemplated thereby; provided, however, that the Company shall not be liable
under this Section 7.04 to an Indemnified Party: (a) for any amount paid in
settlement of claims without the Company's consent (which consent shall not be
unreasonably withheld), (b) to the extent that it is finally judicially
determined that such Liabilities resulted from the willful misconduct or gross
negligence of such Indemnified Party, or (c) to the extent that it is finally
judicially determined that such Liabilities resulted from the material breach by
such Indemnified Party of any representation, warranty, covenant or other
agreement of such Indemnified Party contained in this Agreement; provided,
further, that if and to the extent that such indemnification is unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of such indemnified liability which shall be permissible under
applicable laws. In connection with the obligation of the Company to indemnify
for expenses as set forth above, the Company further agrees, upon presentation
of appropriate invoices containing reasonable detail, to reimburse each
Indemnified Party for all such expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined that the Liabilities in question
resulted primarily from (i) the willful misconduct or gross negligence of such
Indemnified Party or (ii) the material breach by such Indemnified Party of any
representation, warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement.

     (b) Notification. Each Indemnified Party under this Section 7.04 will,
promptly after the receipt of notice of the commencement of any action,
investigation, claim, or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Company under this Section
7.04, notify the Company in writing of the commencement thereof. The omission of
any Indemnified Party so to notify the Company of any such action shall not
relieve the Company from any liability which it may have to such Indemnified
Party (i) other than pursuant to this Section 7.04 or (ii) under this Section
7.04 unless, and only to the extent that, such omission actually prejudices the
Company's substantive rights or defenses. In case any such action, claim or
other proceeding shall be brought against any Indemnified Party and it shall
notify the Company of the commencement thereof, the Company shall be entitled to
assume the defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate

                                      -28-

<PAGE>   34

in such defense. Notwithstanding the foregoing, in any action, claim or
proceeding in which the Company, on the one hand, and an Indemnified Party, on
the other hand, is, or is reasonably likely to become, a party, such Indemnified
Party shall have the right to employ separate counsel at the Company's expense
and to control its own defense of such action, claim or proceeding if, in the
reasonable opinion of counsel to such Indemnified Party, a conflict or potential
conflict exists between the Company, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable. The Company agrees that it will not, without the prior written
consent (which consent shall not unreasonably be withheld) of any Indemnified
Party, settle, compromise or consent to the entry of any judgment in any pending
or threatened claim, action or proceeding relating to the matters contemplated
hereby (if such Indemnified Party is a party thereto or has been actually
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of such Indemnified Party from all
liability arising or that may arise out of such claim, action or proceeding. The
Company shall not be liable for any settlement of any claim, action or
proceeding effected against an Indemnified Party without its written consent,
which consent shall not be unreasonably withheld. The rights accorded to
Indemnified Parties hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise.

7.05. Registration Rights Agreement. Notwithstanding anything to the contrary in
Section 7.04, the indemnification and contribution provisions of the
Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.

ARTICLE 8
Affirmative Covenants

                  Until the payment by the Company of all principal of and
interest on the Notes and all other amounts due at the time of payment of such
principal and interest to the Purchasers under this Agreement or the Notes,
including, without limitation, all fees, expenses and amounts due at such time
in respect of indemnity obligations under Article 7, and for so long as any of
the Warrants remain outstanding, the Company hereby covenants and agrees with
the Purchasers as follows:

8.01.  Financial Statements and Other Reports.  The Company will furnish to the
                                              Purchasers:

     (a) as soon as available, but in any event within 90 days after the end of
each fiscal year of the Company a copy of the audited Consolidated and unaudited
Consolidating financial statements of the Company as at the end of such year and
the related audited statements of income, accumulated earnings, and cash flows
for such year, setting forth in each case in comparative form the figures for
the previous year, certified as being fairly stated in all material respects by
one of the "Big Five" certified public accounting firms or by another nationally
recognized certified public accountant reasonably satisfactory to the
Purchasers; such financial statements shall be complete and correct in all
material respects and shall be prepared in reasonable detail and in accordance
with GAAP throughout the periods reflected therein and with prior periods;

                                      -29-

<PAGE>   35

     (b) as soon as available, but in any event not later than 30 days after the
end of each month, the unaudited Consolidated and Consolidating financial
statements of the Company as at the end of such month and the related unaudited
statements of income, accumulated earnings and cash flows of the Company for the
portion of the fiscal year through the end of such month, setting forth in each
case in comparative form the figures for the previous year, and certified by a
Responsible Officer as being fairly stated in all material respects. Such
financial statements shall be complete and correct in all material respects and
shall be prepared in reasonable detail and in accordance with GAAP throughout
the periods reflected therein and with prior periods (except as approved by such
officer and disclosed therein), provided however that such financial statements
will not be required to include footnotes and will be subject to year-end
adjustments;

     (c) not later than January 31 of each year, financial projections on a
month by month basis for the then current calendar year in form reasonably
acceptable to the Purchasers;

     (d) such information as required by the terms and conditions of any Senior
Security Documents;

     (e) together with each delivery of financial statements pursuant to (a)
above, a written statement by the independent public accountants giving the
report thereon (i) stating that their audit examination has included a review of
the terms of this Agreement as it relates to accounting matters, (ii) stating
whether, in connection with their audit examination, any Default has come to
their attention, and if such a condition or event has come to their attention,
specifying the nature and period of existence thereof, provided that the failure
to deliver the certificate described in this clause (ii) as to Defaults shall
not be a default if the Company has used its best commercially reasonable
efforts to obtain such a certification, and (iii) stating that based on their
audit examination nothing has come to their attention which causes them to
believe that the information contained in the certificates delivered therewith
pursuant to Section 8.08 is not correct and that the matters set forth in the
compliance certificate delivered therewith pursuant to clause (a) of Section
8.08 for the applicable Fiscal Year are not stated in accordance with the terms
of this Agreement;

     (f) promptly upon receipt thereof, copies of all reports submitted to the
Company and any of its Subsidiaries by independent public accountants in
connection with each annual, interim or special audit of the financial
statements of the Company or any of its Subsidiaries made by such accountants,
including the comment letter submitted by such accountants to management in
connection with their annual audit;

     (g) promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company or its Subsidiaries to all holders of any class of
securities, (ii) all regular and periodic reports and all registration
statements and prospectuses filed by the Company or any of its Subsidiaries with
any securities exchange or with the Commission or any governmental authority
succeeding to any of its functions, and (iii) all press releases and other
statements made available generally by the Company or any of its Subsidiaries to
the public concerning material developments in the business of the Company or
any of its Subsidiaries;

     (h) within 30 days after the conclusion of each Fiscal Year, the Company's
and each of its Subsidiaries' annual operating and Capital Expenditure budgets
and cash flow forecast for the following Fiscal Year presented on a monthly
basis, which shall be in a format reasonably consistent with projections,
budgets and

                                      -30-
<PAGE>   36

forecasts theretofore provided to the Purchasers;

     (i) promptly after the Company's receipt of the same, a copy of each bona
fide offer to purchase or sell any securities of the Company or any securities
of any of the Company's Subsidiaries for an aggregate consideration greater than
$100,000 or, in the case of securities of the Company, for a consideration per
share less than the Exercise Price then in effect or less than the Fair Market
Value of the Company per share of outstanding Common Stock on a Fully Diluted
Basis (as the foregoing terms are defined in the Warrants), or the material
assets of the Company or the material assets of any of the Company's
Subsidiaries (which has assets having a fair market value of $100,000 or more,
or which has annual gross income of $250,000 or more) with respect to which the
Company's management gives serious consideration; and

     (j) promptly, and in form to be reasonably satisfactory to the Purchasers,
such other information as the Purchasers may reasonably request from time to
time.

8.02. Payment of Obligations. The Company shall pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of its material obligations, excluding taxes, of whatever nature, except
where the amount or validity thereof is subject to a Permitted Contest and
reserves in conformity with GAAP with respect thereto have been provided on the
books of the Company.

8.03. Insurance. The Company shall maintain, and cause the Subsidiaries to
maintain, insurance coverage on their physical assets and against other business
risks in such amounts and of such types as are customarily carried by companies
similar in size and nature, and in the event of acquisition of additional
property, real or personal, or of incurrence of additional risks of any nature,
increase such insurance coverage in such manner and to such extent as prudent
business judgment and present practice would dictate. The Company shall also
furnish to the Purchasers from time to time upon reasonable request the policies
under which such insurance is issued, certificates of insurance and such other
information relating to such insurance as the Purchasers may reasonably request.
The Company shall maintain in effect at all times a keyman life insurance policy
naming the Company as the beneficiary, insuring the life of John L. Smucker in
an amount not less than $3,000,000 in form and substance, and with an insurer,
satisfactory to the Purchasers.

8.04. Inspection of Property, Books and Records. The Company shall permit, and
cause the Subsidiaries to permit, the Purchasers at the Purchaser's expense and
through their respective authorized attorneys, accountants and representatives,
to examine the Company's and the Subsidiaries' books, accounts, records, ledgers
and assets of every kind and description at all reasonable times upon reasonable
prior oral or written request of a Purchaser, and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often as may
reasonably be desired, provided that following the occurrence and during the
continuance of an Event of Default, such examinations shall be at the Company's
cost and expense. The Company will keep, and will cause each of its Subsidiaries
to keep, proper books of record and account in which full, true and correct
entries shall be made of all material dealings and transactions in relation to
its business and activities.

                                      -31-

<PAGE>   37

8.05. Notice.  The Company shall promptly give notice to the Purchasers of:

               (a) the occurrence of any Potential Default or Event of Default
     of which the Company or any Subsidiary has knowledge;

               (b) any (i) default or event of default under any Contractual
     Obligation of the Company or any Subsidiary or (ii) litigation,
     investigation or proceeding which may exist at any time between the Company
     or any Subsidiary and any governmental authority or any other third party,
     which in the case of either (i) or (ii), if not cured or if it is
     reasonably likely to be adversely determined, as the case may be, would
     have a Material Adverse Effect;

               (c) the following events, as soon as possible and in any event
     within thirty (30) days after the Company knows thereof and to the extent
     the same would have a Material Adverse Effect: (i) the occurrence of any
     "reportable event" as defined in ERISA with respect to any Pension Plan, or
     any withdrawal from or the termination, reorganization or insolvency of any
     Multiemployer Plan or (ii) the institution of proceedings or the taking of
     any other action by the Pension Benefit Guaranty Corporation or Borrowers
     or any Commonly Controlled Entity or any Multiemployer Plan with respect to
     the withdrawal from or the terminating, reorganization or insolvency of any
     Pension Plan;

               (d) any event which is reasonably likely to have a Material
     Adverse Effect;

               (e) promptly after becoming aware of the taking by the Internal
     Revenue Service or any foreign taxing jurisdiction of a written tax
     position which could reasonably be expected to have a material adverse
     effect on the business or financial condition of the Company and its
     Subsidiaries (taken as a whole) (or any such tax position taken by the
     Company) setting forth the details of such position and the financial
     impact thereof; and

               (f) not less than ten (10) days prior to the proposed effective
     date thereof, copies of any proposed material amendments, restatements or
     other modification to the Acquisition Documents.

               Each notice pursuant to this Section shall be accompanied by a
     statement of a Responsible Officer setting forth details of the occurrence
     referred to therein and stating what action the Company proposes to take
     with respect thereto.

8.06. Conduct of Business and Maintenance of Licenses. The Company will
continue, and will cause each of the Subsidiaries to continue,

               (a) preserve, renew and keep in full force and effect its
     existence.

               (b) to take all reasonable action to maintain all rights,
     privileges and franchises necessary or desirable in the normal conduct of
     its business.

                                      -32-

<PAGE>   38

8.07. Compliance with Laws. The Company will comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including Environmental Laws and ERISA and the rules and regulations
thereunder), except where the necessity of compliance therewith is the subject
of a Permitted Contest.

8.08. Certificates. The Company shall furnish to the Purchasers concurrently
with the delivery of each of the financial statements required by Section
8.01(a) and (b) (and with respect to (b) for the months of March, June,
September and December) hereof, a statement prepared and certified by the chief
financial officer of the Company (or in such officer's absence, a responsible
senior officer of the Company) (a) setting forth all computations necessary to
show compliance by the Company with the financial covenants set forth in
Sections 8.16, 8.17, 8.18 and 8.19 as of the date of such financial statements,
(b) stating that as of the date thereof, no condition or event which constitutes
an Event of Default hereunder or which with the running of time and/or the
giving of notice would constitute an Event of Default hereunder has occurred and
is continuing, or if any such event or condition has occurred and is continuing
or exists, specifying in detail the nature and period of existence thereof and
any action taken with respect thereto taken or contemplated to be taken by the
Company and (c) stating that the signer has personally reviewed this Agreement
and that such certificate is based on an examination reasonably sufficient to
assure that such certificate is accurate.

8.09. Use of Proceeds. The Company will use the proceeds of the Loans borrowed
on the Closing Date solely to satisfy its existing Debt, for payment of
transaction fees and expenses incurred in connection with the Transaction
Documents and for working capital purposes.

8.10. Further Assurances. The Company will, at its own cost and expense, cause
to be promptly and duly taken, executed, acknowledged and delivered all such
further acts, documents and assurances as may from time to time be necessary or
as the Purchasers may from time to time reasonably request in order to carry out
the intent and purposes of the Transaction Documents and the transactions
contemplated thereby.

8.11. Board Meetings. The Company will hold at least four regular meetings of
the Board of Directors during each calendar year at such times and at such
places (or via telephone conference) as shall be determined by the Board of
Directors from time to time. The Company will notify the Purchasers of all
meetings and actions by written consent of its board of directors at the same
time and in the same manner as notice of any meetings of such board is required
to be given to its directors who do not waive such notice (or, if such action
requires no notice, then (if practicable) 10 days written notice thereof
describing the matters upon which action is to be taken). So long as the
purchasers (or their respective successor or assigns) under the Senior
Subordinated Note and Warrant Purchase Agreement, dated July 23, 1996, as
amended, modified or supplemented from time to time, among the Company, NCCC and
Hanifen Imhoff Mezzanine Fund, L.P. (the "1996 Agreement") have the right to
send two representatives selected by them to each such meeting, the Purchasers
shall have no additional rights to send representatives selected by them to such
meetings. If, however, such rights are no longer in full force and effect under
the 1996 Agreement, then the Purchasers shall have the right to send two
representatives selected by them to each such meeting,

                                      -33-

<PAGE>   39

who shall be permitted to attend, at the expense of the Company, such meeting
and any adjournments thereof, provided that in no event shall the holders of the
Securities be entitled to send more than two representatives in the aggregate
(in addition to the number of Directors to which the Purchasers are entitled)
pursuant to the terms of this Agreement, the Warrants or the Stockholder
Agreement.

8.12.  SBIC Regulatory Provisions.

     (a) The Company hereby acknowledges that each Purchaser has informed it
that such Purchaser is a "small business investment company" under the Small
Business Investment Act of 1958, as amended, and the regulations thereunder,
including Title 13, Code of Federal Regulations, Part 107.

     (b) At the same time the Company delivers its annual audited financial
statements under Section 8.01(b) hereof and at any time an SBIC Holder (as
defined below) may reasonably request, the Company shall deliver to such
Purchaser and each other holder of Notes or underlying Common Stock which
informs the Company in writing it is an SBIC (an "SBIC Holder") a written
statement certified by its president or chief financial officer describing in
reasonable detail the use of the proceeds of the financing hereunder by the
Company and its Subsidiaries. In addition to any other rights granted hereunder,
the Company shall grant each SBIC Holder and the United States Small Business
Administration (the "SBA") access to its and its Subsidiaries' records for the
purpose of verifying the use of such proceeds and the Company's status as a
"small concern."

     (c) Promptly after the end of each Fiscal Year (but in any event prior to
20 days thereafter), the Company shall deliver to each SBIC Holder, specifying
the full-time equivalent jobs created or retained in connection with the
investment, the impact of the investment on the businesses of the Company in
terms of expanded revenue and taxes and other economic benefits resulting from
the investment (including, but not limited to, technology development or
commercialization, minority business development, urban or rural business
development and expansion of exports).

8.13. Reservation of Shares. The Company shall at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue or
delivery upon exercise of the Warrants as provided therein, the maximum number
of shares of Common Stock that may be issuable or deliverable upon such
exercise. Such shares of Common Stock shall, when issued and delivered in
accordance with the Warrants, be duly and validly issued and fully paid and non-
assessable. The Company shall issue such Common Stock in accordance with the
provisions of the Warrants and shall otherwise comply with the terms thereof.

8.14. Compliance with Agreements. The Company shall comply, and shall cause each
of its Subsidiaries to comply, in all material respects with each Operative
Document to which it is a party.

8.15.  Environmental Provisions.

                                      -34-

<PAGE>   40

     (a) The Company shall comply, and cause its Subsidiaries to comply, in all
material respects with all applicable Environmental Laws, except where the
failure to so comply would not have a Material Adverse Effect.

     (b) The Company shall provide to the Purchasers, promptly after receipt,
copies of any correspondence, notice, pleading, citation, indictment, complaint,
order, decree, or other document from any source asserting or alleging a
circumstance or condition which requires or may require a financial contribution
by the Company or any Subsidiary or a cleanup, removal, remedial action, or
other response by or on the part of the Company or any Subsidiary under
applicable Environmental Laws or which seeks damages or civil, criminal or
punitive penalties from the Company for an alleged violation of Environmental
Laws.

     (c) The Company shall promptly notify the Purchasers in writing as soon as
the Company becomes aware of any condition or circumstance which makes the
environmental warranties contained in this Agreement incomplete or inaccurate in
any material respect as of any date.

     (d) In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement contained herein
incomplete or inaccurate in any material respect as of any date regarding any
real property owned or operated by the Company or any Subsidiary, the Company
shall, at the reasonable request of the Purchasers, at the Company's sole
expense, retain an environmental professional consultant, reasonably acceptable
to the Purchasers, to conduct an environmental audit regarding the changed
condition and/or circumstance and any environmental concerns arising from that
changed condition and/or circumstance in form and scope recommended by such
consultant in light of the relevant facts and circumstances. A copy of the
environmental consultant's report will be promptly delivered to the Purchasers
and the Company upon completion.

     (e) If at any time the Company or any Subsidiary, directly or indirectly
through any professional consultant or other representative, determines to
undertake an environmental audit, assessment or investigation, then the Company
shall promptly provide the Purchasers with written notice of the initiation of
the environmental audit, fully describing the purpose and intended scope of the
environmental audit. Upon receipt, the Company will promptly provide to the
Purchasers copies of all final written findings and conclusions of any such
environmental investigation. Preliminary written findings and conclusions shall
be provided if final reports have not been completed and delivered to the
Purchasers within 60 days following completion of the preliminary findings and
conclusions.

     (f) The Company will promptly comply with any governmental requirements
requiring the removal, treatment or disposal of any Hazardous Materials or
Hazardous Materials Contamination and provide evidence satisfactory to the
Purchasers of such compliance, except where such compliance is the subject of a
Permitted Contest."

8.16. Maintain Consolidated Adjusted Net Worth. Maintain as of the end of
each fiscal quarter a Consolidated Adjusted Net Worth of not less than the
following amounts during the periods specified below:

                                     - 35 -

<PAGE>   41

<TABLE>
<S>                                                                                                     <C>

         from the Closing Date through December 30, 1999................................................$17,000,000
         from December 31, 1999 through December 30, 2000...............................................$17,000,000
         from December 31, 2000 through December 30, 2001...............................................$17,850,000
         from December 31, 2001 through December 30, 2002...............................................$19,550,000
         from December 31, 2002 through December 30, 2003...............................................$22,100,000
         from December 31, 2003 and thereafter..........................................................$25,075,000
</TABLE>

8.17. Maintain Total Debt to EBITDA Ratio. Maintain as of the end of each fiscal
quarter a Total Debt to EBITDA Ratio of not more than the following amounts
during the periods specified below:

<TABLE>
<S>                                                                                                    <C>

         from the Closing Date through December 30, 1999.................................................4.6 to 1.0
         from December 31, 1999 through December 30, 2000................................................4.6 to 1.0
         from December 31, 2000 through December 30, 2001...............................................4.31 to 1.0
         from December 31, 2001 through December 30, 2002...............................................4.03 to 1.0
         from December 31, 2002 through December 30, 2003...............................................4.03 to 1.0
         from December 31, 2003 and thereafter..........................................................4.03 to 1.0
</TABLE>

8.18. Maintain Fixed Charge Coverage Ratio. Maintain as of the end of each
fiscal quarter of Company a Fixed Charge Coverage Ratio of not less than the
following amounts during the periods specified below:
<TABLE>
<S>                                                                                                      <C>

         from the Closing Date through December 30, 1999..................................................89 to 1.0
         from December 31, 1999 through December 30, 2000.................................................89 to 1.0
         from December 31, 2000 through December 30, 2001.................................................89 to 1.0
         from December 31, 2001 through December 30, 2002.................................................89 to 1.0
         from December 31, 2002 through December 30, 2003.................................................94 to 1.0
         from December 31, 2003 and thereafter............................................................98 to 1.0
</TABLE>

8.19. Maintain Senior Debt to EBITDA Ratio. Maintain as of the end of each
fiscal quarter a Senior Debt to EBITDA Ratio of not more than the following
during the periods specified below:

<TABLE>
<S>                                                                                                    <C>
         from the Closing Date through December 30, 1999................................................3.74 to 1.0
         from December 31, 1999 through December 30, 2000...............................................3.74 to 1.0
         from December 31, 2000 through December 30, 2001...............................................3.45 to 1.0
         from December 31, 2001 through December 30, 2002...............................................3.16 to 1.0
         from December 31, 2002 through December 30, 2003...............................................3.16 to 1.0
         from December 31, 2003 and thereafter..........................................................3.16 to 1.0
</TABLE>

8.20. Acquisition and Senior Loans. No later than 10 days after the date hereof,
(i) the closing of the Acquisition and the financing contemplated by the Credit
Agreement shall occur and (ii) the Company shall deliver to the Purchasers true
and complete copies of all Acquisition Documents (other than the Stock Purchase
Agreement) and Senior Loan Documents, together with a true and complete copy of
each document that was delivered at such closings; provided, however that such

                                      -36-
<PAGE>   42

documents shall contain no material change from the drafts delivered to the
Purchasers without the consent of the Purchasers, which consent shall not be
unreasonably withheld.

8.21 TAXES. The Company shall pay and discharge, and cause each of its
Subsidiaries to pay and discharge, all taxes and other governmental charges,
before the same shall become overdue, unless and to the extent only that such
payment is the subject of a Permitted Contest.

8.22 ERISA NOTICES. The Company shall promptly notify the Purchasers after the
occurrence thereof in writing of any of the following events:

     (a) the termination of a Pension Plan pursuant to Subtitle C of Title IV of
         ERISA or otherwise;

     (b) the appointment of a trustee by a United States District Court to
         administer a Pension Plan;

     (c) the commencement by the Pension Benefit Guaranty Corporation, or any
         successor thereto of any proceeding to terminate a Pension Plan;

     (d) the failure of a Pension Plan to satisfy the minimum funding
         requirements for any plan year as established in Section 412 of the
         Internal Revenue Code of 1954, as amended or any similar provision
         under the Internal Revenue Code of 1986, as amended;

     (e) the withdrawal of Company or any Subsidiary from a Pension Plan; or

     (f) a reportable event, within the meaning of Title IV of ERISA.

ARTICLE 9
Negative Covenants

               Until the payment by the Company of all principal of and
interest on the Notes and all other amounts due at the time of payment of such
principal and interest to the Purchasers under this Agreement or the Notes,
including, without limitation, all fees, expenses and amounts due at such time
in respect of indemnity obligations under Article 7, and for so long as any of
the Warrants remain outstanding, the Company hereby covenants and agrees with
the Purchasers as follows:

9.01. Capital Stock. The Company shall not purchase, acquire, issue or redeem
any of its capital stock or make any material change in its capital structure,
except for redemptions of stock if at the time of such redemption or after
giving effect thereto no Potential Default or Event of Default shall exist and
be continuing. Other than the Preferred Stock currently issued and outstanding,
the Company shall not issue any capital stock that under its articles of
incorporation is entitled to a preference over the Common Stock as to payment of
dividends or distributions.

                                      -37-

<PAGE>   43

9.02. Consolidations, Mergers and Sales of Assets. Except as permitted under
Section 9.05, the Company shall not, and shall not permit any Subsidiary to,
enter into any merger or consolidation or sell, lease, transfer, or dispose of
all, substantially all, or any material part of its assets, except in the
ordinary course of business and except mergers of which the Company is the
surviving entity.

9.03. Guarantees. The Company shall not, and shall not permit any Subsidiary to,
guarantee, endorse, or otherwise become secondarily liable for or upon the
obligations of others, except (a) by endorsement for deposit in the ordinary
course of business, (b) guarantees to the Lenders or the Purchasers, (c)
unsecured Guarantees by the Company of the obligations of its Subsidiaries to
the extent the underlying obligations are permitted under this Agreement, and
(d) the corporate guaranty of the Company relative to the obligations of its
wholly owned Subsidiary, Inmet, under the Bank of Ann Arbor credit facility (as
described in SCHEDULE 9.04) provided that in no event shall such obligations
under the Bank of Ann Arbor credit facility exceed $2,830,000.

9.04. Debt. The Company shall not, and shall not permit any Subsidiary to,
become or remain obligated for any indebtedness for borrowed money, or for any
indebtedness incurred in connection with the acquisition of any property, real
or personal, tangible or intangible, except:

     (a) indebtedness to the Purchasers;

     (b) indebtedness to the Lenders under the Credit Agreement in the aggregate
principal amount not to exceed the sum of (i) the product of (A) $25,000,000 of
term Debt minus the sum of all scheduled principal payments (scheduled as of the
date the Credit Agreement is entered into by the parties thereto) multiplied by
(B) 1.30, plus (ii) the product of (A) $12,000,000 of revolving Debt multiplied
by (B) 1.30;

     (c) current unsecured trade payables and accrued liabilities arising in the
ordinary course of the Company's or any Subsidiary's business, deferred income
tax and purchase accounting reserves;

     (d) purchase money indebtedness for the acquisition of fixed assets in an
amount not to exceed $500,000 in the aggregate during any fiscal year of the
Company (determined on a combined basis for the Company and its Subsidiaries).

     (e) existing indebtedness listed in attached Schedule 9.04.

     (f) unsecured indebtedness of the Company to its wholly owned Material
Subsidiaries or a wholly owned Material Subsidiary to another wholly owned
Material Subsidiary or a wholly owned Material Subsidiary to the Company.

     (g) other unsecured indebtedness not exceeding $100,000 in the aggregate at
any time outstanding.

     (h) indebtedness under any Interest Rate Protection Agreements.

     (i) unsecured indebtedness of Densitron Microwave Limited or DML Microwave
Limited under

                                      -38-

<PAGE>   44

an overdraft line of credit in an amount not exceeding 500,000 Pounds Sterling
in the aggregate at any time outstanding.

     (j) unsecured indebtedness of DML Microwave Limited to MCE Europe, Inc. in
an amount not exceeding 3,000,000 Pounds Sterling incurred to consummate the
Acquisition and until June 30, 2000 unsecured indebtedness of Densitron
Microwave Limited to MCE Europe, Inc. in an amount not to exceed 2,000,000
Pounds Sterling incurred for working capital purposes.

9.05. Purchase of Assets. The Company shall not, and shall not permit any
Subsidiary to, purchase or otherwise acquire or become obligated for the
purchase of all or substantially all of the assets or business interests of any
person, firm or corporation or any shares of stock of any corporation,
trusteeship or association or in any other manner effectuate or attempt to
effectuate an expansion of present business by acquisition, other than Permitted
Acquisitions.

9.06. Investments. The Company shall not, and shall not permit any Subsidiary
to, make or allow to remain outstanding any investment (whether such investment
shall be of the character of investment in shares of stock, evidences of
indebtedness or other securities or otherwise) in, or any loans or advances or
extensions of credit to, any person, firm, corporation or other entity or
association, except:

     (a)  the Company's investment in its wholly owned Material Subsidiaries;

     (b)  loans and advances permitted under Section 9.04(f) and 9.04(j) hereof;

     (c)  investments (other than loans or advances) by a wholly owned Material
          Subsidiary in another wholly owned Material Subsidiary or a wholly
          owned Material Subsidiary in the Company;

     (d)  investments of surplus cash in cash equivalents;

     (e)  loans and advances to management employees made to enable them to
          purchase an equity interest in the Company not to exceed $150,000 in
          aggregate amount at any time outstanding;

     (f)  sales on open account or in the ordinary course of business;

     (g)  other loans, advances and investments not exceeding $500,000 in the
          aggregate at any time outstanding;

     (h)  deposits made in the ordinary course of business in order to obtain
          goods and services; and

     (i)  investments which constitute or are part of a Permitted Acquisition,
          including the

                                      -39-

<PAGE>   45

equity investment by MCE Europe, Inc. in DML Microwave Limited in an amount not
exceeding 2,000,000 Pounds Sterling incurred in connection with the Acquisition.

9.07. Negative Pledge. The Company shall not, and shall not permit any
Subsidiary to, affirmatively pledge or mortgage any of their assets, whether now
owned or hereafter acquired, or create, suffer or permit to exist any Lien
thereon, except:

     (a)  for the indebtedness for borrowed money permitted by Section 9.04(b);

     (b)  the Permitted Liens;

     (c)  the Liens described in SCHEDULE 5.06 attached hereto; and

     (d)  Liens upon fixed assets acquired by Company or a Subsidiary after the
date of this Agreement (including by virtue of a Capital Lease) provided that
(i) any such Lien is created solely for the purpose of securing indebtedness
representing, or incurred to finance, the cost of the item of property subject
thereto; (ii) the principal amount of the indebtedness secured by such Lien is
initially at least 70% and does not exceed 100% of the fair value of the
property at the time it was acquired, (iii) the Lien does not cover any other
property other than such item of property, and (iv) the incurrence of the
indebtedness secured by such Lien is permitted by Section 9.04(d) hereof.

9.08. Security Interest. The Company shall not, and shall not permit any
Subsidiary to, sell, assign, transfer or confer a security interest in any
account, contract, note, trade acceptance or other receivable, except to the
Lenders as permitted in Section 9.07(a).

9.09. Business Purposes. The Company shall not, and shall not permit any
Subsidiary to, materially alter the character of its businesses from that
conducted as of the date of this Agreement.

9.10. Extensions of Credit. The Company shall not, and shall not permit any
Subsidiary to, make loans, advances of credit or extensions of credit to any of
its officers, directors or shareholders or any member of their immediate
families or entity controlled by any of the foregoing or to any other person,
except for sales on open account or in the ordinary course of business and
except for loans and advances permitted pursuant to the provisions of Section
9.06.

9.11. Distributions. The Company shall not, and shall not permit any Subsidiary
to, declare or pay any Restricted Payments (whether by reduction of capital or
otherwise) with respect to any shares of its stock, except for (a) dividends by
Subsidiaries to the Company, (b) dividends paid during any fiscal year of the
Company to the extent not exceeding five percent (5%) of Consolidated Net Income
for such fiscal year if at the time such dividends are declared and paid and
after giving effect thereto, no Event of Default or Potential Default shall
exist and be continuing, and (c) dividends or redemptions with respect to the
Preferred Stock, and purchases or redemptions of the Warrants.

9.12. ERISA. The Company shall not, and shall not permit any Subsidiary to,
enter into,

                                      -40-

<PAGE>   46

maintain, or make contributions to, directly or indirectly, any defined benefit
pension plan that is subject to ERISA except for the KDI/Triangle Corporation
Defined Benefit Plan (the "KDI Plan"). The Company shall not, and shall not
permit any of its Subsidiaries to:

     (a) engage in any transaction in connection with which the Company or any
of its Subsidiaries could reasonably be expected to be subject to any material
liability arising from either a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Code;

     (b) terminate any Plan in a manner, or take any other action, which could
result in any material liability of any member of the ERISA Group to the PBGC;

     (c) fail to make full payment when due of all amounts which, under the
provisions of any Plan, it is required to pay as contributions thereto, or
permit to exist any accumulated funding deficiency, whether or not waived, with
respect to any Plan;

     (d) except for the KDI Plan, which had an unfunded past service liability
of $538,475 as of January 1, 1998, permit the present value of all benefit
liabilities under all Plans to exceed the fair market value of the assets of
such Plans; or

     (e) fail to make any material payments to any Multiemployer Plan that it
may be required to make under any agreement relating to such Multiemployer Plan
or any law pertaining thereto.

         In addition, no member of the ERISA Group shall (i) fail to pay when
due any amount that it shall have become liable to pay under Title IV of ERISA,
(ii) cause or permit to exist any event by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated, or (iii) cause or permit there to occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to one or more Multiemployer Plans which could cause one or
more members of the ERISA Group to incur a current payment obligation.

9.13. Transactions with Affiliates. The Company shall not, and shall not permit
any Subsidiary to, enter into any transaction or series of transactions with any
Affiliate other than on terms and conditions as favorable to the Company or
Subsidiary, as the case may be, as would be obtainable in a comparable
arm's-length transaction with a person other than an Affiliate, except
transactions between the Company and any wholly owned Subsidiary.

9.14. Fiscal Year. The Company shall not change, and shall not permit any of its
Subsidiaries to change, its fiscal year from a fiscal year ending December 31.

9.15. Amendments or Waivers. Without the prior written consent of the
Purchasers, the Company will not, and will not permit any Subsidiary to, agree
to (a) any amendment to or waiver of or in respect of any of the Operative
Documents, excluding the Credit Agreement, or (b) any amendment to or waiver of
or in respect of the certificate of incorporation of the Company.
Notwithstanding the foregoing, the Company shall not, and shall not permit any
Subsidiary to, enter
                                      -41-

<PAGE>   47

into any modification or amendment to the Credit Agreement or Senior Security
Documents to which it is a party (or permit the amendment or modification
thereof) that (i) makes less restrictive the advance rates and formulae
applicable to the Debt thereunder, (ii) relates to the payment of dividends or
other distributions with respect to capital stock, or (iii) adds any new
covenant, prepayment event or event of default prohibiting or limiting, as such,
changes in ownership of capital stock of the Company, the effect of which will
directly prohibit the exercise of the Warrants in whole or in part.

9.16. No Inconsistent Agreements; Amendments. Except with respect to Article 11
of this Agreement, the Company shall not, and shall not permit any of its
Subsidiaries to, enter into any loan or other agreement, or enter into any
amendment or other modification to any currently existing agreement, which by
its terms prevents (a) the Company from paying the principal of or premium, if
any, or interest on the Notes at the times or in the amounts as provided
therein; (b) the Company from paying dividends on the Preferred Stock or
redeeming the Preferred Stock at the times or in the amounts as provided
therein; or (c) the Company or any Subsidiaries from otherwise observing or
performing any of its obligations under the Transaction Documents to which it is
a party.

9.17. CAPITAL EXPENDITURES. Make any Capital Expenditure during any single
fiscal year the aggregate amount of all Capital Expenditures made by Company and
its Subsidiaries during such period would exceed $2,500,000 provided, that
Company and its Subsidiaries may make additional Capital Expenditures in any
annual period commencing January 1 in each case in an amount equal to the excess
of the maximum amount of Capital Expenditures specified above for the
immediately previous annual period over the amount of Capital Expenditures
actually made in such period; and provided, further, in calculating the
limitation for purposes of this Section 9.17, the Inmet Cap Ex shall be
excluded.

9.18. PREPAYMENT OF DEBTS. The Company shall not, and shall not permit any
Subsidiary to, prepay, purchase, redeem or defease any Debt for money borrowed
or any Capital Leases excluding, subject to the terms hereof, any indebtedness
or liabilities of the Company to the Purchasers arising under this Agreement,
the 1996 Agreement or the Credit Agreement.

ARTICLE 10
Defaults

10.01. Events of Default. If any one or more of the following events (each an
"Event of Default") shall occur and be continuing for any reason whatsoever
(whether voluntary or involuntary, by operation of law or otherwise):

     (a) the Company shall fail to pay when due any principal of any Note, or
shall fail to pay within two Business Days of the due date thereof any interest
or premium on any Note, or any fees or any other amount payable hereunder;

     (b) the Company shall fail to pay when due any principal of any Senior
Note, or shall fail
                                      -42-

<PAGE>   48

to pay when due any interest or premium on any Senior Note, or any fees or any
other amount payable thereunder;

     (c) the Company shall fail to observe or perform any covenant in Sections
8.13, 8.16 through 8.20, inclusive, or in Article 9, or shall fail to observe or
perform for 10 days any of the covenants or agreements of the Company set forth
in Section 8.01(a), (b), 8.03, 8.04, 8.05 or 8.08.

     (d) the Company shall fail to observe or perform any covenant or agreement
contained in this Agreement or any other Transaction Document to which it is a
party (other than those covered by clause (a), (b) or (c) above) for 30 days
after the earlier of the date written notice of such failure has been given to
the Company by any Purchaser and the date the Company first has knowledge of
such failure;

     (e) any Subsidiary shall fail to observe or perform any covenant or
agreement contained in any Operative Agreement to which it is a party for 30
days after the earlier of the date written notice of such failure has been given
to any Subsidiary by any Purchaser and the date the Company first has knowledge
of such failure;

     (f) any representation, warranty, certification or statement made by the
Company or any Subsidiary in any Operative Document or in any certificate,
financial statement or other material document delivered pursuant to the
Operative Documents shall prove to have been incorrect in any respect (or in any
material respect if such representation, warranty, certification, or statement
is not by its terms already qualified as to materiality) when made (or deemed
made);

     (g) the Company or any of its Subsidiaries shall fail to make any payment
or payments in respect of any Debt (other than the Notes and Senior Notes)
arising in one or more related or unrelated transactions, the amount of such
payment or payments shall be in an aggregate amount exceeding $100,000 and such
failure shall continue beyond any period of grace, if any, specified therein;

     (h) any event or condition shall occur which (i) results in the
acceleration of the maturity of (A) Senior Notes, or (B) any Debt (other than
the Notes and the Senior Notes) of the Company or any of its Subsidiaries
arising in one or more related or unrelated transactions, in an aggregate
principal amount exceeding $100,000, or (ii) enables (or, with the giving of
notice or lapse of time or both, would enable) the holder of such Debt (other
than the Senior Notes) or any Person or Persons acting on behalf of such holder
or holders to accelerate the maturity thereof, or (iii) results in a violation
of, or a default under, any provision of the articles of incorporation of the
Company;

     (i) (i) the Company or any of its Subsidiaries shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general

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<PAGE>   49

assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or (ii) the Company or any of its Subsidiaries shall
take any corporate action to authorize any of the foregoing;

     (j) an involuntary case or other proceeding shall be commenced against the
Company or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Company or any of its Subsidiaries under the
federal bankruptcy laws as now or hereafter in effect;

     (k) one or more judgments or orders for the payment of money aggregating in
excess of $100,000 shall be rendered against the Company or any of its
Subsidiaries and such judgments or orders shall continue unsatisfied and
unstayed for a period of 30 consecutive days; provided that any amounts that an
insurer has acknowledged an obligation to pay shall not be included in such
aggregate amount; or notice of intent to terminate a Material Plan shall be
filed under Title IV of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan;

     (l) any person or group of persons (within the meaning of Rule 13d-3
promulgated by the Commission under the Exchange Act), other than the Investors
and Investor Affiliates, shall have acquired beneficial ownership (within the
meaning of such Rule 13d-3) of 45% or more of the Common Stock; or the Investors
and Investor Affiliates shall cease to be the beneficial owner of at least 45%
of the Common Stock (each, a "Change in Control");

     (m) the auditor's report or reports on the audited statements delivered
pursuant to Section 8.01 shall include any material qualification (including
with respect to the scope of audit) or exception and shall not have been
replaced within 30 days after the delivery thereof by an auditor's report that
does not include any material qualification (including with respect to the scope
of audit) or exception;

     (n) [INTENTIONALLY OMITTED];

     (o) the Company shall be prohibited or otherwise materially restrained from
conducting the business theretofore conducted by it by virtue of any
determination, ruling, decision, decree or order of any court or regulatory
authority of competent jurisdiction and such determination, ruling, decision,
decree or order remains unstayed and in effect for any period of 10 days beyond
any period for which any business interruption insurance policy of the Company
shall provide full coverage to the Company of any losses and lost profits; or

     (p) any of the Operative Documents shall for any reason fail to
constitute the valid and binding agreement of any party thereto, or any such
party shall so assert in writing; provided that in

                                      -44-
<PAGE>   50
the case of any Operative Document which is not a Transaction Document, such
failure could reasonably be expected to have an adverse effect on the
Purchasers;

then, and in every such event and at any time thereafter during the continuance
of such event, the Purchasers by notice to the Company shall declare the Notes
(together with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company;
provided that in the case of any of the Events of Default specified in clause
(i) or (j) above with respect to the Company, without any notice to the Company
or any other act by the Purchasers, all of the Notes (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company. The exercise by the Purchasers of one or more of its remedies upon
the occurrence of an Event of Default shall in no way preclude the Purchasers
from exercising other remedies also available to it in law or in equity.

ARTICLE 11
Subordination

                  The payment of the principal of and premium, if any, and
interest on the Subordinated Indebtedness (as defined below) shall be
subordinate and junior in right of payment to all Senior Indebtedness (as
defined below) to the extent and in the manner provided in this Article 11.

11.01.  Certain Definitions.  As used in this Article 11, the following terms
shall have the following meanings:

                  "Junior Securities" means any debt or equity securities
distributed to the holders of the Notes, but only if they are subordinated to at
least the same extent as the Notes to Senior Indebtedness and any securities
issued in exchange for Senior Indebtedness, and any such subordination shall
include provisions relating to amortization and prepayment or, if applicable,
redemption or repurchase to the effect that all payments of principal on the
Senior Indebtedness or any securities issued in exchange for the Senior
Indebtedness are to be made in full prior to any payment of principal under or
redemption or repurchase of such securities distributed to the holders of the
Notes.

                  "Post Petition Interest" means interest that accrues after the
commencement of a case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company or any of its Subsidiaries or
Affiliates, whether or not allowed or allowable as a claim in any such
proceeding.

                  "Senior Default" means a Senior Payment Default or a Senior
Event of Default.

                  "Senior Event of Default" means any default, other than a
Senior Payment Default, that occurs and is continuing with respect to Senior
Indebtedness that permits the holders of such

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<PAGE>   51

Senior Indebtedness to accelerate the maturity of such Senior Indebtedness.

                  "Senior Indebtedness" means (i) the principal of and interest
(including Post-Petition Interest) on the Senior Loans, (ii) any and all other
costs, fees, expenses and other amounts payable by the Company under the Credit
Agreement or any of the Senior Security Documents, and (iii) any other
obligations or liabilities of the Company to the Lenders; provided that in no
event shall the aggregate principal amount of loans or other obligations
constituting Senior Indebtedness exceed the amount permitted by Section 9.04(b).

                  "Senior Payment Default" means any default in the payment of
any Senior Indebtedness that occurs and is continuing beyond any applicable
period of grace.

                  "Subordinated Indebtedness" means (i) the principal of and
interest (including Post- Petition Interest) on the Notes, (ii) all payments for
the redemption of any Warrant pursuant to Article V of such Warrant or of any
Preferred Stock, and (iii) any other monetary obligations of the Company arising
out of or in connection with this Agreement or the Notes.

11.02.  General.  Subject to Section 11.03, the Company may make and the holders
of the Notes may receive payment on the Subordinated Indebtedness, including,
without limitation:

         (a)      payments of interest on account of the Notes on the regularly
scheduled payment dates thereof in accordance with the terms of the Notes; and

         (b)      payment of the principal of the Notes on the regularly
scheduled payment dates thereof, all in accordance with the terms of the Notes.

11.03.  Limitation on Payment and Remedies.

         (a)      If there shall be a Senior Payment Default, the Company shall
not make any payment (in cash, property, securities or by setoff or otherwise)
of or on account of the principal of or interest on the Notes or as a sinking
fund for the Notes or on account of any other Subordinated Indebtedness or in
respect of any redemption, retirement, purchase or other acquisition of the
Notes until (i) such Senior Payment Default shall have been remedied or waived
or shall have ceased to exist or (ii) the Senior Indebtedness in respect of
which such Senior Payment Default shall have occurred shall have been paid or
provided for in full.

         (b)      If there shall be a Senior Event of Default and the Lenders
shall have delivered a Blockage Notice (as defined below) to the Company and the
holders of the Notes, the Company shall not make any direct or indirect payment
(in cash, property, securities or by setoff or otherwise) of or on account of
the principal of or interest on the Notes or as a sinking fund for the Notes or
on account of any other Subordinated Indebtedness or in respect of any
redemption, retirement, purchase or other acquisition of the Notes prior to the
earlier to occur of (i) the date all such Senior Events of Default that gave
rise to the Blockage Notice shall have been remedied or waived or shall have
ceased to exist or (ii) the 180th day after the Company's receipt of such
Blockage Notice or such shorter

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<PAGE>   52

period as determined in accordance with paragraph (c) below.

         (c)      For the purposes of this Article 11, (i) a "BLOCKAGE NOTICE"
is a notice of a Senior Event of Default that in fact has occurred and is
continuing, given to the Company and the holders of the Notes by the Lenders;
provided, however, that (x) no such notice shall be effective as a Blockage
Notice if an effective Blockage Notice shall have been previously given within
the most recent period of 360 consecutive days, and (y) no such notice shall be
effective as a Blockage Notice if such notice relates to a Senior Event of
Default which existed or is continuing on the date a Blockage Notice was
previously delivered within the most recent period of 360 consecutive days (it
being understood and agreed that a Senior Default resulting from a breach of a
covenant in one time period or at one determination date and a Senior Default
resulting from a breach of the same covenant in the next succeeding time period
or at the next succeeding determination date shall be deemed to be the same
Senior Default); and (ii) a "BLOCKAGE PERIOD" is the period during which the
Company is restricted from making payments of or on account of the Subordinated
Indebtedness pursuant to Section 11.03(a) or Section 11.03(b). Notwithstanding
any provision in this Agreement to the contrary, in no event shall the Company
be restricted from making payments of or on account of the Subordinated
Indebtedness pursuant to Section 11.03(b) by reason of giving one or more
Blockage Notices for a period which exceeds, in the aggregate, 180 days in any
360-consecutive-day period. Upon the expiration or termination of any Blockage
Period, the holders of the Notes shall be entitled to be paid all sums due and
owing on the Subordinated Indebtedness.

         (d)       As long as any Senior Indebtedness remains outstanding, upon
the occurrence of an Event of Default under this Agreement, the holders of the
Subordinated Indebtedness shall not declare or join in any declaration of the
Notes to be due and payable by reason of such Event of Default or otherwise take
any action against the Company prior to the expiration of 10 days (a "REMEDY
STANDSTILL PERIOD") after the written notice of intention to accelerate on
account of the occurrence of such Event of Default (a "REMEDY NOTICE") shall
have been given by the holders of the Subordinated Indebtedness to the Company
and the Lenders or the holders of the Senior Indebtedness unless the holders of
any Senior Indebtedness shall have caused such Senior Indebtedness to become due
prior to its stated maturity or any Event of Default pursuant to Section
10.01(i) or Section 10.01(j) of this Agreement shall have occurred; provided,
however, that such Remedy Standstill Period shall be extended until the earliest
of (x) the date such Event of Default shall have been remedied or waived or
shall have ceased to exist or the date on which the holders of the Senior
Indebtedness have caused such Senior Indebtedness to become due prior to its
stated maturity, (y) the date that such Remedy Standstill Period shall cease to
be effective in accordance with Section 11.03(e), and (z) 120 days from the date
such Remedy Notice was given (if the Remedy Notice was given in respect of an
Event of Default under Section 10.01(a) or Section 10.01(b)) or 180 days from
the date such Remedy Notice was given (if the Remedy Notice was given in respect
of an Event of Default other than under Section 10.01(a) or Section 10.01(b))
if, at the time the Remedy Standstill Period would otherwise expire, (1) there
exists any Senior Payment Default and (2) there exists any Senior Event of
Default and an effective Blockage Notice is given in accordance with, and
subject to the limitations of, this Section 11.03. Upon the expiration or
termination of any Remedy Standstill Period, the holders of the Notes shall be
entitled to exercise any of their rights with respect to the Notes other than
any right to accelerate the maturity date of the Notes based upon the

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<PAGE>   53

occurrence of any Event of Default which has been cured or otherwise remedied
during the Remedy Standstill Period.

         (e)      Notwithstanding any provision in this Agreement to the
contrary (excluding the subordination provisions of Section 11.03(a)), any
Blockage Period or Remedy Standstill Period shall be inapplicable or cease to be
effective if an Event of Default pursuant to Section 10.01(i) or Section
10.01(j) shall have occurred. In addition (subject to the subordination
provisions of Section 11.03(a)), any Blockage Period or Remedy Standstill Period
shall cease to be effective if at any time during such period: (i) all or
substantially all of the assets of the Company are sold or otherwise disposed of
outside of the ordinary course of business, or (ii) payment or any distribution
of any character, whether in cash, securities or other property of the Company
shall be made to or received by any creditor on any indebtedness for borrowed
money which is on a parity with or subordinate in right of payment to the Notes.

         (f)      Section 11.03(d) shall not apply to any action taken by any
holder of the Notes in filing lawsuits to prevent the running of any applicable
statute of limitations or other similar restriction on claims, but in each case
only to the extent reasonably necessary to prevent such running.

11.04. Subordination upon Certain Events. Upon the occurrence of any Event of
Default under Section 10.01(i) or Section 10.01(j) or, without duplication, upon
a receivership, insolvency, liquidation or dissolution of the Company or in
connection with an assignment for the benefit of its creditors or marshaling of
its assets or liabilities:

         (a)      Upon any payment or distribution of assets of the Company to
creditors of the Company, holders of Senior Indebtedness shall be entitled to
receive payment of the Senior Indebtedness in full before the holders of the
Notes shall be entitled to receive any payment in respect of the Subordinated
Indebtedness, except that the holders of the Notes may receive Junior
Securities.

         (b)      Until all Senior Indebtedness is paid in full, any
distribution to which the holders of the Notes would be entitled but for this
Article 11 shall be made to holders of Senior Indebtedness, as their interests
may appear, except that the holders of the Notes may receive Junior Securities.

         (c)      For purposes of this Article 11, a distribution or payment may
consist of cash, securities or other property, whether by setoff or otherwise.

         (d)      Notwithstanding the foregoing provisions of this Section
11.04, if payment or delivery by the Company of Junior Securities to the holders
of the Subordinated Indebtedness is authorized by an order or decree giving
effect, and stating in such order or decree that effect is given, to the
subordination of the Subordinated Indebtedness to the Senior Indebtedness, and
made by a court of competent jurisdiction in a proceeding under any applicable
bankruptcy or reorganization law, payment or delivery by the Company of such
Junior Securities shall be made to the holders of the Subordinated Indebtedness
in accordance with such order or decree.

11.05. Payments and Distributions Received. If the holders of the Subordinated
Indebtedness shall
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<PAGE>   54

have received any payment from or distribution of assets of the Company of any
kind or character in respect of the Subordinated Indebtedness in contravention
of the terms of this Article 11 before all Senior Indebtedness is paid in full,
then and in such event such payment or distribution shall be received and held
in trust for and shall be paid over or delivered to the Lenders, as the holder
of the Senior Indebtedness (or its authorized agent) to the extent necessary to
pay all such Senior Indebtedness in full.

11.06. Subrogation. After all amounts payable under or in respect of Senior
Indebtedness are paid in full, the holders of the Subordinated Indebtedness
shall be subrogated to the rights of holders of Senior Indebtedness to receive
payments or distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to the holders of the Subordinated Indebtedness
have been applied to the payment of Senior Indebtedness. A distribution made
under this Section 11.06 to a holder of Senior Indebtedness which otherwise
would have been made to the holders of the Subordinated Indebtedness is not, as
between the Company and the holders of the Subordinated Indebtedness, a payment
by the Company on Senior Indebtedness.

11.07. Relative Rights. This Article defines the relative rights of the holders
of the Subordinated Indebtedness and the holders of Senior Indebtedness. Nothing
in this Article 11 shall: (i) impair, as between the Company and the holders of
the Subordinated Indebtedness, the obligation of the Company, which is absolute
and unconditional, to pay principal of and premium, if any, and interest
(including default interest) on the Notes in accordance with their terms; or
(ii) affect the relative rights of the holders of the Subordinated Indebtedness
and creditors of the Company other than holders of Senior Indebtedness.

11.08.  Subordination May Not Be Impaired by the Company.  No right of any
holder of any Senior Indebtedness to enforce the subordination of the
Subordinated Indebtedness shall be impaired by any act or any failure to act by
the Company or by the failure of the Company to comply with this Agreement.

11.09.  Payments.  A payment with respect to principal of or interest on the
Subordinated Indebtedness shall include, without limitation, payment of
principal of and interest on the Notes and any payment on account of mandatory
prepayment or optional prepayment provisions.

11.10. Subordination Not to Prevent Events of Default. The failure to make a
payment on account of principal of or interest on or other amounts constituting
Subordinated Indebtedness by reason of any provision of this Article 11 shall
not be construed as preventing the occurrence of an Event of Default under
Article 10.

11.11. Subordination Not Impaired; Benefit of Subordination. Each holder of
Subordinated Indebtedness agrees and consents that, without notice to or assent
by such holder, and without affecting the liabilities and obligations of the
Company and any holder of Subordinated Indebtedness and the rights and benefits
of the holders of the Senior Indebtedness set forth in this Article 11:

         (a)      The holders of Senior Indebtedness, and any representative or
representatives acting

                                      -49-

<PAGE>   55

on behalf thereof, may exercise or refrain from exercising any right, remedy or
power granted by or in connection with any agreements relating to the Senior
Indebtedness; and

         (b)       Any balance or balances of funds with any holder of Senior
Indebtedness at any time outstanding to the credit of the Company or any
collateral under the Senior Loan Documents may from time to time, in whole or in
part, be surrendered or released;

all as the holders of the Senior Indebtedness, and any representative or
representatives acting on behalf thereof, may deem advisable, and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Subordinated Indebtedness to the Senior Indebtedness provided for herein.

11.12.  Miscellaneous.

         (a)      To the extent permitted by applicable law, the holders of the
Subordinated Indebtedness and the Company hereby waive notice of acceptance
hereof by the holders of the Senior Indebtedness.

         (b)      The Company and the holders of the Subordinated Indebtedness
hereby expressly agree that the holders of the Senior Indebtedness may enforce
any and all rights derived herein by suit, either in equity or law, for specific
performance of any agreement contained in this Article 11 or for judgment at law
and any other relief whatsoever appropriate to such action or procedure.

ARTICLE 12
Prepayment

                  The Company shall prepay outstanding principal (together with
accrued interest) on the Notes in accordance with the "Mandatory Prepayment"
provisions set forth in the Notes. The Company may prepay outstanding principal
of (together with accrued interest on) the Notes only if the Notes are prepaid
on a pro rata basis and in accordance with the "Optional Prepayment" provisions
set forth in the Notes.

ARTICLE 13
Miscellaneous

13.01. Survival of Agreements, Representations and Warranties. All of the
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, any investigation by or on behalf of
the Purchasers, acceptance of the Securities and payment therefor, exercise of
the Warrants or termination of this Agreement.

13.02. Notices. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail,

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<PAGE>   56

return receipt requested, telecopier, courier service or personal delivery:

                           (a)      if to the Purchasers:

                                    National City Capital Corporation
                                    1965 East Sixth Street
                                    Cleveland, Ohio 44114
                                    Attention: Mr. Richard Martinko
                                    Managing Director

                                    Rocky Mountain Mezzanine Fund II, L.P.
                                    c/o Rocky Mountain Capital Partners LLP
                                    1125 17th Street, Suite 2260
                                    Denver, Colorado 80202
                                    Attention:  Edward C. Brown
                                    Managing Partner

                           with a copy to:

                                    Baker & Hostetler
                                    3200 National City Center
                                    1900 East 9th Street
                                    Cleveland, Ohio 44114-3485
                                    Telecopier No.: (216) 696-0740
                                    Attention:  Gary R. Martz, Esq.

                           (b)      if to the Company:

                                    John L. Smucker
                                    MCE Companies, Inc.
                                    310 Depot Street
                                    Ann Arbor, Michigan 48104
                                    Telecopier No.: (734) 761-1727

                           and to:

                                    Jon E. Carlson
                                    MCE Companies, Inc.
                                    310 Depot Street
                                    Ann Arbor, Michigan 48104
                                    Telecopier No.: (734) 761-1727

                                      -51-

<PAGE>   57

                           with a copy to:

                                    Dykema Gossett PLLC
                                    400 Renaissance Center
                                    Detroit, Michigan 48243-1668
                                    Telecopier No.: (313) 568-6915
                                    Attention: J. Michael Bernard

                  All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, certified mail, return
receipt requested if mailed first class; and when receipt is acknowledged, if
telecopied.

13.03.  Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the successors and permitted assigns and permitted transferees
of the parties hereto.

13.04.  Assignments and Participations.

         (a)      The Company may not assign any of its rights or obligations
under this Agreement without the prior written consent of the Purchasers.

         (b)      Subject to applicable securities laws and the applicable
provisions of the Warrants and the Stockholder Agreement, the Purchasers may, at
any time and from time to time assign or sell or otherwise transfer any of their
interests in any of the Transaction Documents (i) to an Affiliate thereof, (ii)
to any bank, insurance company, investment company, savings and loan
association, mezzanine investment fund or other financial institution or any
affiliate thereof or to any other Person (excluding a competitor of the Company
or its Subsidiaries), with the prior written consent of the Company, which
consent will not be unreasonably withheld.

13.05.  Amendment and Waiver.

         (a)      No failure or delay on the part of the Company or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchasers at law, in equity or otherwise.

         (b)       Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company from the terms of any provision of
this Agreement, shall be effective (i) only if it is made or given in writing
and signed by the Company and the Purchasers, and (ii) only in the specific
instance and for the specific purpose for which made or given.

                                      -52-

<PAGE>   58

Except where notice is specifically required by this Agreement, no notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.

13.06.  Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

13.07. Headings; Section References. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. Unless otherwise specified, all references to Sections and
Articles are references to Sections and Articles of this Agreement, and all
references to Exhibits and Schedules are to Exhibits and Schedules to this
Agreement.

13.08.  Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflicts of law.

13.09. Jurisdiction. Each party to this Agreement hereby irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement or
any agreements or transactions contemplated hereby may be brought in the courts
of the State of Ohio located in the City of Cleveland or of the United States
District Court for the Northern District of Ohio and hereby expressly submits to
the personal jurisdiction and venue of such courts for the purposes thereof and
expressly waives any claim of improper venue and any claim that such courts are
an inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing (via first class mail) of copies thereof by registered
or certified mail, return receipt requested, postage prepaid, to the address set
forth in Section 13.02, such service to become effective 10 days after such
mailing.

13.10. Severability. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.

13.11.  Rules of Construction. Unless the context otherwise requires, "or" is
not exclusive, and references to sections or subsections refer to sections or
subsections of this Agreement.

13.12. Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and the other Transaction Documents, is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits and
schedules hereto and the other Transaction Documents, supersedes all prior
agreements and understandings between the parties with respect to

                                      -53-

<PAGE>   59

such subject matter.

13.13. Certain Expenses. The Company will pay all reasonable
expenses of the Purchasers (including reasonable fees, charges and disbursements
of counsel) in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the Closing and each purchase of Securities and any amendment,
supplement, modification or waiver of or to any provision of this Agreement, the
Notes or any other Transaction Document, or any consent to any departure by the
Company from the terms of any provision of this Agreement, the Notes or any
other Transaction Document.

13.14.  Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.

13.15. Waiver of Jury Trial. THE COMPANY AND THE PURCHASERS HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY
RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN
CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

13.16. Required Purchasers. Whenever any action is to be taken or consent given,
such action or consent shall be effective if approved in writing and signed by
the Holders of at least 66 2/3% in principal amount of the Notes then
outstanding or, if no Notes are then outstanding, the Holders of at least 66
2/3% of the Warrants then outstanding; provided, however, that no modification
or waiver of any provision of this Agreement shall, unless in writing and signed
by the Holders of all Notes then outstanding, do any of the following: (a)
reduce the principal of, or interest on, the Notes, (b) postpone any date fixed
for any payment of principal of, or interest on, the Notes, or (c) change the
unpaid principal amount of the Notes or the principal percentage of Holders
required to take any action hereunder.

13.17. Confidentiality. Each Purchaser agrees to keep confidential any
information relating to the Company or any of its Subsidiaries received by it
pursuant to or in connection with this Agreement which is (a) trade information
which the Purchasers reasonably expect that the Company would want to keep
confidential, (b) technical information with respect to the equipment or
operations of the Company, (c) financial or environmental information, and (d)
any written information that is clearly and conspicuously identified in writing
by the Company as confidential; provided, however, that this Section 13.17 shall
not be construed to prevent any Purchaser from disclosing such information (i)
to any other Purchaser or any Purchaser's legal counsel, auditors, and
accountants, or any Affiliate that shall agree to be bound by this obligation of
confidentiality, (ii) upon the order of any court or

                                      -54-

<PAGE>   60

administrative agency, (iii) upon the request or demand or any regulatory agency
or authority (whether or not such request or demand has the force of law), (iv)
that has been publicly disclosed, other than from a breach of this provision by
the Purchaser, (v) that has been obtained from any Person that is neither a
party to this Agreement nor an Affiliate of any such party, (vi) in connection
with the exercise of any right or remedy hereunder or under any other
Transaction Documents, or (vii) to any purchaser of all or any part of the Notes
or Warrants owned by that Purchaser that agrees to be bound by the obligation of
confidentiality in this Agreement.

                  [Remainder of page intentionally left blank]

                                      -55-
<PAGE>   61

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective officers hereunto
duly authorized as of the date first above written.

                               MCE COMPANIES, INC.

                               By: /s/John L. Smucker
                                  --------------------------------
                               Name: John L. Smucker
                               Title:   President
Number of
Warrant
Shares
--------
7,142.72                       NATIONAL CITY CAPITAL CORPORATION

                               By: /s/ Todd S. McCuaig
                                  --------------------------------
                               Name: Todd S. McCuaig
                               Title:   Managing Director

                               Payment Account Designation
                               ---------------------------
                               National City Bank, Cleveland, Ohio
                               ABA No. 041-000-124
                               Account Name: National City Capital Corporation
                               Account No.: 2085108

1,260.48                       GREAT LAKES CAPITAL
                               INVESTMENTS I, LLC

                               By: /s/ Todd S. McCuaig
                                  --------------------------------
                               Name: Todd S. McCuaig
                               Title:   Member

                               Payment Account Designation
                               National City Bank, Cleveland, Ohio
                               ABA No. 041-000-124
                               Account Name: Great Lakes Capital Investments I,
                                                    LLC
                               Account No.: 394991598

<PAGE>   62

4,726.80                       ROCKY MOUNTAIN MEZZANINE
                               FUND II, L.P.
                               By: Rocky Mountain Capital Partners
                                      LLP, its General Partner

                                        By: /s/Stephen N. Sangalis
                                           --------------------------------
                                        Name:  Stephen N. Sangalis
                                        Title:    General Partner

                                        Payment Account Designation
                                        ---------------------------
                                        US Bank
                                        ABA No. 102-000-021
                                        Account Name: Rocky Mountain Mezzanine
                                                      Fund II, L.P.
                                        Account No.: 103655151910

<PAGE>   63
                                                                  EXECUTION COPY
                                 FIRST AMENDMENT
                                       TO
             SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT

         This FIRST AMENDMENT TO SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE
AGREEMENT (the "Amendment"), made as of July 21, 2000, is among MCE COMPANIES,
INC., a Michigan corporation (the "Company"), GREAT LAKES CAPITAL INVESTMENTS I,
LLC, a Delaware limited liability company ("GLCI"), NATIONAL CITY CAPITAL
CORPORATION, a Delaware corporation ("NCCC"), and ROCKY MOUNTAIN MEZZANINE FUND
II, L.P., a Colorado limited partnership ("RMMF") (GLCI, NCCC and RMMF each a
"Purchaser" and collectively the "Purchasers").

                                    Recitals

         A. The Company and the Purchasers entered into a Senior
Subordinated Note and Warrant Purchase Agreement, dated as of July 28, 1999 (the
"Purchase Agreement"); and

         B. The parties desire to amend the Purchase Agreement as set forth
herein;

                                   Agreements

         NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements hereinafter set forth, the parties hereto agree as
follows:

         1. Effect of Amendment; Definitions. The Purchase Agreement shall be
and hereby is amended as provided in Section 2 hereof. Except as expressly
amended in Section 2 hereof, the Purchase Agreement shall continue in full force
and effect in accordance with its respective provisions on the date hereof. As
used in the Purchase Agreement, the terms "this Agreement", "herein",
"hereinafter", "hereto", "hereof", and words of similar import shall, unless the
context otherwise requires, mean the Purchase Agreement as amended and modified
by this Amendment. Capitalized terms that are not otherwise defined herein, have
the meanings ascribed to such terms in the Purchase Agreement.

         2. Amendments.

                  (a)      Section 1.01 is hereby amended to include the
following definition in alphabetical order:

                           "MCE Europe" means MCE Europe, Inc., a Michigan
          corporation and a wholly-owned subsidiary of the Company. As of the
          date of this
<PAGE>   64

          Agreement, MCE Europe is the sole shareholder of MCE Microwave Limited
          UK which, in turn, is the sole shareholder of DML Microwave Limited;
          see REVISED SCHEDULE 5.09 attached hereto.

                  (b) Section 1.01 of the Purchase Agreement is hereby amended,
effective as of September 30, 1999, by deleting in its entirety the definition
of "EBITDA Adjustment" contained therein, and substituting in lieu thereof the
following:

                      "EBITDA Adjustment" shall mean (i) if the date of
         determination is September 30, 1999, that portion of actual
         Consolidated EBITDA attributable to MCE Europe divided by 2 then
         multiplied by 10; (ii) if the date of determination is December 31,
         1999, that portion of actual Consolidated EBITDA attributable to MCE
         Europe divided by 5 then multiplied by 7; (iii) if the date of
         determination is March 31, 2000, that portion of actual Consolidated
         EBITDA attributable to MCE Europe divided by 8 then multiplied by 4;
         (iv) if the date of determination is June 30, 2000, that portion of
         actual Consolidated EBITDA attributable to MCE Europe divided by 11
         then multiplied by 1; and (v) if the date of determination is after
         June 30, 2000, $0.

                  (c) Section 1.01 of the Purchase Agreement is hereby amended,
effective as of December 31, 1999, by adding the following new definition:

                      "Breakeven Adjustment" shall mean (i) if the date of
         determination is December 31, 1999, $1,000,000, (ii) if the date of
         determination is March 31, 2000, $1,000,000, (iii) if the date of
         determination is June 30, 2000, $1,000,000, (iv) if the date of
         determination is September 30, 2000, $500,000, and (v) if the date of
         determination is after September 30, 2000, $0.

                  (d) Section 1.01 of the Purchase Agreement is hereby amended,
effective as of December 31, 1999, by deleting in its entirety the definition of
"Consolidated EBITDA" contained therein, and substituting in lieu thereof the
following:

                      "Consolidated EBITDA" shall mean for any period of
         determination, Consolidated Net Income for such period, less the
         aggregate amounts included in determining Consolidated Net Income for
         extraordinary gains during such period, plus the aggregate amounts
         deducted in determining Consolidated Net Income in respect of (a)
         income taxes for such period, (b) interest expense for such period, (c)
         depreciation and amortization expense and other non-cash charges for
         such period, and (d) extraordinary losses for such period, in each case
         determined on a Consolidated basis in accordance with GAAP, plus the
         EBITDA Adjustment, plus the Breakeven Adjustment.

         3. Representations and Warranties of the Company.

                  (a) The Company hereby represents and warrants that all
representations and

<PAGE>   65

warranties set forth in the Financing Documents, as the same may be amended
hereby, to which it is a party are true and correct in all material respects,
and that this Amendment has been executed and delivered by its duly authorized
officer and constitutes a legal, valid and binding obligation of it, enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and general principles of equity.

                  (b) Without limiting the generality of the foregoing, and
notwithstanding anything herein to the contrary, the parties hereto expressly
acknowledge and agree that, effective as of September 30, 1999, the references
in Section 5.09 of the Purchase Agreement (relative to Subsidiaries; Other
Equity Investments) to Schedule 5.09 is replaced by REVISED SCHEDULE 5.09
attached to this Amendment.

                  (c) The Company hereby represents and warrants that the
execution, delivery and performance by it of this Amendment and its performance
of the Financing Documents, as the same may be amended hereby, to which it is a
party (i) have been duly authorized by all necessary corporate action, (ii) do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the articles of incorporation or bylaws of the Company, or
of any judgment, injunction, order or decree or of any material agreement or
other material instrument binding upon the Company, and (iii) do not result in
the creation or imposition of any Lien (other than the Permitted Liens) on any
asset of the Company.

         4.  Representations and Warranties of the Purchasers. Each of the
Purchasers hereby severally, and not jointly, represents and warrants with
respect to itself that this Amendment has been executed and delivered by its
duly authorized officer and constitutes a legal, valid and binding obligation of
it, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and general principles of equity.

         5.  Counterparts.  This Amendment may be executed in any number of
counterparts, each of which shall be treated as an original but all of which,
collectively, shall constitute a single instrument.

         6.  Miscellaneous.

                  (a) This Amendment shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws.

                  (b) This Amendment shall become effective upon the execution
and delivery hereof by GLCI, NCCC, RMMF and the Company.

                  (c) Except as expressly set forth in this Amendment, (i)
the execution, delivery and performance by each of the Purchasers of this
Amendment shall not constitute or be deemed to be or construed as a waiver of
any right, power or remedy, or a waiver of any provision of the Purchase
Agreement or any other Financing Document, or a waiver of any

<PAGE>   66

Default or any Event of Default, and (ii) nothing herein shall be deemed to
entitle the Company to a future consent to, or a future waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Purchase Agreement or any other
Financing Document in similar or different circumstances. This Amendment is
subject to the provisions of Section 13.05 of the Purchase Agreement.

                  (d) Pursuant to Section 13.13 of the Purchase Agreement, the
Company agrees to pay on demand all reasonable expenses of the Purchasers
(including reasonable fees, charges and disbursements of counsel) in connection
with the preparation, negotiation, execution and delivery of this Amendment.

                            [SIGNATURES ON NEXT PAGE]

<PAGE>   67

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the day and year first above written.

                                       MCE COMPANIES, INC.

                                       By: /s/ John L. Smucker
                                           -----------------------------------
                                           John L. Smucker, President

                                       GREAT LAKES CAPITAL INVESTMENTS I,
                                       LLC

                                       By: /s/ Richard J. Martinko
                                           -----------------------------------
                                       Its: Member
                                           -----------------------------------

                                       NATIONAL CITY CAPITAL CORPORATION

                                       By: /s/ Richard J. Martinko
                                           -----------------------------------

                                       Its: Managing Director
                                           -----------------------------------

                                       ROCKY MOUNTAIN MEZZANINE FUND II,
                                       L.P.

                                       By: Rocky Mountain Capital Partners LLP
                                           Its:  General Partner

                                       By: /s/ Stephen Sangalis
                                           -----------------------------------

                                       Its: General Partner
                                           -----------------------------------

<PAGE>   68

                              REVISED SCHEDULE 5.09
                                       to
                                 FIRST AMENDMENT
                                       TO
             SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT

                                  SUBSIDIARIES

         DML MICROWAVE LIMITED, a private limited company registered in
              England and Wales (company no. 01064744) and a wholly-owned
              subsidiary of MCE UK (f/k/a Densitron Microwave Limited)

         INMET CORPORATION, a Michigan corporation ("Inmet")

         KDI/TRIANGLE CORPORATION, a Michigan corporation ("KDI")

         MCE EUROPE, INC., a Michigan corporation ("MCE Europe")

         MCE MANUFACTURING CORPORATION, a Michigan corporation

         MCE MICROWAVE LIMITED, a private limited company registered in
              England and Wales (company no. 3719966) and a wholly-owned
              subsidiary of MCE Europe ("MCE UK") (f/k/a DML Microwave
              Limited)

         MCE WORLDWIDE CORPORATION, a Barbados corporation (company no. 14658)

         METELICS CORPORATION, a California corporation ("Metelics")

         SOLENT MICROWAVE LIMITED a private limited company registered in
                  England and      Wales (company no. 01854836) and a wholly-
                  owned Subsidiary of DML Microwave Limited

         WEINSCHEL CORPORATION, a Michigan corporation ("Weinschel")

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