-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RGMqJGPAr1Wa4Pkgynm6C67Za369w/XJIaDfA/wW5VXHWksVFCzVHVK1K2KDxBG0 nTJlesHEFbFYH9ZyiUU8yA== 0000950123-97-006233.txt : 19970729 0000950123-97-006233.hdr.sgml : 19970729 ACCESSION NUMBER: 0000950123-97-006233 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 33 FILED AS OF DATE: 19970728 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEENAH TRANSPORT INC CENTRAL INDEX KEY: 0001040597 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 391378433 STATE OF INCORPORATION: WI FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-28751-01 FILM NUMBER: 97645989 BUSINESS ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 BUSINESS PHONE: 4147257000 MAIL ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARTLEY CONTROLS CORP CENTRAL INDEX KEY: 0001040598 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 391378433 STATE OF INCORPORATION: WI FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-28751-02 FILM NUMBER: 97645990 BUSINESS ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 BUSINESS PHONE: 4147257000 MAIL ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEENAH FOUNDRY CO CENTRAL INDEX KEY: 0001040599 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 390496210 STATE OF INCORPORATION: WI FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-28751-03 FILM NUMBER: 97645991 BUSINESS ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 BUSINESS PHONE: 4147257000 MAIL ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 S-4/A 1 NEENAH CORPORATION 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY , 1997 REGISTRATION NO. 333-28751 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ NEENAH FOUNDRY COMPANY HARTLEY CONTROLS CORPORATION NEENAH TRANSPORT, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) WISCONSIN 3321 39-1580331 WISCONSIN 3321 39-0842568 WISCONSIN 3321 39-1378433 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
2121 BROOKS AVENUE, BOX 729, NEENAH, WISCONSIN 54927 (414) 725-7000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) C/O GARY W. LACHEY VICE PRESIDENT -- FINANCE, TREASURER AND SECRETARY NEENAH FOUNDRY COMPANY 2121 BROOKS AVENUE, BOX 729, NEENAH, WISCONSIN 54927 (414) 725-7000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPY TO: LANCE C. BALK KIRKLAND & ELLIS 153 EAST 53RD STREET NEW YORK, NEW YORK 10022-4675 TELEPHONE: (212) 446-4800 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE ================================================================================
PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE - -------------------------------------------------------------------------------------------------------------------------- Neenah Foundry Company's 11 1/8% Senior Subordinated Notes due 2007, Series B............................ $150,000,000 $1,000 $150,000,000 $51,724.14 Hartley Controls Corporation's Guarantee of 11 1/8% Senior Subordinated Notes due 2007, Series B........ * * * None Neenah Transport, Inc.'s Guarantee of 11 1/8% Senior Subordinated Notes due 2007, Series B............... * * * None ==========================================================================================================================
* Not applicable (1) Estimated solely for the purpose of calculating the registration fee. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 CROSS REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-4
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS ------------------------------------------- ------------------------------------------- 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus..... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus.............................. Inside Front Cover Page; Outside Back Cover Page 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information.............. Prospectus Summary; The Company; Risk Factors; Unaudited Pro Forma Consolidated Financial Information; Selected Consolidated Financial and Other Data 4. Terms of the Transaction................... Outside Front Cover Page; Prospectus Summary; The Exchange Offer; Description of Exchange Notes; Certain Federal Income Tax Consequences 5. Pro Forma Financial Information............ Unaudited Pro Forma Consolidated Financial Information 6. Material Contracts with the Company Being Acquired................................... Inapplicable 7. Additional Information Required............ Inapplicable 8. Interests of Named Experts and Counsel..... Legal Matters; Experts 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................................ Inapplicable 10. Information with Respect to S-3 Registrants................................ Inapplicable 11. Incorporation of Certain Information by Reference.................................. Inapplicable 12. Information with Respect to S-3 or S-2 Registrants................................ Inapplicable 13. Incorporation of Certain Information by Reference.................................. Inapplicable 14. Information with Respect to Registrants other than S-3 or S-2 Registrants.......... Outside Front Cover Page; Prospectus Summary; Risk Factors; Use of Proceeds; The Transactions; Capitalization; Unaudited Pro Forma Consolidated Financial Information; Selected Consolidated Financial and Other Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Industry; Business; Management; Security Ownership; Certain Relationships and Related Transactions; Description of Credit Agreement
3
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS ------------------------------------------- ------------------------------------------- 15. Information with Respect to S-3 Companies.. Inapplicable 16. Information with Respect to S-3 or S-2 Companies.................................. Inapplicable 17. Information with Respect to Companies Other Than S-3 or S-2 Companies.................. Inapplicable 18. Information if Proxies, Consents or Authorizations are to be Solicited......... Inapplicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer....................... Management; Security Ownership; Certain Relationships and Related Transactions
4 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell nor the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of any such State. SUBJECT TO COMPLETION, DATED JULY , 1997 PRELIMINARY PROSPECTUS OFFER FOR ALL OUTSTANDING 11 1/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 IN EXCHANGE FOR 11 1/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 OF NEENAH FOUNDRY COMPANY THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1997 UNLESS EXTENDED NEENAH FOUNDRY COMPANY, a Wisconsin corporation (the "Company"), hereby offers to exchange an aggregate principal amount of up to $150,000,000 of its 11 1/8% Series B Senior Subordinated Notes due 2007 (the "New Notes") for a like principal amount of its 11 1/8% Series A Senior Subordinated Notes due 2007 (the "Old Notes") outstanding on the date hereof upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"). The New Notes and the Old Notes are collectively hereafter referred to as the "Notes." The terms of the New Notes are identical in all material respects to those of the Old Notes, except for certain transfer restrictions and registration rights relating to the Old Notes. The New Notes will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Old Notes. The New Notes will be unsecured and will be subordinated to all existing and future Senior Indebtedness (as defined) of the Company. The New Notes will rank pari passu with any future Senior Subordinated Indebtedness (as defined) of the Company and will rank senior to all subordinated indebtedness of the Company. The New Notes will be fully and unconditionally guaranteed on a joint and several basis (the "Subsidiary Guaranties") by each of the Company's principal operating subsidiaries, Hartley Controls Corporation ("Hartley Controls") and Neenah Transport, Inc. ("Neenah Transport") (collectively, the "Guarantor Subsidiaries"). The Company will derive some of its operating income and cash flow from its subsidiaries. The Guarantor Subsidiaries guarantee the Senior Bank Facilities (as defined) and are jointly and severally liable on a senior basis with the Company for all obligations thereunder. Such obligations are secured by pledges of all the capital stock of the Guarantor Subsidiaries and security interests in, or liens on, substantially all other tangible and intangible assets located in the United States of the Guarantor Subsidiaries. See "Description of Senior Bank Facilities" and "Description of Notes." As of July 1, 1997, on a pro forma basis, after giving effect to the Transactions (as defined), the Refinancing (as defined) and the application of proceeds therefrom, the Company and the Guarantor Subsidiaries would have had outstanding $0.1 million (excluding $0.6 million of outstanding letters of credit) aggregate amount of Senior Indebtedness (all of which is Secured Indebtedness (as defined)), $197.6 million aggregate principal amount of Senior Subordinated Indebtedness including the indebtedness represented by the Notes and no indebtedness that is subordinate or junior in right of payment to the Senior Subordinated Indebtedness. The New Notes are being offered hereunder in order to satisfy certain obligations of the Company and the Guarantor Subsidiaries contained in the Exchange and Registration Rights Agreement dated April 30, 1997 (the "Registration Rights Agreement"), among the Company, the Guarantor Subsidiaries and Chase Securities Inc. and Morgan Stanley & Co. Incorporated (the "Initial Purchasers"), with respect to the initial sale of the Old Notes. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date (as defined) for the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Old Notes with respect to the Exchange Offer, the Company will promptly return such Old Notes to the holders thereof. See "The Exchange Offer." Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the New Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivery of a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as it may be amended or supplemented from time to time may be used by a broker- dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. Each of the Company and the Guarantor Subsidiaries has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." - -------------------------------------------------------------------------------- Prior to the Exchange Offer, there has been no public market for the Old Notes. If a market for the New Notes should develop, such New Notes could trade at a discount from their principal amount. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system and no active public market for the New Notes is currently anticipated. There can be no assurance that any public market for the New Notes will develop. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange pursuant to the Exchange Offer. SEE "RISK FACTORS" COMMENCING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1997. 5 AVAILABLE INFORMATION The Company and the Guarantor Subsidiaries have filed with the Commission a Registration Statement on Form S-4 (the "Exchange Offer Registration Statement", which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the New Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company, the Guarantor Subsidiaries and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Exchange Offer Registration Statement, including the exhibits thereto, can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such Web site is: http://www.sec.gov. As a result of the Exchange Offer, the Company will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will be required to file periodic reports and other information with the Commission. The obligation of the Company to file periodic reports and other information with the Commission will be suspended if the New Notes are held of record by fewer than 300 holders as of the beginning of any fiscal year of the Company other than the fiscal year in which the Exchange Offer Registration Statement is declared effective. The Company will nevertheless be required to continue to file reports with the Commission if the New Notes are listed on a national securities exchange. In the event the Company ceases to be subject to the informational requirements of the Exchange Act, the Company will be required under the Indenture to continue to file with the Commission the annual and quarterly reports, information, documents or other reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K, which would be required pursuant to the informational requirements of the Exchange Act. Under the Indenture, the Company shall file with the Trustee annual, quarterly and other reports after it files such reports with the Commission. Annual reports delivered to the Trustee and the holders of New Notes will contain financial information that has been examined and reported upon, with an opinion expressed by an independent public accountant. The Company will also furnish such other reports as may be required by law. Information contained in this Prospectus contains "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other similar terminology, or by discussions of strategy. The Company's actual results could differ materially from those anticipated by any such forward-looking statements as a result of certain factors, including those set forth under the "Risk Factors" beginning on page 16 and elsewhere in this Prospectus. ------------------------ 2 6 SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and related notes thereto included elsewhere in this Prospectus. Prospective investors are urged to read this Prospectus in its entirety. Unless otherwise indicated in this Prospectus, all market share percentages are based on industry information compiled by Georgetown Economic Services, an independent market research firm that compiles information on behalf of the foundry industry. Unless otherwise stated in this Prospectus or unless the context otherwise requires, references herein to the "Company" are (i) to Neenah Corporation and its subsidiaries, Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc., for periods prior to the Merger (ii) to Neenah Corporation, as the surviving entity in the Merger, and its subsidiaries, for the period from the Merger to July 1, 1997 and (iii) to Neenah Foundry Company and its subsidiaries for periods thereafter. Neenah Corporation was a Wisconsin corporation organized in 1987 as a holding company for its operating subsidiaries. The Company's fiscal year ends on March 31, and unless otherwise indicated all annual references herein refer to such fiscal year. THE COMPANY OVERVIEW The Company, founded in 1872, is one of the largest manufacturers of a wide range of high quality ductile and gray iron castings for the heavy municipal market and selected segments of the industrial market. The Company believes it is the largest manufacturer of heavy municipal iron castings in the United States with approximately a 19% market share in calendar year 1996. The Company's broad range of heavy municipal iron castings includes manhole covers and frames, storm sewer frames and grates, heavy duty airport castings, specialized trench drain castings, specialty flood control castings and ornamental tree grates. These municipal castings are sold throughout the United States to state and local government entities, utility companies, precast concrete manhole structure producers and contractors for both new construction and infrastructure replacement. The municipal market generated approximately 43% of the Company's 1997 net sales. The Company believes it is also a leading manufacturer of a wide range of complex industrial castings, including castings for medium- and heavy-duty truck drive line components, a broad range of castings for the farm equipment industry and specific components for compressors used in heating, ventilation and air conditioning systems ("HVAC"). The industrial market generated approximately 53% of the Company's 1997 net sales. In addition, the Company engineers, manufactures and sells customized sand control systems and related products, which are an essential part of the casting process, to other iron foundries. Sales of these sand control systems and related products represented approximately 4% of the Company's 1997 net sales. The Company currently operates two modern foundries with an annual aggregate rated capacity of approximately 187,000 tons at a single site in Neenah, Wisconsin. Since 1985, the Company has invested approximately $100 million in its production facilities, with approximately $73 million invested in a major plant modernization program from 1985 to 1990. This plant modernization program was a critical part of a long-term strategy to produce higher volume, value-added castings for its existing industrial customers and to penetrate other selected segments of the industrial market, while preserving its position as the leader in the heavy municipal market. This modernization program entailed the closing of the Company's oldest foundry, Plant 1, and the updating of the Company's other two foundries, Plants 2 and 3, which enabled the Company both to produce higher volume, complex castings for selected industrial segments and to improve the Company's cost position in the heavy municipal market. Following the completion of the modernization program, the Company has steadily decreased its production of lower margin products such as axle covers and brake drums and increased the production of higher margin, more complex parts such as transmission and axle housings. As a result of this strategy, the Company's ongoing improvements in its manufacturing process and increased demand for medium- and heavy-duty truck components, 3 7 net sales and EBITDA (as defined) have increased substantially. From 1992 to 1997, net sales have grown from $116.5 million to $165.4 million, representing a compound annual growth rate of 7.3%, and EBITDA has grown from $13.4 million to $38.0 million during the same period, representing a compound annual growth rate of 23.2%. COMPETITIVE ADVANTAGES The Company believes it benefits from the following competitive advantages, which have enabled it to increase sales and operating profitability and to maintain its position as one of the leaders in the iron casting industry. Leading Market Position. The Company believes it is the largest manufacturer of heavy municipal iron castings in the United States with approximately a 19% market share in calendar year 1995. Furthermore, the Company, which has produced municipal castings for over 70 years has, according to its estimates, over a 50% market share in nine of the top ten states in which the Company sells heavy municipal castings. Sales in those states represented approximately 69% of the Company's municipal sales in 1997. The Company believes it is also one of the largest manufacturers of iron castings for selected segments of the industrial market, including the medium-and heavy-duty truck and farm equipment segments. The Company is the sole sourced supplier for over 85% of the industrial products it produces and has multi-year arrangements with certain of its largest customers. The Company believes it can continue to capitalize on its strong market position to generate additional revenues and realize economies of scale, thereby increasing margins and earnings. Low Cost Structure. As a result of its size, significant investment in equipment and technology and focus on improving efficiency, the Company believes it possesses a highly competitive cost structure. Since 1985, the Company has invested approximately $100 million in its production facilities, with approximately $73 million invested in plant modernization and new equipment from 1985 to 1990. These investments, combined with the Company's ongoing improvements to its manufacturing process, have substantially increased efficiency and manufacturing productivity. From 1992 to 1997, the Company reduced its scrap rate from 3.5% to 2.0%, which the Company believes is one of the lowest scrap rates in the industry. During the same period, the Company reduced its employee hours per ton by approximately 40% from 14.8 to 9.0, while improving product quality levels and producing higher margin, more complex parts. Broad Product Offering. The Company carries a broad range of products, offering more than 4,400 patterns that can produce over 20,000 part combinations for the heavy municipal market, and more than 350 patterns for the industrial market. The Company believes its municipal catalog offers the largest castings selection of any foundry serving the heavy municipal market. This extensive product offering, which includes hundreds of one-of-a-kind specialty items, enables the Company to compete throughout the United States and provide a substantial number of the many types of municipal castings required for individual projects. Heavy municipal castings are manufactured from Company-owned patterns which have been appraised by independent appraisers to have a value in excess of $22 million. Additionally, the Company's extensive and growing offering of complex industrial castings enables it to more effectively service its customers' increasing needs for highly engineered cast parts and often positions the Company as the sole source of supply to original equipment manufacturers ("OEMs") and their first tier suppliers. The Company's broad industrial product offering and its recognized casting engineering expertise have become increasingly important as large industrial customers seek to reduce the number of suppliers with whom they conduct business. Strong, Diverse Customer Relationships. The Company continually focuses on establishing and maintaining strong relationships with its customers. In the heavy municipal market, the Company currently sells to over 17,000 active customers in all 50 states, with the majority of its sales concentrated in the midwestern states. The Company believes it has the largest sales and marketing 4 8 effort of any foundry serving the heavy municipal market, including 47 Company employees and 26 commissioned representatives. The Company believes the size of its marketing effort, the breadth of its product offering and the level of its technical support provide it with a significant competitive advantage and will allow it to further strengthen its leading position in the heavy municipal market. With respect to the industrial market, the Company has established strong relationships with leading manufacturers of medium- and heavy-duty truck components, farm equipment and HVAC systems. The Company is the sole sourced provider for over 85% of the products it currently supplies to its industrial customer base and has multi-year arrangements with certain of its largest customers. Furthermore, the average industrial casting typically takes between 12 and 18 months to go from the design phase to full production and has an average life cycle of approximately 8 to 10 years. This lengthy development process, in which the Company actively participates, provides the Company with an inventory of products that cannot be quickly replicated by its competitors. Historically, the foundry that has originally manufactured an industrial part has continued to manufacture that part throughout its product life cycle. The Company's participation in both the heavy municipal and industrial markets helps to diversify the Company's business and to reduce the Company's reliance on individual customers or end-use markets. High Quality Products and Customer Service. The Company believes it enjoys a reputation for providing a high level of customer service and is recognized for its ability to consistently manufacture high-quality, complex products. The Company believes its manufacturing capabilities and process controls allow it to manufacture high quality castings which are dimensionally and metallurgically consistent. In addition to providing high quality products, the Company emphasizes customer service by providing tooling and engineering development support to its customers, consistent on-time delivery utilizing its own fleet of trucks for delivery of many of its municipal products and a small portion of the Company's industrial products and follow-up through its sales and marketing team. The Company believes its ability to provide such product quality and responsive service has fostered customer loyalty and long-term relationships. Experienced Management Team with Significant Equity Stake. The top seven members of the Company's senior operating management have an average of approximately 12 years with the Company and 23 years in the iron foundry industry. Through an investment in ACP Products, L.L.C., certain members of the Company's management (the "Management Investors") beneficially own, on a fully diluted basis, approximately 10% of the common stock of the Company. BUSINESS STRATEGY The Company's strategy for achieving continued growth in sales and profitability includes: (i) increasing the sale of higher margin products, (ii) selectively entering new markets, (iii) improving operating performance and (iv) making selective acquisitions. Increasing the Sale of Higher Margin Products. The Company continually strives to improve the margins on the parts it produces. In the heavy municipal market, the Company has historically maintained strong margins by periodically implementing price increases and introducing new, higher value-added products. For example, the Company is currently leading the market in the sale of lightweighted municipal castings, which are less costly to handle and require less raw material to produce. The Company believes incremental margin improvements will be realized from the Company's increased production of these lightweighted products. In the industrial market, the Company increased its focus on manufacturing complex, highly engineered castings in the early 1990s following substantial capital investment in the late 1980s. Since 1991, the Company has steadily increased the volume, array and complexity of the parts it produces for its industrial customers. The Company intends to continue to pursue opportunities to produce more complex, higher value-added castings, thereby continuing to improve product margins. Selectively Entering New Markets. The Company intends to selectively expand its presence in both the heavy municipal and industrial markets. In the heavy municipal market, the Company is 5 9 considering expanding its product offering in high volume markets such as New York and Nevada where the Company already has sales representatives in place and for which the Company has already invested in certain of the toolings necessary to meet potential product demand. In addition, the Company is exploring further opportunities in New Jersey, New Hampshire and Massachusetts. The Company's strategy in its chosen industrial segments is to continue to increase its penetration of existing customers and to develop similar relationships with other selected industrial companies which would value the Company's technical ability and high level of product quality and customer service. The Company also intends to explore opportunities in austempering (heat-treating ductile iron) and machining and assembling sub-components for specific industrial customers. Improving Operating Performance. The Company operates two modern foundries, and believes it possesses a highly competitive cost structure. The Company intends to continue to seek ways to capitalize on and extend its technological expertise and operating efficiencies, thereby reducing its operating costs. In contrast to the major investments made from 1985 to 1990, which significantly improved both manufacturing capacity and efficiency, the Company's near term capital expenditures will be focused primarily on incrementally improving efficiency and reducing costs through projects such as: (i) sand system optimization, (ii) material handling improvements and (iii) energy utilization improvements. Making Selective Acquisitions. The United States iron foundry industry is highly fragmented despite significant consolidation over the past decade. In 1986, there were approximately 880 foundries engaged in the casting of iron, with an aggregate capacity of approximately 15 million tons according to Stratecasts, Inc., a foundry industry research and consulting organization. By 1996, the number of iron foundries decreased to approximately 730, with an aggregate capacity of approximately 13 million tons. Management believes the consolidation that has occurred will continue, particularly in the industrial market, as technical, environmental and quality standards continue to increase. The Company intends to pursue selective acquisition opportunities that complement its existing product offering or enable the Company to expand its presence in selected geographic areas of the heavy municipal market. The Company believes such acquisitions will provide opportunities for incremental revenue and cash flow by leveraging the Company's current expertise in manufacturing, sales and marketing, and product and process engineering. THE MERGER NFC Castings, Inc. ("Holdings") and its wholly-owned subsidiary, NC Merger Company ("NC Merger"), were organized to effect the acquisition of Neenah Corporation. On April 30, 1997, pursuant to an Agreement and Plan of Reorganization, dated November 20, 1996, as amended (the "Merger Agreement"), among Holdings, NC Merger and Neenah Corporation, NC Merger merged with and into Neenah Corporation, with Neenah Corporation as the surviving corporation (the "Merger"). As a result of the Merger, Neenah Corporation became a wholly owned subsidiary of Holdings. On July 1, 1997 Neenah Foundry Company merged with and into Neenah Corporation, with Neenah Corporation as the surviving entity. Following the Internal Merger (as defined), Neenah Corporation changed its name to Neenah Foundry Company. See "--Internal Merger." Holdings is a wholly-owned subsidiary of ACP Holding Company ("ACP Holdings"). ACP Holdings is wholly-owned by ACP Products, L.L.C., which in turn is owned in part by Citicorp Venture Capital, Ltd. ("CVC") and certain other investors (collectively, the "Investor Group"). The Management Investors also own an interest in ACP Products, L.L.C. The consideration for the Merger was $236.9 million in cash (the "Merger Consideration"), subject to a closing date net worth adjustment. In addition to the Merger Consideration, and upon consummation of the Merger, the Company paid approximately $11.3 million to certain former stockholders of the Company (the "Former Stockholder Payment" and, together with the Merger Consideration, the "Merger Price"). Pro forma for a March 31, 1997 closing, the closing date net 6 10 worth adjustment would have been $9.1 million which would result in a total pro forma Merger Price of $258.3 million (including fees and expenses attributable to the Merger of $1.0 million). The Merger Price reflects the use of approximately $25.3 million of cash on the Company's balance sheet pro forma for a March 31, 1997 closing (resulting in a valuation of the Company's business and other assets of approximately $233.0 million). In order to finance the Merger Price, including the payment of related fees and expenses: (i) NC Merger consummated the Offering; (ii) NC Merger entered into a credit agreement providing for (a) a term loan (the "Tranche A Term Loan") in the amount of $20.0 million and a second term loan (the "Tranche B Term Loan" and, together with the Tranche A Term Loan, the "Term Loans") in the amount of $25.0 million, and (b) a revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loans, the "Senior Bank Facilities") in the amount of $30.0 million, subject to a borrowing base formula; (iii) Holdings made an equity contribution (the "Equity Contribution") of $45.0 million to NC Merger; and (iv) $25.3 million of cash (pro forma for a March 31, 1997 closing) was utilized. Concurrently with the consummation of the Offering, the Company, as the surviving corporation in the Merger, assumed, pursuant to the Merger, the obligations under the Notes and the Senior Bank Facilities. The Offering, the establishment of the Senior Bank Facilities, the Equity Contribution and the Merger are referred to collectively herein as the "Transactions." The sources and uses of funds for the Merger and related Transactions, assuming that the Merger occurred on March 31, 1997, were as follows (dollars in millions): SOURCES OF FUNDS Senior Bank Facilities:(1)(2) Tranche A Term Loan............................................... $ 20.0 Tranche B Term Loan............................................... 25.0 Senior Subordinated Notes due 2007.................................. 150.0 Equity Contribution(3).............................................. 45.0 Excess Cash and Borrowings under Revolving Credit Facility(2)....... 26.2 ------ Total..................................................... $266.2 ======
USES OF FUNDS Merger Price(2)(4).................................................. $258.3 Financing Costs..................................................... 7.9 ------ Total..................................................... $266.2 ======
- --------------- (1) Total borrowings of up to $30.0 million under the Revolving Credit Facility are available, subject to borrowing base limitations, for working capital and general corporate purposes, including up to $15.0 million for letters of credit. At March 31, 1997, on a pro forma basis after giving effect to the Offering, the other Transactions, and the application of the proceeds therefrom, as well as borrowing base limitations and $0.6 million of outstanding letters of credit, the Company estimates that it would have had the ability to borrow approximately $24.5 million under the Revolving Credit Facility. See "Description of Senior Bank Facilities." (2) Based on the Company's results of operations since March 31, 1997, the Company estimates the closing net worth adjustment will be approximately $12.6 million resulting in a total Merger Price of approximately $261.8 million, cash on hand of approximately $11.5 million, substantially all of which will be applied to fund the Merger Price, and approximately $1.0 million will be drawn under the Revolving Credit Facility in order to provide the remainder of the necessary financing. (3) Holdings made an Equity Contribution of $45.0 million to NC Merger for which it received all of NC Merger's common stock. See "Ownership of Securities." (4) The Merger Price includes a net worth adjustment, which would have been $9.1 million based on a March 31, 1997 pro forma closing. 7 11 INTERNAL MERGER In order to realize certain state tax benefits, on July 1, 1997, Neenah Corporation merged (the "Internal Merger") with its principal operating subsidiary, Neenah Foundry Company, with Neenah Corporation as the surviving entity. Following the Internal Merger, Neenah Corporation changed its name to Neenah Foundry Company. The Company does not anticipate that the Internal Merger will impact its business in any material respect other than the realization of the tax benefits mentioned above. THE REFINANCING On July 1, 1997, the Company issued $45.0 million aggregate principal amount of Series C Senior Subordinated Notes due 2007 (the "Refinancing Notes") and used the proceeds of $47.6 million to pay the Term Loans, the accrued interest thereon and related fees and expenses. The issuance of the Refinancing Notes and payment of the Term Loans and related fees and expenses are referred to herein as the "Refinancing." PROPOSED AMENDMENT TO SENIOR BANK FACILITIES The Company is currently negotiating an amendment to the Revolving Credit Facility which, if adopted, would (i) increase the borrowings available under the Revolving Credit Facility to the Company from $30.0 million to $50.0 million and (ii) eliminate all borrowing base limitations from the current Revolving Credit Facility. THE EXCHANGE OFFER Securities Offered......... Up to $150,000,000 aggregate principal amount of 11 1/8% Series B Senior Subordinated Notes due 2007 (the "New Notes"). The terms of the New Notes and Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes. The Exchange Offer......... The New Notes are being offered in exchange for a like principal amount of Old Notes. Old Notes may be exchanged only in integral multiples of $1,000. The issuance of the New Notes is intended to satisfy obligations of the Company and the Guarantor Subsidiaries contained in the Registration Rights Agreement. Expiration Date; Withdrawal of Tender................ The Exchange Offer will expire 5:00 p.m. New York City time, on , 1997, or such later date and time to which it is extended by the Company. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Certain Conditions to the Exchange Offer........... Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an"affiliate" of the Company within the meaning of 8 12 Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Notes. The Company's obligation to accept for exchange, or to issue New Notes in exchange for, any Old Notes is subject to certain customary conditions relating to compliance with any applicable law, or any applicable interpretation by any staff of the Commission, or any order of any governmental agency or court of law. The Company currently expects that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." Procedures for Tendering Old Notes................ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Old Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. See "The Exchange Offer -- Procedures for Tendering Old Notes." Use of Proceeds............ There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. Exchange Agent............. United States Trust Company of New York is serving as the Exchange Agent in connection with the Exchange Offer. Federal Income Tax Consequences............. The exchange of Notes pursuant to the Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." 9 13 CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, the Company is of the view that holders of Old Notes (other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchange their Old Notes for New Notes pursuant to the Exchange Offer generally may offer such New Notes for resale, resell such New Notes and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act, provided such New Notes are acquired in the ordinary course of the holders' business and such holders have no intention, or any arrangement with any person, to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered for sale unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. If a holder of Old Notes does not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Old Notes may not be offered for sale, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Holders of Old Notes do not have any appraisal or dissenters' rights under Delaware General Corporation Law in connection with the Exchange Offer. To the extent the Old Notes are exchanged for New Notes, the market for the Old Notes may be adversely affected. See "The Exchange Offer -- Consequences of Failure to Exchange; Resales of New Notes." The Old Notes are, and following the Exchange Offer will continue to be, eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. Following commencement of the Exchange Offer but prior to its consummation, the Old Notes may continue to be traded in the PORTAL market. Following consummation of the Exchange Offer, the New Notes will not be eligible for PORTAL trading. 10 14 THE OFFERING The terms of the New Notes are identical in all material respects to the Old Notes, except for certain transfer restrictions and registration rights relating to the Old Notes. Issuer..................... Neenah Foundry Company. Securities Offered......... $150,000,000 aggregate principal amount of 11 1/8% Senior Subordinated Notes due 2007. Maturity................... May 1, 2007. Interest Payment Dates..... May 1 and November 1 of each year, commencing November 1, 1997. Optional Redemption........ Except as described below, the Company may not redeem the New Notes (or the Old Notes) prior to May 1, 2002. On or after such date, the Company may redeem the New Notes (and any outstanding Old Notes), in whole or in part, at any time at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time and from time to time on or prior to May 1, 2000, the Company may, subject to certain requirements, redeem up to 40% of the original aggregate principal amount of the Notes with the net cash proceeds of one or more Public Equity Offerings (as defined) by the Company, Holdings, or ACP Holdings, for which there is a Public Market (as defined), at a redemption price equal to 111.125% of the principal amount of the Notes to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least 60% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of Notes -- Optional Redemption." Change of Control.......... Upon the occurrence of a Change of Control (as defined), (i) the Company will have the option, at any time prior to May 1, 2002, to redeem the New Notes (and any outstanding Old Notes) at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined), together with accrued and unpaid interest, if any, to the date of redemption; and (ii) if the Company does not redeem the New Notes (or such Old Notes) pursuant to the preceding clause (i) or if such Change of Control occurs after May 1, 2002, each holder will have the right to require the Company to make an offer to repurchase the New Notes (and such Old Notes) at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. See "Description of Notes -- Change of Control." Subsidiary Guaranties...... The New Notes will be (as are the Old Notes) fully and unconditionally guaranteed, jointly and severally, on an unsecured, senior subordinated basis by the Guarantor Subsidiaries. Neenah Foundry Company derives some of its income from its subsidiaries, Hartley Controls Corporation and Neenah Transport, Inc. The Guarantor Subsidiaries have guaranteed the Senior Bank Facilities (as defined), and are jointly and severally liable on a senior basis with the Company for the 11 15 obligations thereunder. Such obligations are secured by pledges of all the capital stock of the Company and the Guarantor Subsidiaries and security interests in, or liens on, substantially all other tangible and intangible assets of the Company and the Guarantor Subsidiaries. See "Description of Notes -- Subsidiary Guaranties" and "-- Certain Covenants -- Future Note Guarantors." Ranking.................... The New Notes will be (as are the Old Notes) unsecured and will be subordinated to all existing and future Senior Indebtedness (as defined) of the Company. The New Notes will (as do the Old Notes) rank pari passu with any future Senior Subordinated Indebtedness of the Company and will rank senior to all other subordinated indebtedness of the Company. The Subsidiary Guaranties are unsecured, senior subordinated obligations of the Guarantor Subsidiaries, subordinated in right of payment to existing and future Senior Indebtedness of the Guarantor Subsidiaries. As of March 31, 1997, on a pro forma basis, after giving effect to the Transactions and the Refinancing, and the application of the net proceeds therefrom, the Company and the Guarantor Subsidiaries would have had outstanding $0.1 million (excluding $0.6 million of outstanding letters of credit) aggregate principal amount of Senior Indebtedness (all of which is Secured Indebtedness), $197.6 million aggregate amount of Senior Subordinated Indebtedness including the indebtedness represented by the Notes and no indebtedness that is subordinate or junior in right of payment to the indebtedness represented by the Notes. As of July 1, 1997, after giving effect to the Transactions and the Refinancing, and the application of the net proceeds therefrom, the Company and the Guarantor Subsidiaries would have had outstanding $0.1 million (excluding $0.6 million of outstanding letters of credit) aggregate principal amount of Senior Indebtedness (all of which is Secured Indebtedness), $197.6 million aggregate amount of Senior Subordinated Indebtedness including the indebtedness represented by the Notes and no indebtedness that is subordinate or junior in right of payment to the indebtedness represented by the Notes. Restrictive Covenants...... The indenture (the "Indenture") governing the New Notes, which is the Indenture governing the Old Notes, limits (i) the incurrence of additional Indebtedness by the Company and its Restricted Subsidiaries (as defined); (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; (iii) certain other restricted payments, including without limitation, investments; (iv) sales of assets and Restricted Subsidiary stock; (v) certain transactions with affiliates; (vi) the sale or issuance of capital stock of its Restricted Subsidiaries; (vii) the creation of liens; (viii) the lines of business in which the Company and its Restricted Subsidiaries may operate; (ix) consolidations, mergers and transfers of all or substantially all of the Company's assets; and (x) sale and leaseback transactions. The Indenture also prohibits certain restrictions on distributions from Restricted Subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exemptions. 12 16 See "Description of Notes -- Certain Covenants" and "-- Merger and Consolidation." Transfer Restrictions; Absence of a Public Market for the Notes............ The New Notes are new securities and there is currently no established market for the New Notes. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Initial Purchasers have advised the Company that they currently intend to make a market in the New Notes. However, they are not obligated to do so, and any market making with respect to the New Notes may be discontinued without notice. The Company does not intend to apply for listing of the New Notes on any national securities exchange or for their quotation through the National Association of Securities Dealers Automated Quotation System. The address for the Company and each of the Guarantor Subsidiaries is 2121 Brooks Avenue, Box 729, Neenah, Wisconsin 54927 and the telephone number is (414) 725-7000. RISK FACTORS Holders of Old Notes should carefully consider all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors under "Risk Factors" beginning on page 16 for risks in connection with the Exchange Offer. 13 17 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA The following table sets forth summary historical consolidated, financial and other data of the Company for the five years ended March 31, 1997, and certain financial and other data for the year ended March 31, 1997. The summary historical consolidated financial and other data, (with the exception of tons produced, employees, employee hours per ton and scrap rate) are derived from the audited historical consolidated financial statements and the "Unaudited Pro Forma Financial Information" of the Company, all of which are included elsewhere in this Prospectus. The historical consolidated balance sheets for 1995, 1996 and 1997 and the historical consolidated statements of income for 1994, 1995, 1996 and 1997 were audited by Ernst & Young LLP, independent auditors. The historical consolidated balance sheets for 1993 and 1994 and the historical consolidated statement of income for 1993 were audited by other auditors. The unaudited pro forma balance sheet data as of March 31, 1997 gives effect to the Transactions and the Refinancing as if such transactions had occurred on March 31, 1997. The unaudited pro forma consolidated statement of income for the year ended March 31, 1997 gives effect to the Transactions and the Refinancing as if they were consummated on April 1, 1996. The unaudited pro forma financial and other data do not purport to represent what the Company's financial position or results of operations would actually have been had the Transactions and the Refinancing in fact occurred on the assumed dates or to project the Company's financial position or results of operations for any future date or future period. The information contained in the following table should also be read in conjunction with "Capitalization," "Selected Consolidated Financial and Other Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Consolidated Financial Information," and the Company's historical consolidated financial statements and related notes included elsewhere in this Prospectus. 14 18 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA FISCAL YEAR ENDED MARCH 31,
PRO FORMA FOR TRANSACTIONS AND REFINANCING ------------- 1993 1994 1995 1996 1997 1997 -------- -------- -------- -------- -------- ------------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales(1)...................... $133,422 $131,982 $160,621 $166,951 $165,426 $ 165,426 Gross profit...................... 25,143 25,451 39,640 45,320 48,690 48,747 Operating income.................. 6,106 11,837 22,967 28,337 31,143 29,718 Interest expense (income), net.... 2,118 1,043 397 (481) (1,162) 20,948 Net income........................ 5,080 6,581 13,704 17,142 19,838 4,190 BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents......... $ 79 $ 118 $ 238 $ 10,126 $ 22,403 $ 202 Working capital(2)................ 13,425 14,596 15,174 18,094 21,438 30,101 Total assets...................... 87,388 74,327 73,813 82,957 93,869 307,984 Total debt........................ 21,409 13,325 887 241 134 197,722 Total stockholders' equity........ 36,862 37,929 43,198 54,790 68,857 43,396 OTHER DATA: EBITDA(3)......................... $ 13,399 $ 18,577 $ 29,809 $ 35,113 $ 38,024 $ 41,539 Depreciation and amortization..... 7,293 6,740 6,842 6,776 6,881 12,979 Capital expenditures.............. 3,967 4,583 3,665 7,275 4,546 4,546 Net cash provided by (used in): Operating activities............ 15,240 18,301 23,581 22,273 23,479 13,187 Investing activities............ (4,239) (4,949) (3,412) (7,299) (3,104) (3,104) Financing activities............ (11,499) (13,313) (20,049) (5,086) (8,098) (4,896) Cash interest expense(4).......... 2,128 1,049 624 84 39 21,733 Tons produced..................... 137,260 136,754 171,727 168,400 155,134 155,134 Employees......................... 1,169 931 952 922 910 910 Employee hours per ton(5)......... 13.3 10.7 8.7 8.6 9.0 9.0 Scrap rate(6)..................... 3.3% 2.9% 2.2% 2.0% 2.0% 2.0%
- --------------- (1) Net sales for the years ended March 31, 1993 and 1994 include sales of products manufactured in Plant 1, which was closed in 1994 as part of the Company's strategy to increase its focus on higher volume, complex parts for its industrial customers. The majority of the parts produced in Plant 1 were then discontinued. Plant 1 provided sales of $30.9 million and $4.4 million for the fiscal years ended March 31, 1993 and 1994, respectively. (2) Working capital represents total current assets (excluding cash and cash equivalents) less total current liabilities (excluding the Revolving Credit Facility and the current portion of long-term debt). (3) EBITDA represents operating income plus depreciation and amortization. The Company has included information concerning EBITDA because management believes that EBITDA is generally accepted as providing useful information regarding a company's ability to service and/or incur debt. EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. The Company understands that, while EBITDA is frequently used by securities analysts in the evaluation of companies, EBITDA, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. EBITDA is not intended as an alternative to cash flow from operating activities as a measure of liquidity, an alternative to net income as an indicator of the Company's operating performance or an alternative to any other measure of performance in conformity with generally accepted accounting principles. (4) Cash interest expense is defined as interest expense less amortization of debt issuance cost. (5) Employee hours per ton represents the number of hours worked by hourly employees during this period (excluding supervisory employee hours) divided by the number of tons produced. (6) The scrap rate is the percentage of castings that are determined to be unusable prior to delivery to customers. 15 19 RISK FACTORS Holders of Old Notes should carefully consider the following factors in addition to the other information set forth in this Prospectus in connection with the Exchange Offer. The risk factors set forth below are generally applicable to the Old Notes as well as the New Notes. SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE INDEBTEDNESS The Company is highly leveraged. As of March 31, 1997, on a pro forma basis, after giving effect to the Transactions, the Refinancing and the application of the proceeds therefrom, the Company and the Guarantor Subsidiaries would have had $0.1 million (excluding $0.6 million of outstanding letters of credit) aggregate amount of Senior Indebtedness (all of which is Secured Indebtedness), $197.6 million aggregate amount of Senior Subordinated Indebtedness including the indebtedness represented by the Notes and no indebtedness that is junior in right of payment to the indebtedness represented by the Notes. As of July 1, 1997, after giving effect to the Transactions and the Refinancing, and the application of the net proceeds therefrom, the Company and the Guarantor Subsidiaries would have had outstanding $0.1 million (excluding $0.6 million of outstanding letters of credit) aggregate principal amount of Senior Indebtedness (all of which is Secured Indebtedness), $197.6 million aggregate amount of Senior Subordinated Indebtedness, including the indebtedness represented by the Notes and no indebtedness that is subordinated or junior in right of payment to the indebtedness represented by the Notes. As of March 31, 1997, on a pro forma basis, after giving effect to the Transactions, the Refinancing and the application of the proceeds therefrom, as well as borrowing base limitations and $0.6 million of outstanding letters of credit, the Company estimates that it would have had the ability to borrow approximately $24.5 million under the Revolving Credit Facility. Subject to the restrictions in the Senior Bank Facilities and the Indenture, the Company may incur additional indebtedness from time to time, including additional Senior Indebtedness. The degree to which the Company is leveraged could have important consequences to holders of the New Notes (and to holders of Old Notes), including the following: (i) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be limited; (ii) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of interest on the New Notes (and any outstanding Old Notes), and interest and principal on the Senior Bank Facilities and the Company's other existing indebtedness, thereby reducing the funds available to the Company for other purposes; (iii) all of the indebtedness under the Senior Bank Facilities is and will be at variable rates of interest, which causes the Company to be vulnerable to increases in interest rates; (iv) all of the indebtedness outstanding under the Senior Bank Facilities is secured by pledges of all the capital stock of the Company and the Guarantor Subsidiaries and security interests in, or liens on, substantially all other assets of the Company and the Guarantor Subsidiaries, and will become due prior to the time the principal on the Notes will become due; (v) the Company may be hindered in its ability to adjust rapidly to changing market conditions; and (vi) the Company's substantial degree of leverage could make it more vulnerable in the event of a downturn in general economic conditions or in its business. The Company's ability to pay interest on the New Notes (and any outstanding Old Notes) and to satisfy its other debt obligations will depend on its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond the Company's control. If the Company's cash flow from operations and capital resources is insufficient to fund its debt service obligations, the Company may be forced to reduce or delay capital expenditures, sell assets, obtain additional equity capital or restructure its debt. There can be no assurance that the Company's cash flow from operations and capital resources will be sufficient for payment of its indebtedness in the future. In the absence of such operating results and resources, the Company could face substantial liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations, and there can be no assurance as to the timing of such sales or the proceeds that the Company could realize therefrom. The financial covenants and other restrictions in the Senior Bank Facilities and the 16 20 Indenture will limit the Company's ability to borrow additional funds and dispose of certain assets. See "Description of Senior Bank Facilities" and "Description of Notes." SUBORDINATION; ASSET ENCUMBRANCE The payment of principal of and interest on, and any premium or other amounts owing in respect of, the New Notes will be (as is the case with the Old Notes) subordinated to the prior payment in full of all existing and future Senior Indebtedness of the Company, including all amounts owing or guaranteed under the Senior Bank Facilities. Consequently, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to the Company, assets of the Company will be available to pay obligations of the New Notes (and any outstanding Old Notes) only after all Senior Indebtedness of the Company has been paid in full, and there can be no assurance that there will be sufficient assets to pay amounts due on all or any of the New Notes (and any outstanding Old Notes). Payments in respect of the respective Subsidiary Guaranties of the New Notes will be (as is the case with the Old Notes) subordinated to the prior payment in full of all existing and future Senior Indebtedness of the respective Guarantor Subsidiaries, including all amounts guaranteed in respect of the Senior Bank Facilities. As of March 31, 1997, on a pro forma basis after giving effect to the Transactions, the Refinancing and the application of the proceeds therefrom, (i) the aggregate principal amount of such Senior Indebtedness would have been $0.1 million (excluding $0.6 million of outstanding letters of credit) guaranteed under the Senior Bank Facilities and (ii) after giving effect to borrowing base limitations and $0.6 million of outstanding letters of credit, the Company estimates that it would have had the ability to borrow approximately $24.5 million under the Revolving Credit Facility. The Company expects to negotiate an amendment to the Revolving Credit Facility which will remove borrowing base limitations and increase the borrowings available to the Company under the Revolving Credit Facility from $30.0 million to $50.0 million. See "Summary -- Amendments to the Senior Bank Facilities." Consequently, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to a Guarantor Subsidiary, its assets will be available to pay obligations only after the Senior Indebtedness of such Guarantor Subsidiary has been paid in full, and there can be no assurance that there will be sufficient assets to pay amounts due in respect of such Guarantor Subsidiary's guaranty of the New Notes (or any outstanding Old Notes). The Indenture permits the Company and the Guarantor Subsidiaries to incur certain Secured Indebtedness, including indebtedness under the Senior Bank Facilities, which will be secured by pledges of all the capital stock of the Company and the Guarantor Subsidiaries, and security interests in, or liens on, substantially all other assets of the Company and the Guarantor Subsidiaries. The New Notes (and the Old Notes) and the Subsidiary Guaranties are unsecured and therefore do not have the benefit of such collateral. Accordingly, if an event of default occurs under the Senior Bank Facilities, the lenders will have a prior right to the assets of the Company and the Guarantor Subsidiaries, and may foreclose upon such collateral to the exclusion of the holders of the New Notes (and of any of the Old Notes), notwithstanding the existence of an event of default with respect thereto. In such event, such assets would first be used to repay in full amounts outstanding under the Senior Bank Facilities, resulting in all or a portion of the Company's and the Guarantor Subsidiaries' assets being unavailable to satisfy the claims of the holders of the New Notes (and of any of the Old Notes) and other unsecured indebtedness. RESTRICTIVE LOAN COVENANTS The Senior Bank Facilities include certain covenants that, among other things, restrict the ability of the Company and its subsidiaries to: (i) dispose of assets; (ii) incur additional indebtedness; (iii) incur guarantee obligations; (iv) prepay other indebtedness or amend other debt instruments; (v) pay dividends; (vi) create liens on assets; (vii) enter into sale and leaseback transactions; (viii) make investments, loans or advances; (ix) make acquisitions; (x) engage in mergers or consolidations; (xi) change the business conducted by the Company; (xii) make capital expendi- 17 21 tures; or (xiii) engage in certain transactions with affiliates and otherwise restrict certain corporate activities. In addition, under the Senior Bank Facilities the Company is required to comply with a consolidated leverage ratio, a consolidated net worth test and a consolidated interest coverage ratio. The Company is currently in compliance with such ratios and test. However, there can be no assurance that these requirements will be met in the future. If they are not, the holders of the indebtedness under the Senior Bank Facilities would be entitled to declare such indebtedness immediately due and payable. See "Description of Senior Bank Facilities." HOLDING COMPANY STRUCTURE; POSSIBLE UNENFORCEABILITY OF THE SUBSIDIARY GUARANTIES The Company is a holding company which derives substantially all of its operating income from its subsidiaries. The holders of the New Notes (and of any of the Old Notes) will have no direct claim against the Guarantor Subsidiaries other than the claim created by the Subsidiary Guaranties, which may themselves be subject to legal challenge in the event of the bankruptcy of a Guarantor Subsidiary. See "-- Fraudulent Conveyance." If such a challenge were upheld, the Subsidiary Guaranties would be unenforceable. To the extent that the Subsidiary Guaranties are not enforceable, the rights of holders of the New Notes (and of any of the Old Notes) to participate in any distribution of assets of any Guarantor Subsidiary upon liquidation, bankruptcy, reorganization or otherwise may, as is the case with other unsecured creditors of the Company, be subject to prior claims of creditors of that Guarantor Subsidiary. The Company must rely upon dividends and other payments from its subsidiaries to generate the funds necessary to meet its obligations, including the payment of principal of and interest on the New Notes (and any of the Old Notes). The Indenture contains covenants that restrict the ability of the Company's Restricted Subsidiaries (as defined) to enter into agreements limiting distributions and transfers, including dividends. However, the ability of the Company's subsidiaries to pay dividends and make other payments may be restricted by, among other things, applicable state corporate laws and regulations or by terms of agreements to which they may become party. See "Description of Notes." DEPENDENCE ON KEY PERSONNEL Three of the Company's senior executives, including the chief executive officer, did not remain with the Company after the Closing. The Company retained James K. Hildebrand to serve as Chairman and Chief Executive Officer following the Merger, and the Company's current management assumed primary responsibility for the other duties conducted by the departing senior executives. The ability of the Company to maintain its competitive position will depend to a significant degree upon its ability to continue to attract and retain highly qualified managerial and manufacturing personnel. There can be no assurance that the Company will be able to continue to recruit and retain such personnel. In particular, the Company is dependent on certain key management personnel, and there can be no assurance that the loss of key personnel would not have a material adverse effect on the Company's results of operations. See "Management." CHANGE OF CONTROL After May 1, 2002, upon the occurrence of a Change of Control, unless the Company redeems the Notes, each holder of the New Notes (and of any outstanding Old Notes) will have the right to require the Company to repurchase all or any portion of such holder's Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. The occurrence of a Change of Control would constitute a default under the Senior Bank Facilities. In addition, the Senior Bank Facilities will prohibit the purchase of the New Notes (and of any outstanding Old Notes) by the Company in the event of a Change of Control, unless and until such time as all indebtedness under the Senior Bank Facilities is repaid in full. The Company's failure to purchase the New Notes (and any outstanding Old Notes) would result in a default under the Indenture. The inability to repay the indebtedness under the Senior Bank Facilities, if accelerated, would also constitute an event of default under the Indenture. In the event of a Change of Control, there can be no assurance that the Company would have sufficient assets to satisfy all of its 18 22 obligations under the Senior Bank Facilities and the New Notes (and any outstanding Old Notes). The Company could in the future, enter into certain transactions, including acquistions, refinancings or other recapitalizations or highly leveraged transactions, that would not constitute a Change of Control under the Indenture, but that would increase the amount of indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings or otherwise adversely affect holders of the Notes. See "Description of Senior Bank Facilities" and "Description of Notes -- Change of Control." CONCENTRATION OF CUSTOMERS In 1997, sales to one of the Company's customers, Rockwell International, accounted for 16.1% of the Company's total net sales, and the Company's top three customers accounted for approximately 34.8% of the Company's net sales. A significant reduction of purchases by one or more of the Company's key industrial customers could have a material adverse effect on the Company's business, financial condition or results of operations. See "Business -- Products, Customers and Markets." DEPENDENCE ON INDUSTRY/CYCLICALITY The Company has historically experienced moderate cyclicality in the heavy municipal market. Sales of municipal castings are influenced by, among other things, public spending. The Company's industrial sales are largely dependent on orders from OEMs of medium- and heavy-duty trucks and truck components and their first-tier suppliers and orders for farm equipment. The truck market has historically been subject to fluctuations due to general economic conditions and, in particular, the industrial sector of the economy. From 1993 to 1995, the truck market experienced significant growth, while in 1996 the medium- and heavy-duty truck market declined substantially from 1995 levels. In 1997, the medium- and heavy-duty truck market increased over 1996 levels but remained below 1995 levels. There can be no assurance that the truck market will not decline. The farm equipment market has also experienced cyclicality. A downturn in these markets could reduce demand for, and prices of, the Company's products. A significant downturn in either of these markets could have a material adverse effect on the Company's business, financial condition or results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." COMPETITION The markets for the Company's products are highly competitive. Competition is based not only on price, but also on quality of product, range of capability, level of service and reliability of delivery. The Company competes with numerous independent and captive domestic iron foundries, as well as with a number of foreign iron foundries, including certain foundries located in India. The Company also competes with several large domestic foundries and manufacturers whose casting products are made with materials other than ductile and gray iron, such as steel or aluminum. Industry consolidation over the past decade has resulted in a significant reduction in the number of smaller foundries and a rise in the share of production by larger foundries, some of which have significantly greater financial resources than the Company. There can be no assurance that the Company will be able to maintain or improve its competitive position in the markets in which it competes. See "Business -- Competition." FLUCTUATIONS IN PRICE AND SUPPLY OF RAW MATERIALS The Company is dependent upon outside suppliers for all of its raw material needs and, therefore, is subject to price increases and delays in receiving supplies of such materials. Changes in the supply of or demand for raw materials could affect delivery times and prices. Although historically the Company has been able to increase prices in response to increased raw material costs, no assurance can be given that the Company will continue to have available necessary raw materials at reasonable prices or that any increases in raw material costs would not have a material adverse effect on the Company's business, financial condition, or results of operations. See "Business -- Raw Materials." 19 23 CONTROLLING SHAREHOLDERS The Investor Group beneficially owns approximately 90% of the Common Stock of the Company and, together with the Management Investors, collectively, has the ability to elect the entire Board of Directors and generally to control the affairs and policies of the Company. Circumstances may occur in which the interests of the Investor Group and Management Investors, as shareholders of the Company, could be in conflict with the interests of the holders of the New Notes (and of any outstanding Old Notes). In addition, the Investor Group and Management Investors may have an interest in pursuing acquisitions, divestitures or other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve disproportionate risks to the holders of the New Notes (and of any outstanding Old Notes). See "Ownership of Securities" and "Certain Relationships and Related Transactions" and "Business -- Business Strategy." ENVIRONMENTAL MATTERS The Company's facilities are subject to numerous federal, state and local laws and regulations relating to the protection of the environment and worker health and safety, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. The Company does not currently anticipate any material adverse effect on its operations or financial condition as a result of its efforts to comply with, or its liabilities under, such requirements. Risk of environmental liability is inherent in the manufacturing of casting products, however, and there can be no assurance that material environmental costs will not arise in the future. In particular, the Company might incur capital and other costs to comply with increasingly stringent air emission control laws and enforcement policies. See "Business -- Environmental Matters." FRAUDULENT CONVEYANCE The incurrence by the Company of indebtedness such as the Old Notes (and the New Notes exchanged therefor) to finance the Transactions may be subject to review under relevant state and federal fraudulent conveyance and similar laws if a bankruptcy or reorganization case or a lawsuit is commenced by or on behalf of creditors of the Company. Under these laws, if a court were to find that, after giving effect to the sale of the Old Notes and the exchange of the New Notes therefor and the application of the net proceeds therefrom, either (a) the Company incurred such indebtedness with the intent of hindering, delaying or defrauding then-existing or future creditors or (b) the Company received less than a reasonably equivalent value or fair consideration for incurring such indebtedness and at the time of the incurrence of such indebtedness the Company (i) was insolvent or was rendered insolvent by reason of such transactions; (ii) was engaged in a business or transaction for which the assets remaining with the Company constituted unreasonably small capital; or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay as they matured, such court may subordinate such indebtedness to presently existing and future indebtedness of the Company, avoid the issuance of such indebtedness and direct the repayment of any amounts paid thereunder to the creditors of the Company or take other action detrimental to the holders of such indebtedness. The measure of insolvency for purposes of determining whether a transfer is avoidable as a fraudulent transfer varies depending upon the law of the jurisdiction which is being applied. Generally, however, a debtor would be considered insolvent if the sum of all its liabilities, including contingent liabilities, was greater than the value of all its assets at a fair valuation, or if the present fair saleable value of the debtor's assets was less than the amount required to repay its probable liabilities on its debts, including contingent liabilities, as they become absolute and matured. There can be no assurance as to what standard a court would apply in order to determine solvency. To the extent that proceeds from the sale of the Old Notes were used to finance the Transactions, a court may find that the Company did not receive fair consideration or reasonably equivalent value for the incurrence of the indebtedness represented thereby. In addition, if a court were to find that any of the components of the Transactions constituted a fraudulent transfer, to the 20 24 extent that proceeds from the sale of the Old Notes were used to finance such Transactions, a court may find that the Company did not receive fair consideration or reasonably equivalent value for the incurrence of the indebtedness represented by the Old Notes. The Company believes that it received equivalent value at the time the indebtedness under the Old Notes was incurred. In addition, the Company does not, after giving effect to the consummation of the Transactions: (i) believe that it was insolvent or rendered insolvent; (ii) believe that it was engaged in a business or transaction for which its remaining assets constitute unreasonably small capital; or (iii) intended to incur, or believe that it incurred, debts beyond its ability to pay as they mature. These beliefs are based on the Company's analysis of internal cash flow projections and estimated values of assets and liabilities of the Company and the Guarantor Subsidiaries at the time of the offering of the Old Notes. There can be no assurance, however, that a court passing on the issues would make the same determination. In addition, the Subsidiary Guaranties may be subject to review under relevant federal and state fraudulent conveyance and similar statutes in a bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of any of the Guarantor Subsidiaries. In such a case, the analysis set forth above would generally apply, except that the Subsidiary Guaranties could also be subject to the claim that, since the Subsidiary Guaranties were incurred for the benefit of the Company (and only indirectly for the benefit of the Guarantor Subsidiaries), the obligations of the Guarantor Subsidiaries thereunder were incurred for less than reasonably equivalent value or fair consideration. A court could void a Guarantor Subsidiary's obligation under the Subsidiary Guaranties, subordinate the Subsidiary Guaranties to other indebtedness of a Guarantor Subsidiary or take other action detrimental to the holders of the Old Notes (and the New Notes exchanged therefor). ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER The New Notes are new securities for which there currently is no market. Although the Initial Purchasers have informed the Company that they currently intend to make a market in the New Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice in the sole discretion of the Initial Purchasers. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Old Notes are eligible for trading by qualified buyers in the PORTAL market. The Company does not intend to apply for listing of the Old Notes or, if issued, the New Notes, on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. The liquidity of, and trading market for, the New Notes also may be adversely affected by general declines in the market for similar securities. Such declines may adversely affect such liquidity and trading markets independently of the financial performance of, and prospects for, the Company. FORWARD-LOOKING STATEMENTS This Prospectus contains certain forward-looking statements concerning the Company's operations, economic performance and financial condition, including, in particular, the likelihood of the Company's success in developing and expanding its business. These statements are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions which are subject to change. The foregoing description of risk factors specifies the principal contingencies and uncertainties to which the Company believes it is subject. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect the Company's results. USE OF PROCEEDS There will be no proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. 21 25 CAPITALIZATION The following table sets forth as of March 31, 1997 (i) the consolidated historical capitalization of the Company, and (ii) the unaudited consolidated pro forma capitalization of the Company after giving effect to the Transactions and the Refinancing, assuming the Transactions and the Refinancing were consummated on such date. This table should be read in conjunction with the "Selected Consolidated Financial and Other Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Consolidated Financial Information" and the consolidated financial statements and related notes included elsewhere in this Prospectus.
MARCH 31, 1997 ---------------------------- PRO FORMA FOR TRANSACTIONS ACTUAL AND REFINANCING ------- ---------------- (DOLLARS IN THOUSANDS) Cash and cash equivalents................................. $22,403 $ 202(1)(2) ======= ======== Debt: Revolving Credit Facility(2)(3)......................... $ -- $ -- 11 1/8% Senior Subordinated Notes due 2007.............. -- 150,000 Refinancing Notes, including unamortized premium of $2,588............................................... -- 47,588 Other................................................... 134 134 ------- -------- Total debt...................................... 134 197,722 Stockholders' equity: Common stock............................................ 444 100 Additional paid-in capital.............................. -- 44,900 Retained earnings (accumulated deficit)................. 71,335 (1,604)(4) Notes receivable from owners to finance stock purchase............................................. (2,922) -- ------- -------- Total stockholders' equity...................... 68,857 43,396 ------- -------- Total capitalization............................ $68,991 $241,118 ======= ========
- --------------- (1) Pro Forma cash and cash equivalents include actual cash and cash equivalents at March 31, 1997, plus $2.9 million in repayments of notes receivable from certain stockholders of the Company prior to the Merger, less $25.3 million to be paid as part of the Merger Price, plus $0.2 million of cash resulting from the Refinancing. (2) Based on the Company's results of operations since March 31, 1997, the Company estimates the closing net worth adjustment will be approximately $12.6 million resulting in a total Merger Price of approximately $261.8 million, cash on hand of approximately $11.5 million (after giving effect to payments during April of 1997 of approximately $17.5 million, including the Former Stockholder Payment, that are included in the Merger Price), substantially all of which will be applied to fund the balance of Merger Price, and approximately $1.0 million will be drawn under the Revolving Credit Facility in order to provide the remainder of the necessary financing. (3) Total borrowings of up to $30.0 million under the Revolving Credit Facility are available, subject to borrowing base limitations, for working capital and general corporate purposes, including up to $15.0 million for letters of credit. The Company expects that the Senior Bank Facilities will be amended to provide total borrowing availability of up to $50.0 million under the Revolving Credit Facility. See "Summary -- Proposed Amendment to Senior Bank Facilities." At March 31, 1997, on a pro forma basis after giving effect to the Offering, the other Transactions, and the application of the proceeds therefrom, as well as borrowing base limitations and $0.6 million of outstanding letters of credit, the Company estimates that it would have had the ability to borrow approximately $24.5 million under the Revolving Credit Facility. See "Description of Senior Bank Facilities." (4) Represents a write-off of approximately $2.7 million of financing costs related to the Term Loans, less a tax deduction of approximately $1.1 million. 22 26 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA The following table sets forth the selected historical consolidated financial and other data of the Company for the five years ended March 31, 1997 and certain pro forma consolidated financial and other data for the year ended March 31, 1997. The selected historical consolidated financial and other data, with the exception of tons produced, employees, employee hours per ton and scrap rate, for the five years ended March 31, 1997 are derived from the audited consolidated financial statements of the Company. The historical consolidated financial statements of the Company as of March 31, 1995, 1996 and 1997 and for each of the four years in the period ended March 31, 1997, have been audited by Ernst & Young LLP, independent auditors. The historical consolidated financial statements of the Company as of March 31, 1993 and 1994 and for the year ended March 31, 1993 have been audited by other auditors. The pro forma consolidated financial and other data, with the exception of tons produced, employees, employee hours per ton and scrap rate, as of and for the year ended March 31, 1997, were derived from the "Unaudited Pro Forma Consolidated Financial Information" included elsewhere herein. The pro forma financial data does not purport to represent what the Company's financial position or results of operations would actually have been had the Transactions and the Refinancing in fact occurred on the assumed dates or to project the Company's financial position or results of operations for any future date or period. The information contained in the following table should also be read in conjunction with "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Consolidated Financial Information," and the Company's historical consolidated financial statements and related notes included elsewhere in this Prospectus. 23 27 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA FISCAL YEAR ENDED MARCH 31,
PRO FORMA FOR TRANSACTIONS AND REFINANCING 1993 1994 1995 1996 1997 1997 -------- -------- -------- -------- -------- ----------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales(1)....................................... $133,422 $131,982 $160,621 $166,951 $165,426 $ 165,426 Cost of sales...................................... 108,279 106,531 120,981 121,631 116,736 116,679 -------- -------- -------- -------- -------- -------- Gross profit....................................... 25,143 25,451 39,640 45,320 48,690 48,747 Selling, general and administrative expenses....... 12,865 13,614 16,673 16,983 17,547 19,029 Restructuring charge............................... 6,172 -- -- -- -- -- -------- -------- -------- -------- -------- -------- Operating income................................... 6,106 11,837 22,967 28,337 31,143 29,718 Interest expense (income), net..................... 2,118 1,043 397 (481) (1,162) 20,948 -------- -------- -------- -------- -------- -------- Income before income taxes and cumulative effect of accounting changes............................... 3,988 10,794 22,570 28,818 32,305 8,770 Provision for income taxes......................... 1,544 4,213 8,866 11,676 12,467 4,580 -------- -------- -------- -------- -------- -------- Income before cumulative effect of accounting changes.......................................... 2,444 6,581 13,704 17,142 19,838 4,190 Cumulative effect of accounting changes: Income taxes..................................... 5,200 -- -- -- -- -- Postretirement benefits other than pensions...... (2,564) -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net income......................................... $ 5,080 $ 6,581 $ 13,704 $ 17,142 $ 19,838 $ 4,190 ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents.......................... $ 79 $ 118 $ 238 $ 10,126 $ 22,403 $ 202 Working capital(2)................................. 13,425 14,596 15,174 18,094 21,438 30,101 Total assets....................................... 87,388 74,327 73,813 82,957 93,869 307,984 Total debt......................................... 21,409 13,325 887 241 134 197,722 Total stockholders' equity......................... 36,862 37,929 43,198 54,790 68,857 43,396 OTHER DATA: EBITDA(3).......................................... $ 13,399 $ 18,577 $ 29,809 $ 35,113 $ 38,024 $ 41,539 Depreciation and amortization...................... 7,293 6,740 6,842 6,776 6,881 12,979 Capital expenditures............................... 3,967 4,583 3,665 7,275 4,546 4,546 Net cash provided by (used in): Operating activities............................. 15,240 18,301 23,581 22,273 23,479 13,187 Investing activities............................. (4,239) (4,949) (3,412) (7,299) (3,104) (3,104) Financing activities............................. (11,499) (13,313) (20,049) (5,086) (8,098) (4,896) Cash interest expense(4)........................... 2,128 1,049 624 84 39 21,733 Ratio of earnings to fixed charges(5).............. 2.7x 9.5x 25.9x 70.3x 81.4x 1.4x Tons produced...................................... 137,260 136,754 171,727 168,400 155,134 155,134 Employees.......................................... 1,169 931 952 922 910 910 Employee hours per ton(6).......................... 13.3 10.7 8.7 8.6 9.0 9.0 Scrap rate(7)...................................... 3.3% 2.9% 2.2% 2.0% 2.0% 2.0%
See accompanying Notes to Selected Consolidated Financial and Other Data. 24 28 NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (1) Net sales for the years ended March 31, 1993 and 1994 include sales of products manufactured in Plant 1, which was closed in 1994 as part of the Company's strategy to increase its focus on higher volume, complex parts for its industrial customers. The majority of the parts produced in Plant 1 were then discontinued. Plant 1 provided sales of $30.9 million and $4.4 million for the fiscal years ended March 31, 1993 and 1994, respectively. (2) Working capital represents total current assets (excluding cash and cash equivalents) less total current liabilities (excluding the Revolving Credit Facility and the current portion of long-term debt). (3) EBITDA represents operating income plus depreciation and amortization. The Company has included information concerning EBITDA because management believes that EBITDA is generally accepted as providing useful information regarding a company's ability to service and/or incur debt. EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. The Company understands that, while EBITDA is frequently used by securities analysts in the evaluation of companies, EBITDA, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. EBITDA is not intended as an alternative to cash flow from operating activities as a measure of liquidity, an alternative to net income as an indicator of the Company's operating performance or an alternative to any other measure of performance in conformity with generally accepted accounting principles. (4) Cash interest expense is defined as interest expense less amortization of debt issuance costs. (5) For purposes of the computation, the ratio of earnings to fixed charges has been calculated by dividing (i) income before income taxes and cumulative effect of accounting changes plus fixed charges by (ii) fixed charges. Fixed charges are equal to interest expense plus the portion of the rent expense estimated to represent interest. (6) Employee hours per ton represents the number of hours worked by hourly employees during this period (excluding supervisory employee hours) divided by the number of tons produced. (7) The scrap rate is the percentage of castings that are determined to be unusable prior to delivery to customers. 25 29 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma consolidated financial information (the "Unaudited Pro Forma Financial Information") has been derived by the application of pro forma adjustments, which give effect to the Transactions and the Refinancing, to the Company's historical consolidated financial statements included elsewhere in this Prospectus. The unaudited pro forma consolidated balance sheet gives effect to the Transactions and the Refinancing as if they had occurred on March 31, 1997. The unaudited pro forma consolidated statement of income for the year ended March 31, 1997 gives effect to the Transactions and the Refinancing as if they were consummated on April 1, 1996. The Unaudited Pro Forma Financial Information is for comparative purposes only and does not purport to represent what the Company's financial position or results of operations would actually have been had the Transactions and the Refinancing in fact occurred on the assumed dates or to project the Company's financial position or results of operations for any future date or future period. The Unaudited Pro Forma Financial Information should be read in conjunction with the Company's historical consolidated financial statements and related notes included elsewhere in this Prospectus. The pro forma adjustments, as described in the accompanying Notes to the Unaudited Pro Forma Consolidated Balance Sheet and Statement of Income, are based on available information and certain assumptions that management believes are reasonable. The acquisition of the Company is accounted for under the purchase method of accounting. Assuming the Merger was consummated on March 31, 1997, the Merger Price would have been $258.3 million, which would include (i) a net worth adjustment of $9.1 million at the Closing based on a March 31, 1997 closing, and (ii) an $11.3 million payment to certain former stockholders of the Company upon consummation of the Merger. The Merger Price reflects the use of approximately $25.3 million of cash on the Company's balance sheet and borrowings under the Revolving Credit Facility of $0.9 million. In addition, there was a repayment of $2.9 million in notes receivable from certain stockholders of the Company prior to the Merger, which reduces the net effect on cash to $22.4 million. The Merger Price has been allocated to the tangible and identifiable intangible assets and to the liabilities based on preliminary estimates of their fair values. However, the allocation of the Merger Price is subject to revision when additional information concerning certain asset valuations is obtained. Management believes that the final allocation of the Merger Price will not materially differ from the preliminary estimated amounts. The Merger Price is subject to a closing date net worth adjustment. 26 30 NEENAH CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET MARCH 31, 1997
PRO FORMA PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA ADJUSTMENTS FOR FOR FOR FOR TRANSACTIONS HISTORICAL TRANSACTIONS TRANSACTIONS REFINANCING AND REFINANCING ---------- ------------- ------------- ----------- --------------- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and cash $ 2,922(a) equivalents............. $ 22,403 (25,325)(b) $ -- $ 202(g) $ 202 Accounts receivable....... 21,423 21,423 21,423 Inventories............... 13,956 7,995(c) 21,951 21,951 Deferred income taxes and other................... 2,726 (401)(c) 2,325 2,325 ------- ------- ------- ------- ------- 60,508 (14,809) 45,699 202 45,901 Property, plant and equipment................. 31,379 69,821(c) 101,200 101,200 925(c) 1,500(g) Other assets................ 1,982 7,925(d) 10,832 (2,673)(h) 9,659 Identifiable intangible assets.................... -- 29,245(c) 29,245 29,245 Goodwill.................... -- 121,979(c) 121,979 121,979 ------- ------- ------- ------- ------- Total assets....... $ 93,869 $ 215,086 $ 308,955 $ (971) $ 307,984 ======= ======= ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving credit facility................ $ -- $ 886(b) $ 886 $ (886)(g) $ -- Accounts payable.......... 8,497 8,497 8,497 Income taxes payable (refundable)............ 573 573 (1,069)(h) (496) Other current liabilities............. 7,597 7,597 7,597 Current portion of long- term debt............... 134 5,000(e) 5,134 (5,000)(g) 134 ------- ------- ------- ------- ------- 16,801 5,886 22,687 (6,955) 15,732 Long-term debt, including unamortized premium of 47,588(g) $2,588.................... -- 190,000(e) 190,000 (40,000)(g) 197,588 Post-retirement benefit obligations............... 5,667 (243)(c) 5,424 5,424 Deferred income taxes....... 2,544 43,300(c) 45,844 45,844 ------- ------- ------- ------- ------- Total liabilities...... 25,012 238,943 263,955 633 264,588 2,922(a) (71,779)(c) Stockholders' equity........ 68,857 45,000(f) 45,000 (1,604)(h) 43,396 ------- ------- ------- ------- ------- Total liabilities and stockholders' equity........... $ 93,869 $ 215,086 $ 308,955 $ (971) $ 307,984 ======= ======= ======= ======= =======
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet. 27 31 NEENAH CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) (a) Adjustment to reflect repayment of $2,922 notes receivable from owners (reported as a reduction from stockholders' equity in the historical balance sheet) prior to the closing of the Transactions. (b) Adjustment to reflect the net effect of the Transactions (decrease in cash and cash equivalents of $25,325 and increase in borrowings under the Revolving Credit Facility of $886), as follows: Proceeds from Term Loans and Senior Subordinated Notes.............. $ 195,000 Proceeds from Equity Contribution................................... 45,000 Purchase price: Merger Consideration................................ $(236,840) Closing date net worth adjustment................... (9,103) Former Stockholder Payment.......................... (11,336) --------- (257,279) Acquisition costs................................... (1,007) Financing costs..................................................... (7,925) --------- $ (26,211) =========
(c) Adjustment to reflect the push-down of the $258,286 Merger Price (which includes the acquisition costs) to the assets and liabilities of the Company, allocated as follows: Book value of Company as of March 31, 1997 ($68,857 + $2,922(1)).................................. $ 71,779 Fair value adjustments(2): Write-up inventories(3)................................ 7,995 Eliminate other current assets repaid at closing....... (401) Write-up property, plant and equipment(4).............. 69,821 Write-up net pension asset............................. 925 Record identifiable intangible assets(5)............... 29,245 Reduce post-retirement benefit obligations............. 243 Record deferred income taxes(6)........................ (43,300) Residual -- goodwill(7)................................ 121,979 --------- $258,286 =========
-------------------- (1) Add back notes receivable from owners (repaid prior to the Closing), which is shown as a reduction from stockholders' equity in the historical balance sheet. (2) For all other recorded assets and liabilities of the Company, the historical book values were estimated to approximate their fair values at the balance sheet date. (3) Net effect of changing inventory costing method from last in, first out to fair value. (4) The fair value of property, plant and equipment was based on outside appraisals completed in connection with the Transactions. The write-up has been allocated to the fixed asset categories as shown below. The remaining economic useful lives used in depreciating the new basis of the depreciable fixed assets are also indicated:
REMAINING ECONOMIC ALLOCATED EXCESS USEFUL LIFE ------------------ --------------------- Land....................................... $ 53 N/A Buildings and improvements................. 1,995 10 to 35 years Machinery and equipment.................... 45,373 7 to 20 years Municipal patterns......................... 22,400 15 years -------- $ 69,821 ===============
28 32 (5) The fair value of identifiable intangible assets was based on an outside valuation. The identifiable intangible assets and the estimated useful lives are as follows:
FAIR ESTIMATED VALUE USEFUL LIFE ------------ ------------- Customer lists.......................................... $ 14,200 10 years Trade names............................................. 11,700 40 years Assembled work force.................................... 2,050 15 years Internally prepared materials........................... 1,025 10 years Patents................................................. 270 15 years ------- $ 29,245 =======
(6)Deferred income taxes were calculated at 40% of all fair value adjustments except for goodwill since there is no step-up in basis of assets or liabilities for income tax purposes resulting from the Transactions. (7)An amortization period of 40 years will be used for goodwill because the period expected to be benefited exceeds 40 years. (d) Adjustment to record the estimated financing costs of $7,925. The amount is being amortized using the interest method over the term of the related debt. (e) Adjustment to record the debt used to finance the acquisition of the Company: Term Loans Tranche A Term Loan........................... $20,000 Tranche B Term Loan........................... 25,000 ------ $ 45,000 Senior Subordinated Notes due 2007....................... 150,000 -------- $195,000 ========
(f) Adjustment to record the $45,000 Equity Contribution to the Company by Holdings. (g) Adjustment to reflect the net effect of the Refinancing on cash and cash equivalents and borrowings under the Revolving Credit Facility, as follows: Proceeds from Refinancing Notes $47,588 ======= Uses: Repay Term Loans $45,000 Repay borrowings under Revolving Credit Facility 886 Financing costs 1,500 Cash for working capital 202 ------- $47,588 =======
The premium of $2,588 resulting from the issuance of the Refinancing Notes at 105.75% will be amortized using the interest method over the term of the related debt. The estimated financing costs of $1,500 will be amortized using the interest method over the term of the related debt. (h) Adjustment to write-off the financing costs of $2,673 related to the Term Loans, net of taxes of $1,069. 29 33 NEENAH CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED MARCH 31, 1997
PRO FORMA PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA ADJUSTMENTS FOR FOR FOR FOR TRANSACTIONS HISTORICAL TRANSACTIONS TRANSACTIONS REFINANCING AND REFINANCING ---------- ----------- ------------ ----------- --------------- (DOLLARS IN THOUSANDS) Net sales............... $ 165,426 $ 165,426 $ 165,426 Cost of sales........... (116,736) $ 57(a) (116,679) (116,679) --------- -------- --------- --------- Gross profit............ 48,690 57 48,747 48,747 Selling, general and 22(a) administrative (5,019)(b) expenses.............. (17,547) 3,515(c) (19,029) (19,029) --------- -------- --------- --------- Operating income........ 31,143 (1,425) 29,718 29,718 Interest income (expense), net........ 1,162 (21,527)(d) (20,365) $(583)(f) (20,948) --------- -------- --------- ----- --------- Income before income taxes and extraordinary item.... 32,305 (22,952) 9,353 (583) 8,770 Provision for income taxes................. (12,467) 7,663(e) (4,804) 224(g) (4,580) --------- -------- --------- ----- --------- Income before extraordinary item.... $ 19,838 $ (15,289) $ 4,549 $(359) $ 4,190 ========= ======== ========= ===== =========
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of Income. 30 34 NEENAH CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS) (a) Adjustment to reflect depreciation expense based on the new basis and remaining economic useful lives of the Company's property, plant and equipment, as follows:
YEAR ENDED MARCH 31, 1997 ----------------------- COST OF SALES SG&A ------------- ----- Historical depreciation (accelerated and straight line methods).................................................. $(6,723) $(158) New basis depreciation (straight line method)............... 6,666 136 ------- ----- $ (57) $ (22) ======= =====
(b) Adjustment to record in selling, general and administrative expenses, the amortization of the identifiable intangible assets and residual goodwill, calculated as follows:
YEAR ENDED MARCH 31, 1997 -------------- Intangible assets................................................... $1,970 Goodwill............................................................ 3,049 ------ $5,019 ======
(c) Adjustment to reduce selling, general and administrative expenses for the compensation expense (salary, bonuses, and benefits) relating to the four executives (Edmund W. Aylward, Jr., Andrew A. Aylward, Thomas R. Franklin, and James P. Keating, Jr.) who did not continue with the Company after the Transactions. Compensation expense relating to replacement executives, including additional compensation to current employees who will assume new responsibilities, is included based on planned employment arrangements. Messrs. E.W. Aylward and A.A. Aylward resigned from their positions in connection with the consummation of the Transactions. Mr. Franklin retired on February 28, 1997. Mr. Keating's employment agreement terminated on June 30, 1997. James K. Hildebrand has been named chief executive officer of the Company. The responsibilities of the other three executives not continuing with the Company were assumed by current employees. Compensation expense related to four executives not continuing with the Company......................................................... $ (4,015) Compensation expense related to replacement executive................. 120 Additional compensation expense for current employees who assumed additional responsibilities......................................... 380 ------- $ (3,515) =======
(d) Adjustment to record interest expense and amortization of deferred financing costs on the debt incurred to finance the Transactions, calculated as follows:
YEAR ENDED MARCH 31, 1997 -------------- Tranche A Term Loan ($20,000 @ 8.25%)............................. $ 1,526 Tranche B Term Loan ($25,000 @ 8.75%)............................. 2,155 Senior Subordinated Notes due 2007 ($150,000 @ 11.125%)........... 16,688 ------- 20,369 Amortization of deferred financing costs.......................... 1,158 ------- $ 21,527 =======
31 35 The interest expense amounts are based on quarterly principal payments of $1,000 and $250 for the Tranche A and Tranche B Term Loans, respectively. (e) Adjustment to record the tax effect on the above adjustments using the marginal effective income tax rate of 38.5%. All adjustments were tax-effected except for goodwill amortization. (f) Adjustment to record interest expense and amortization of deferred financing costs on the debt incurred to refinance the Term Loans, calculated as follows: Refinancing Notes due 2007 ($45,000 @ 11.125%).......................... $ 5,006 Amortization of premium of $2,588 on Refinancing Notes.................. (259) Eliminate interest expense on Term Loans................................ (3,681) ------ 1,066 Amortization of deferred financing costs on Refinancing Notes due 2007.................................................................. 150 Eliminate amortization of deferred financing costs on Term Loans........ (633) ------ $ 583 ======
(g) Adjustment to record the tax effect on the above adjustments using the marginal effective income tax rate of 38.5%. 32 36 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations covers periods before consummation of the Transactions and the Refinancing. The following information should be read in conjunction with "Selected Consolidated Financial and Other Data," "Unaudited Pro Forma Consolidated Financial Information," and the consolidated financial statements and the notes thereto included elsewhere in this Prospectus. GENERAL Historically, the Company's net sales have been derived primarily from sales of heavy municipal and industrial iron castings, which represented 43% and 53%, respectively, of the Company's net sales for the year ended March 31, 1997. In addition, the Company sells sand control systems and other related products, which represented 4% of net sales for the year ended March 31, 1997. Sales to the heavy municipal market have produced, and continue to produce, significantly higher gross profit margins than sales to the industrial market. Since 1985, the Company has invested approximately $100 million in its facilities, with approximately $73 million invested in a major plant modernization program from 1985 to 1990. This plant modernization program was a critical part of a long-term strategy to produce higher value-added castings for its existing industrial customers and to penetrate other selected segments of that market, while preserving its position as the leader in the heavy municipal market. This modernization program entailed the closing of the Company's oldest foundry, Plant 1, and the updating of the Company's other two foundries, Plants 2 and 3. Plant 1 was closed due to its age and the significant investment required to keep it competitive with more modern mold technology. Plants 2 and 3 were updated with four new molding lines to enable the Company both to produce higher volume, complex castings for selected industrial segments, and to improve the Company's cost position in the heavy municipal market. Following the completion of the modernization program, the Company has steadily decreased its production of lower margin products such as axle covers and brake drums and increased the production of more complex, higher value-added parts such as transmission housings and axle housings. In 1996, the Company began to introduce what it calls "lightweighted" castings to the municipal market. These lightweighted castings have been reengineered in order to reduce both their weight and the amount of raw materials necessary for their manufacture, while maintaining the high quality performance characteristics of the heavier version of the casting. This improvement in the design and manufacture of municipal castings has resulted in lower material costs and improved margins for this product line. The impact of lightweighted parts on operating results has generally been lower tons produced, equal or higher unit volumes, higher prices per ton, lower raw material costs and improved margins. From 1992 to 1997, the Company's net sales increased from $116.5 million to $165.4 million, representing a compound annual growth rate of 7.3%, and operating income increased from $6.2 million to $31.1 million, representing a compound annual growth rate of 38.1%. The Company's net sales during this period have been driven primarily by the Company's increased market penetration in selected products in the medium- and heavy-duty and farm equipment markets, by increased market demand in the medium- and heavy-duty truck market and, to a lesser extent, increased heavy municipal market sales. The Company's increase in operating income during this period was largely the result of improvements in industrial products and, to a lesser extent, municipal products. Operating income attributable to industrial castings increased primarily due to higher production volume, an improved product mix, improved pricing and increased efficiency in operating its manufacturing equipment, while operating income attributable to municipal castings increased primarily due to improved pricing and the effects of the lightweighted casting program. In addition, the Company's operating income increased due to increased operating leverage. 33 37 RESULTS OF OPERATIONS The following table sets forth for the periods shown certain statement of income data expressed as a percentage of net sales:
FISCAL YEAR ENDED MARCH 31, ------------------------- 1995 1996 1997 ----- ----- ----- Net sales: Municipal sales........................................ 43.9% 41.6% 43.1% Industrial sales....................................... 53.2 55.2 53.4 Hartley Controls sales................................. 2.9 3.2 3.5 ----- ----- ----- Total net sales.......................................... 100.0 100.0 100.0 Cost of sales............................................ 75.3 72.9 70.6 ----- ----- ----- Gross profit............................................. 24.7 27.1 29.4 Selling, general and administrative...................... 10.4 10.1 10.6 ----- ----- ----- Operating income......................................... 14.3% 17.0% 18.8% ===== ===== =====
COMPARISON OF FISCAL YEAR ENDED MARCH 31, 1997 TO FISCAL YEAR ENDED MARCH 31, 1996 Net Sales. Net sales were $165.4 million for the year ended March 31, 1997, a decrease of $1.6 million, or 0.9%, from $167.0 million for the year ended March 31, 1996. Net sales of industrial castings decreased $3.9 million, or 4.2%, to $88.3 million. The decrease in industrial casting sales was primarily the result of a decision by the Company to discontinue its production of certain lower margin brake components, which resulted in a 9,600 ton decrease in tons produced compared to the year earlier period, and, to a lesser extent, reduced demand for casting products in the medium- and heavy-duty truck market. Net sales of municipal castings increased $1.9 million, or 2.7%, to $71.3 million, primarily due to increased pricing. Hartley Controls net sales grew $0.4 million, or 7.4%, to $5.8 million, principally due to increased volume of equipment sales. Gross Profit. Gross profit was $48.7 million for the year ended March 31, 1997, an increase of $3.4 million, or 7.5%, from $45.3 million for the year ended March 31, 1996. Gross profit as a percentage of net sales increased to 29.4% for the year ended March 31, 1997, from 27.1% for the year ended March 31, 1996. The increase in gross profit as a percentage of net sales was due mainly to improved product mix in the industrial product line and greater overall plant efficiency. Gross profit percentage also improved due to the continued effect of the lightweighted municipal casting program. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $17.5 million for the year ended March 31, 1997, an increase of $0.5 million, or 2.9%, from $17.0 million for the year ended March 31, 1996. As a percentage of net sales, selling, general and administrative expenses increased to 10.6% for the year ended March 31, 1997, from 10.1% for the year ended March 31, 1996. Approximately $0.2 million of the increase in selling, general and administrative expenses was due to a non-recurring charitable contribution and approximately $0.9 million of the increase was due to increased compensation and benefits to officers of the Company who resigned at Closing. Excluding the effects of estimated nonrecurring officer compensation and benefits and the charitable contribution, selling, general and administrative expenses, as a percentage of net sales, decreased slightly to 8.3% for the year ended March 31, 1997, from 8.4% for the year ended March 31, 1996. Operating Income. Operating income increased to $31.1 million for the year ended March 31, 1997, an increase of $2.8 million or 9.9% from $28.3 million for the year ended March 31, 1996. As a percentage of net sales, operating income increased to 18.8% for the year ended March 31, 1997, from 17.0% for the year ended March 31, 1996. The improvement in operating income was achieved primarily for the reasons discussed above. 34 38 COMPARISON OF FISCAL YEAR ENDED MARCH 31, 1996 TO FISCAL YEAR ENDED MARCH 31, 1995 Net sales. Net sales were $167.0 million for the year ended March 31, 1996, an increase of $6.4 million, or 4.0%, from $160.6 million for the year ended March 31, 1995. Net sales of industrial castings grew $6.6 million, or 7.7%, to $92.2 million. The increase in industrial sales was primarily due to improved pricing while sales volume remained stable. The improved pricing for industrial castings was mainly the result of a better industrial product mix as the Company increased its sales of more complex, value-added industrial castings. Net sales of municipal castings decreased $1.0 million, or 1.4%, to $69.4 million, due to a decrease in unit volume, which was partially offset by improved pricing. The decrease in municipal castings volume was principally due to artificially high sales in fiscal 1995 resulting from weather conditions. Fiscal 1995 net sales were affected by poor winter weather in January to March 1994 which resulted in the postponement of certain sales from fiscal 1994 to fiscal 1995, and mild weather from January to March 1995 which resulted in the acceleration of sales from fiscal 1996 to fiscal 1995. Total production volume in tons decreased more significantly than unit volume for municipal sales because of the effect of the lightweighted casting program. See "-- General." Hartley Controls net sales grew $0.8 million, or 17.4%, to $5.4 million, principally due to increased volume of equipment sales. Gross Profit. Gross profit was $45.3 million for the year ended March 31, 1996, an increase of $5.7 million, or 14.4%, from $39.6 million for the year ended March 31, 1995. Gross profit as a percentage of net sales increased to 27.1% for the year ended March 31, 1996, from 24.7% for the year ended March 31, 1995. The continued improvement in gross profit, as a percentage of net sales, was due to the combined effect of margin improvements in both the industrial and municipal product lines. Industrial castings gross profit percentage improved due to the shift to a more profitable product mix and improved efficiency in plant operations. Municipal castings gross profit percentage improved largely due to the effect of implementing the lightweighted casting program and an increase in selling prices. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $17.0 million for the year ended March 31, 1996, an increase of $0.3 million, or 1.8%, from $16.7 million for the year ended March 31, 1995. As a percentage of net sales, selling, general and administrative expenses decreased slightly to 10.1% for the year ended March 31, 1996, from 10.4% for the year ended March 31, 1995. Approximately $0.1 million of the increase in selling, general and administrative expense was due to increased compensation and benefits to officers of the Company who resigned at Closing. Excluding the effects of estimated nonrecurring executive compensation and benefits, selling, general and administrative expenses, as a percentage of net sales, decreased to 8.4% from 8.6% for the year ended March 31, 1995, primarily due to the spreading of fixed expenses over a greater volume of sales. Operating Income. Operating income increased to $28.3 million for the year ended March 31, 1996, an increase of $5.3 million, or 23.0%, from $23.0 million for the year ended March 31, 1995. As a percentage of net sales, operating income increased to 17.0% for the year ended March 31, 1996, from 14.3% for the year ended March 31, 1995. The improvement in operating income was achieved primarily for the reasons discussed above. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity needs will arise primarily from debt service on indebtedness incurred in connection with the Transactions and the Refinancing, working capital needs and the funding of capital expenditures. At March 31, 1997, on a pro forma basis after giving effect to the Transactions, the Company's consolidated indebtedness would have been approximately $197.7 million (excluding $0.6 million of outstanding letters of credit), consisting of $150.0 million of the Notes, $47.6 million of the Refinancing Notes (including unamortized premium of $2.6 million) and $0.1 million of Senior Indebtedness (consisting of capital lease obligations). As of July 1, 1997, after giving effect to the Transactions and the Refinancing, and the application of the net proceeds therefrom, the 35 39 Company and the Guarantor Subsidiaries would have had outstanding $0.1 million (excluding $0.6 million of outstanding letters of credit) aggregate principal amount of Senior Indebtedness (all of which is Secured Indebtedness), $197.6 million aggregate amount of Senior Subordinated Indebtedness including the indebtedness represented by the Notes and no indebtedness that is subordinate or junior in right of payment to the indebtedness represented by the Notes. The degree to which the Company is leveraged could have a significant effect on its results of operations. Principal and interest payments under the Revolving Credit Facility, the Refinancing Notes and the Notes will represent significant liquidity requirements for the Company. Borrowings under the Revolving Credit Facility bear interest at variable interest rates and are subject to a borrowing base. The Credit Agreement for the Senior Bank Facilities imposes restrictions on the Company's ability to make capital expenditures and both the Credit Agreement and the Indenture governing the Notes limit the Company's ability to incur additional indebtedness. Such restrictions, together with the highly leveraged nature of the Company, could limit the Company's ability to respond to market conditions, to meet its capital spending program, to provide for unanticipated capital investments or to take advantage of business opportunities. The covenants contained in the Credit Agreement also, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur guarantee obligations, prepay the Notes or amend the Indenture, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, change the business conducted by the Company, make capital expenditures or engage in certain transactions with affiliates, and otherwise restrict corporate activities. The covenants in the Indenture also impose restrictions on the operations of the Company's businesses. See "Risk Factors -- Restrictive Loan Covenants." "Description of Notes," and "Description of Senior Bank Facilities." For the fiscal years ended March 31, 1995, 1996 and 1997, the Company's capital expenditures were $3.7 million, $7.3 million and $4.5 million, respectively. The $3.6 million increase in capital expenditures for the fiscal year ended March 31, 1996 from the comparable period for 1995 was primarily the result of the expansion of the cooling capabilities of two of the Company's production lines. Of the $4.5 million of capital expenditures in 1997, an estimated $4.0 million was attributable to maintenance of capital equipment. The Company currently plans to make capital expenditures of approximately $6.0 million in the fiscal year ended March 31, 1998, exclusive of any acquisitions. While a component of the Company's strategy is to make selective acquisitions in the foundry industry, it currently has no agreements relating to any acquisitions. The Company's principal source of cash to fund its liquidity needs will be net cash from operating activities and borrowings under the Revolving Credit Facility. Net cash from operating activities for the year ended March 31, 1997 was $23.5 million, an increase of $1.2 million from $22.3 million for the year ended March 31, 1996, primarily as a result of an increase in net income. Net cash from operating activities for the year ended March 31, 1996 of $22.3 million represented a decrease of $1.3 million from $23.6 million in the comparable period of 1995, primarily as a result of a net increase in working capital (excluding cash and cash equivalents) during 1996 partially offset by greater net income in 1996. At March 31, 1997, on a pro forma basis after giving effect to the Transactions, the Refinancing, and the application of the proceeds therefrom, as well as borrowing base limitations and $0.6 million of outstanding letters of credit, the Company estimates that it would have had the ability to borrow approximately $24.5 million under the Revolving Credit Facility. Amounts under the Revolving Credit Facility may be used for working capital and general corporate and other purposes, subject to certain limitations under the Senior Bank Facilities. The Company is currently negotiating an amendment to the Senior Bank Facilities which, if adopted, would (i) increase the borrowings available under the Revolving Credit Facility to the Company from $30.0 million to $50.0 million and (ii) eliminate all borrowing base limitations from the current Revolving Credit Facility. See "Summary -- Amendment to Senior Bank Facilities." The Company believes that cash generated from operations, together with the amounts available under the Revolving Credit Facility, will be adequate 36 40 to meet its debt service requirements, anticipated capital expenditures and working capital needs for the foreseeable future, although no assurance can be given in this regard. The Company also believes that such resources, together with the potential future use of debt or equity financing, will allow the Company to pursue its strategic goal of making selective acquisitions. The Company's future operating performance and ability to service or refinance the Notes and to extend or refinance the Senior Bank Facilities will be subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control. RAW MATERIALS Although the prices of all raw materials used by the Company vary, the fluctuations in the price of steel scrap are the most significant to the Company. The Company has arrangements with most of its industrial customers which require the Company to adjust industrial casting prices to reflect scrap price fluctuations. In periods of rapidly rising or falling scrap prices, these adjustments will lag the current scrap price because they are generally based on average market prices for prior periods, which periods vary by customer but are generally no longer than six months. Castings are generally sold to the heavy municipal market on a bid basis and, after a bid is won, the price for the municipal casting subject to the bid generally cannot be adjusted for raw material price increases. However, in most cases the Company has been successful in obtaining higher municipal casting unit prices in subsequent bids to compensate for rises in scrap prices in prior periods. Rapidly fluctuating scrap prices may have a temporary adverse or positive effect on the Company's results of operations. INFLATION The Company does not believe that inflation has had a material impact on its financial position or results of operations during the three years ended March 31, 1997. CYCLICALITY AND SEASONALITY The Company has historically experienced moderate cyclicality in the heavy municipal market. Sales of municipal products are influenced by, among other things, public spending. In the industrial market, the Company has experienced cyclicality in sales resulting from fluctuations in the medium-and heavy-duty truck market and the farm equipment market, which are subject to general economic trends. The Company experiences seasonality in its municipal business where sales tend to be higher during the construction season, which occurs during the warmer months, generally the first and second quarters of the Company's fiscal year. Seasonal weather can also impact the Company's net sales from year to year, as warmer weather conditions in the months of January through March of any given year can allow shipments during that time which would normally occur in the subsequent fiscal year. The Company maintains level production throughout the year in anticipation of such seasonality and does not experience production volume fluctuations as a result. The Company builds inventory in anticipation of the construction season with such inventories reaching a peak near the end of its fiscal year in March. The Company has not historically experienced seasonality in industrial casting sales. 37 41 EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), the Company will accept for exchange Old Notes which are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City time, on ; provided, however, that if the Company has extended the period of time for which the Exchange Offer is open, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $150.0 million aggregate principal amount of the Old Notes are outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent on or about , to all holders of Old Notes known to the Company. The Company's obligation to accept Old Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "-- Certain Conditions to the Exchange Offer" below. The Company expressly reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and thereby delay acceptance for any exchange of any Old Notes, by giving notice of such extension to the holders thereof. During any such extension, all Old Notes previously tendered will remain subject to the Exchange Offer and may be accepted for exchange by the Company. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Old Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified below under "-- Certain Conditions to the Exchange Offer." The Company will give notice of any extension, amendment, non-acceptance or termination to the holders of the Old Notes as promptly as practicable, such notice in the case of any extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. PROCEDURES FOR TENDERING OLD NOTES The tender to the Company of Old Notes by a holder thereof as set forth below and the acceptance thereof by the Company will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a holder who wishes to tender Old Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to United States Trust Company of New York (the "Exchange Agent") at one of the addresses set forth below under "Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date, or the holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE 38 42 ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Old Notes surrendered for exchange pursuant thereto are tendered (i) by registered holder of the Old Notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution (as defined below). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm that is a member or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program or by an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If Old Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed by or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, duly executed by, the registered holder with the signature thereon guaranteed by an Eligible Institution. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Old Notes tendered for exchange will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all tenders of any particular Old Notes not properly tendered or to not accept any particular Old Notes which acceptance might, in the judgment of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Notes either before or after the Expiration Date. The interpretation of the terms and conditions of the Exchange Offer as to any particular Old Notes either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes for exchange must be cured within such reasonable period of time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Old Notes for exchange, nor shall any of them incur any liability for failure to give such notification. The Exchange Offer is subject to certain customary conditions relating to compliance with any applicable law, or any applicable interpretation by any staff of the Commission, or any order of any governmental agency or court of law. See "--Certain Conditions of the Exchange Offer." If the Letter of Transmittal or any Old Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to do so must be submitted. By tendering, each holder will represent to the Company that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the holder and any beneficial holder, that neither the holder nor any such beneficial holder has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. If the holder is a broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer, it must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities, and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. 39 43 ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES For each Old Note accepted for exchange, the holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Old Notes for exchange when, as and if the Company has given oral and written notice thereof to the Exchange Agent. In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's accountant the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Old Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Old Notes will be returned without expense to the tendering holder thereof (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such non-exchanged Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration of the Exchange Offer. BOOK-ENTRY TRANSFER Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Exchange Agent at one of the addresses set forth below under "Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If a registered holder of the Old Notes desires to tender such Old Notes and the Old Notes are not immediately available, or time will not permit such holder's Old Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by telegram, telex, facsimile and transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, in proper form for transfer or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation"), as the case may be, and any other documents required by the letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. 40 44 WITHDRAWAL RIGHTS Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time on the business day prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at one of the addresses set forth below under "Exchange Agent." Any such notice of withdrawal must specify the name of the person having tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn (including the principal amount of such Old Notes), and (where certificates for Old Notes have been transmitted) specify the name in which such Old Notes are registered, if different from that of the withdrawing holder. If certificates for Old Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial number of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book entry transfer described above, such Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under "-- Procedures for Tendering Old Notes" above at any time on or prior to the Expiration Date. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer if at any time before the Expiration Date, the Company determines that the Exchange Offer violates applicable law, any applicable interpretation of the staff of the Commission or any order of any governmental agency or court of competent jurisdiction. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its reasonable discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, the Company will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for any such Old Notes, if prior to the Expiration Date any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "TIA"). In any such event, the Company is required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. EXCHANGE AGENT United States Trust Company of New York has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at the address set forth below. Questions and requests for assistance, requests for additional copies of 41 45 this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: United States Trust Company of New York 114 West 47th Street New York, NY 10036 Via Facsimile: (212) 852-1626 Confirm by Telephone: (212) 852-1614 For Information: (212) 858-2103 DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The Company will not make any payments to brokers, dealers or other soliciting acceptances of the Exchange Offer. The principal solicitation is being made by mail; however, additional solicitations may be made in person or by telephone by officers and employees of the Company. The expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs among others. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes, which is the principal amount as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The expenses of the Exchange Offer will be capitalized for accounting purposes. TRANSFER TAXES Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register New Notes in the name of, or request that Old Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of, the Securities Act and applicable state securities law. Old Notes not exchanged pursuant to the Exchange Offer will continue to accrue interest at 11 1/8% per annum and will otherwise remain outstanding in accordance with their terms. Holders of Old Notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law in connection with the Exchange Offer. In general, the Old Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. To the extent that Old Notes are exchanged for New Notes, the market for the Old Notes may be adversely affected. The Company does not currently anticipate that it will register the Old Notes under the Securities Act. However, (i) if the Initial Purchasers so request with respect to Old Notes not eligible to be exchanged for New Notes in the Exchange Offer and held by them following consummation of the Exchange Offer or (ii) if any holder of Old Notes is not eligible to 42 46 participate in the Exchange Offer, or, in the case of any holder of Old Notes that participates in the Exchange Offer, does not receive freely tradable New Notes in exchange for Old Notes, the Company is obligated to file a Registration Statement on the appropriate form under the Securities Act relating to the Old Notes held by such persons. Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, it is the Company's view that New Notes issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than (i) any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that purchases Notes form the Company to resell pursuant to Rule 144A or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no intention, or any arrangement or understanding with any person, to participate in the distribution of such New Notes. If any holder has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. A broker-dealer who holds Old Notes that were acquired for its own account as a result of market-making or other trading activities may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of New Notes. Each such broker-dealer that acquired New Notes as a result of market-making activities or other trading activities, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. 43 47 BUSINESS OVERVIEW The Company, founded in 1872, is one of the largest manufacturers of a wide range of high quality ductile and gray iron castings for the heavy municipal market and selected segments of the industrial market. The Company believes it is the largest manufacturer of heavy municipal iron castings in the United States with approximately a 19% market share in calendar year 1996. The Company's broad range of heavy municipal iron castings includes manhole covers and frames, storm sewer frames and grates, heavy duty airport castings, specialized trench drain castings, specialty flood control castings and ornamental tree grates. These municipal castings are sold throughout the United States to state and local government entities, utility companies, precast concrete manhole structure producers and contractors for both new construction and infrastructure replacement. The municipal market generated approximately 43% of the Company's 1997 net sales. The Company believes it is also a leading manufacturer of a wide range of complex industrial castings, including castings for medium- and heavy-duty truck drive line components, a broad range of castings for the farm equipment industry and specific components for compressors used in heating, ventilation and air conditioning systems ("HVAC"). The industrial market generated approximately 53% of the Company's 1997 net sales. In addition, the Company engineers, manufactures and sells customized sand control systems and related products, which are an essential part of the casting process, to other iron foundries. Sales of these sand control systems and related products represented approximately 4% of the Company's 1997 net sales. The Company currently operates two modern foundries with an annual aggregate rated capacity of approximately 187,000 tons at a single site in Neenah, Wisconsin. Since 1985, the Company has invested approximately $100 million in its production facilities, with approximately $73 million invested in a major plant modernization program from 1985 to 1990. This plant modernization program was a critical part of a long-term strategy to produce higher volume, value-added castings for its existing industrial customers and to penetrate other selected segments of the industrial market, while preserving its position as the leader in the heavy municipal market. This modernization program entailed the closing of the Company's oldest foundry, Plant 1, and the updating of the Company's other two foundries, Plants 2 and 3, which enabled the Company both to produce higher volume, complex castings for selected industrial segments and to improve the Company's cost position in the heavy municipal market. Following the completion of the modernization program, the Company has steadily decreased its production of lower margin products such as axle covers and brake drums and increased the production of higher margin, more complex parts such as transmission and axle housings. As a result of this strategy, the Company's ongoing improvements in its manufacturing process and increased demand for medium- and heavy-duty truck components, net sales and EBITDA (as defined) have increased substantially. From 1992 to 1997, net sales have grown from $116.5 million to $165.4 million, representing a compound annual growth rate of 7.3%, and EBITDA has grown from $13.4 million to $38.0 million during the same period, representing a compound annual growth rate of 23.2%. INDUSTRY The United States casting industry includes products made from gray, malleable and ductile iron, aluminum, steel and various other metals, each with different underlying structural and performance properties such as strength, durability and weight. Gray iron, the oldest and most widely used cast iron, is readily cast into intricate shapes that are easily machined and wear resistant. Malleable iron, the least used form of iron, is stronger than gray iron and is more costly than either gray or ductile iron. Ductile iron is also readily cast into intricate shapes, and due to the addition of alloys during the casting process, has greater strength and ductility than gray iron. As a result, ductile iron is used as a higher-strength substitute for gray iron and a lower-cost substitute 44 48 for malleable iron and, in certain applications, steel. The Company manufactures both gray and ductile iron which it sells into two broad end markets, the municipal and industrial markets. The municipal market consists of the heavy municipal market and the water works market. The heavy municipal market is composed of "standard" castings (consisting primarily of storm and sanitary sewer castings including manhole covers and frames and storm sewer frames and grates), and "specialty" castings (consisting primarily of heavy duty airport castings, trench drain castings, flood control castings, special manhole and inlet castings and ornamental tree grates). The water works market consists of certain pipe fittings, valves and fire hydrants. The Company competes in the heavy municipal market and does not participate in the water works market. The industrial market includes segments such as car/light truck, medium- and heavy-duty truck, farm equipment and HVAC. Of these, the Company primarily provides parts to the medium- and heavy-duty truck, farm equipment and, to a lesser extent, HVAC segments. Since 1986, the industrial market has steadily increased its demand for ductile iron due to its superior performance properties such as strength, ductility and resistance to stress and mechanical shock. The heavy municipal market utilizes gray iron for the overwhelming majority of the parts it requires because gray iron continues to be the most cost-effective material for most municipal applications. The United States iron foundry industry is highly fragmented despite significant consolidation over the past decade. In 1986, there were approximately 880 foundries engaged in the casting of gray, ductile and malleable irons, with an aggregate capacity of approximately 15 million tons according to Stratecasts, Inc. a foundry industry research and consulting organization. By 1996, the number of iron foundries had decreased to approximately 730, with an aggregate capacity of approximately 13 million tons, with further consolidation expected to take place. Many smaller foundries have closed due to the increasing cost of complying with environmental and other governmental regulations and their inability to satisfy the increasing demand for higher quality, more complex castings. Due to capacity achieved through consolidation and technological advancements, the output per remaining foundry has risen. In the heavy municipal market, a significant share of the market is served by a few large foundries, including the Company. Foreign competition, particularly from India, which had a strong presence in the heavy municipal market in the past, has receded over the last 18 months as a result of both antidumping and countervailing duty litigation and increasingly stringent emission controls in such countries. Such foreign competition, which continues to be a factor in the heavy municipal market, is primarily present in the western and eastern coastal states due in part to the costs associated with transportation. The industrial market has experienced substantial change over the last 20 years due to two major initiatives by industrial original equipment manufacturers and their first tier suppliers. The first, outsourcing, has meant the closing of automotive and other captive foundries as OEMs and their first tier suppliers focus on core businesses and take advantage of specialized skills and lower manufacturing and labor costs of independent foundries. Second, OEMs and their first tier suppliers are reducing the number of suppliers with whom they work in an effort to eliminate duplicative overhead at multiple suppliers, take advantage of economies of scale inherent in volume production and confine suppliers to those with the resources necessary to satisfy stringent quality and dependability criteria. COMPETITIVE ADVANTAGES The Company believes it benefits from the following competitive advantages, which have enabled it to increase sales and operating profitability and to maintain its position as one of the leaders in the iron casting industry. Leading Market Position. The Company believes it is the largest manufacturer of heavy municipal iron castings in the United States with approximately a 19% market share in calendar year 1995. Furthermore, the Company, which has produced municipal castings for over 70 years has, according to its estimates, over a 50% market share in nine of the top ten states in which the 45 49 Company sells heavy municipal castings. Sales in those states represented approximately 69% of the Company's municipal sales in 1997. The Company believes it is also one of the largest manufacturers of iron castings for selected segments of the industrial market, including the medium-and heavy-duty truck and farm equipment segments. The Company is the sole sourced supplier for over 85% of the industrial products it produces and has multi-year arrangements with certain of its largest customers. The Company believes it can continue to capitalize on its strong market position to generate additional revenues and realize economies of scale, thereby increasing margins and earnings. Low Cost Structure. As a result of its size, significant investment in equipment and technology and focus on improving efficiency, the Company believes it possesses a highly competitive cost structure. Since 1985, the Company has invested approximately $100 million in its production facilities, with approximately $73 million invested in plant modernization and new equipment from 1985 to 1990. These investments, combined with the Company's ongoing improvements to its manufacturing process, have substantially increased efficiency and manufacturing productivity. From 1992 to 1997, the Company reduced its scrap rate from 3.5% to 2.0%, which the Company believes is one of the lowest scrap rates in the industry. During the same period, the Company reduced its employee hours per ton by approximately 40% from 14.8 to 9.0, while improving product quality levels and producing higher margin, more complex parts. Broad Product Offering. The Company carries a broad range of products, offering more than 4,400 patterns that can produce over 20,000 part combinations for the heavy municipal market, and more than 350 patterns for the industrial market. The Company believes its municipal catalog offers the largest castings selection of any foundry serving the heavy municipal market. This extensive product offering, which includes hundreds of one-of-a-kind specialty items, enables the Company to compete throughout the United States and provide a substantial number of the many types of municipal castings required for individual projects. Heavy municipal castings are manufactured from Company-owned patterns which have been appraised by independent appraisers to have a value in excess of $22 million. Additionally, the Company's extensive and growing offering of complex industrial castings enables it to more effectively service its customers' increasing needs for highly engineered cast parts and often positions the Company as the sole source of supply to original equipment manufacturers ("OEMs") and their first tier suppliers. The Company's broad industrial product offering and its recognized casting engineering expertise have become increasingly important as large industrial customers seek to reduce the number of suppliers with whom they conduct business. Strong, Diverse Customer Relationships. The Company continually focuses on establishing and maintaining strong relationships with its customers. In the heavy municipal market, the Company currently sells to over 17,000 active customers in all 50 states, with the majority of its sales concentrated in the midwestern states. The Company believes it has the largest sales and marketing effort of any foundry serving the heavy municipal market, including 47 Company employees and 26 commissioned representatives. The Company believes the size of its marketing effort, the breadth of its product offering and the level of its technical support provide it with a significant competitive advantage and will allow it to further strengthen its leading position in the heavy municipal market. With respect to the industrial market, the Company has established strong relationships with leading manufacturers of medium- and heavy-duty truck components, farm equipment and HVAC systems. The Company is the sole sourced provider for over 85% of the products it currently supplies to its industrial customer base and has multi-year arrangements with certain of its largest customers. Furthermore, the average industrial casting typically takes between 12 and 18 months to go from the design phase to full production and has an average life cycle of approximately 8 to 10 years. This lengthy development process, in which the Company actively participates, provides the Company with an inventory of products that cannot be quickly replicated by its competitors. Historically, the foundry that has originally manufactured an industrial part has continued to manufacture that part throughout its product life cycle. The Company's participation in both the heavy municipal and 46 50 industrial markets helps to diversify the Company's business and to reduce the Company's reliance on individual customers or end-use markets. High Quality Products and Customer Service. The Company believes it enjoys a reputation for providing a high level of customer service and is recognized for its ability to consistently manufacture high-quality, complex products. The Company believes its manufacturing capabilities and process controls allow it to manufacture high quality castings which are dimensionally and metallurgically consistent. In addition to providing high quality products, the Company emphasizes customer service by providing tooling and engineering development support to its customers, consistent on-time delivery utilizing its own fleet of trucks for delivery of many of its municipal products and a small portion of the Company's industrial products and follow-up through its sales and marketing team. The Company believes its ability to provide such product quality and responsive service has fostered customer loyalty and long-term relationships. Experienced Management Team with Significant Equity Stake. The top seven members of the Company's senior operating management have an average of approximately 12 years with the Company and 23 years in the iron foundry industry. Through an investment in ACP Products, L.L.C., certain members of the Company's management (the "Management Investors") beneficially own, on a fully diluted basis, approximately 10% of the common stock of the Company. BUSINESS STRATEGY The Company's strategy for achieving continued growth in sales and profitability includes: (i) increasing the sale of higher margin products, (ii) selectively entering new markets, (iii) improving operating performance and (iv) making selective acquisitions. Increasing the Sale of Higher Margin Products. The Company continually strives to improve the margins on the parts it produces. In the heavy municipal market, the Company has historically maintained strong margins by periodically implementing price increases and introducing new, higher value-added products. For example, the Company is currently leading the market in the sale of lightweighted municipal castings, which are less costly to handle and require less raw material to produce. The Company believes incremental margin improvements will be realized from the Company's increased production of these lightweighted products. In the industrial market, the Company increased its focus on manufacturing complex, highly engineered castings in the early 1990s following substantial capital investment in the late 1980s. Since 1991, the Company has steadily increased the volume, array and complexity of the parts it produces for its industrial customers. The Company intends to continue to pursue opportunities to produce more complex, higher value-added castings, thereby continuing to improve product margins. Selectively Entering New Markets. The Company intends to selectively expand its presence in both the heavy municipal and industrial markets. In the heavy municipal market, the Company is considering expanding its product offering in high volume markets such as New York and Nevada where the Company already has sales representatives in place and for which the Company has already invested in certain of the toolings necessary to meet potential product demand. In addition, the Company is exploring further opportunities in New Jersey, New Hampshire and Massachusetts. The Company's strategy in its chosen industrial segments is to continue to increase its penetration of existing customers and to develop similar relationships with other selected industrial companies which would value the Company's technical ability and high level of product quality and customer service. The Company also intends to explore opportunities in austempering (heat-treating ductile iron) and machining and assembling sub-components for specific industrial customers. Improving Operating Performance. The Company operates two modern foundries, and believes it possesses a highly competitive cost structure. The Company intends to continue to seek ways to capitalize on and extend its technological expertise and operating efficiencies, thereby reducing its operating costs. In contrast to the major investments made from 1985 to 1990, which significantly improved both manufacturing capacity and efficiency, the Company's near term capital 47 51 expenditures will be focused primarily on incrementally improving efficiency and reducing costs through projects such as: (i) sand system optimization, (ii) material handling improvements and (iii) energy utilization improvements. Making Selective Acquisitions. The United States iron foundry industry is highly fragmented despite significant consolidation over the past decade. In 1986, there were approximately 880 foundries engaged in the casting of iron, with an aggregate capacity of approximately 15 million tons according to Stratecasts, Inc., a foundry industry research and consulting organization. By 1996, the number of iron foundries decreased to approximately 730, with an aggregate capacity of approximately 13 million tons. Management believes the consolidation that has occurred will continue, particularly in the industrial market, as technical, environmental and quality standards continue to increase. The Company intends to pursue selective acquisition opportunities that complement its existing product offering or enable the Company to expand its presence in selected geographic areas of the heavy municipal market. The Company believes such acquisitions will provide opportunities for incremental revenue and cash flow by leveraging the Company's current expertise in manufacturing, sales and marketing, and product and process engineering. PRODUCTS, CUSTOMERS AND MARKETS The Company provides a variety of products to both the heavy municipal and industrial markets. The following table sets forth certain information regarding the end-user markets served by the Company, the products produced by the Company, representative customers in each end-user market and the percentage of net sales attributable to each of the Company's markets for the years ended March 31, 1996 and 1997.
PERCENTAGE OF NET SALES(1) ------------------------------- FISCAL YEAR FISCAL YEAR REPRESENTATIVE ENDED ENDED MARKET END PRODUCT CUSTOMERS MARCH 31, 1996 MARCH 31, 1997 - ------------------ ------------------------ ---------------- -------------- -------------- Heavy Municipal Standard castings State and local 42.9% %44.6 including storm and government sanitary sewer castings, entities, including manhole covers utility and frames, storm sewer companies, frames and grates; precast concrete Specialty castings structure including heavy duty producers and airport castings, contractors(2) specialized trench drain castings, specialty flood control castings and ornamental tree grates Industrial Medium- and % %(3) Heavy-Duty Differential carriers Rockwell 42.3 34.3 Truck and cases, brackets, International cages, calipers, caps, Eaton Corp. carriers, hubs, Dana Corp. knuckles, transmission housings, yokes Farm Equipment Various gear housings, John Deere 10.7% %16.0 planet carriers, axle New Holland housings, planting and harvesting equipment parts, counterweights Other Industrial Compressor components, Aisin 4.1% % 5.1 various housing and gear The Trane cases Company
48 52 - --------------- (1) Net sales include sales of Neenah Foundry only. (2) No municipal customer represented more than 1.2% of Neenah Foundry's net sales for the fiscal years ended March 31, 1996 or 1997. (3) Commencing in the second quarter of calendar 1996, the Company decided to discontinue the production of certain lower margin brake components as part of its strategy to increase its focus on higher volume, complex parts for its industrial customers. These brake components accounted for 8.3% of medium- and heavy-duty truck net sales in fiscal 1996 and 1.0% in fiscal 1997. Heavy Municipal. Based on industry reported data, the Company believes it is the largest manufacturer of heavy municipal iron castings in the United States with an estimated 19% market share in calendar year 1996. The Company's broad heavy municipal product line consists of two general categories of castings, "standard" and "specialty" castings. Standard castings principally consist of storm and sanitary sewer castings which are consistent with pre-existing dimension and strength specifications established by local authorities. Standard castings are generally high volume items that are routinely used in new construction and infrastructure replacement. Specialty castings are generally lower volume, higher margin products which include heavy-duty airport castings, trench drain castings, flood control castings, special manhole and inlet castings and ornamental tree grates. These specialty items are frequently selected and/or specified from the Company's municipal product catalog and its tree grate catalog, which together encompass over 4,400 standard and specialty patterns. For many of these specialty products, the Company believes it is the only manufacturer with existing patterns to produce such a particular casting, although a competing manufacturer could elect to make the investment in patterns or equipment necessary to produce such a casting. The Company's municipal castings are sold to state and local government entities, utility companies, pre-cast concrete manhole structure producers and contractors for both new construction and infrastructure replacement. The Company's 17,000 active municipal customers generally make purchase decisions based on a number of criteria including acceptability of the product per local specification, quality, service, price and the customer's relationship with the foundry. Relative to customers in the industrial market, municipal market customers are less technically demanding and rely on published product specifications to ensure product performance. A key aspect of winning orders in the heavy municipal market is the specification process in which a local authority or design engineer sets specific criteria for the casting or castings to be used in a particular project. Those criteria then become part of the formal plans and specifications that will govern the acceptability of castings for a particular project. The Company seeks to be an active participant in the specification process. Its sales staff makes frequent calls on design engineers as part of a continuous effort to stay abreast of current specifications and upcoming projects. In these sales calls, the Company seeks to create opportunities for the selection of specifications which utilize an existing Company pattern. Although in many cases the design engineer who sets the specification does not make the purchase decision, when the Company's specialty product is specified it becomes more difficult for another manufacturer to provide an alternate part which is considered acceptable. The Company's professional sales staff and product engineering department are highly regarded by design engineers and are frequently consulted during the specification drafting process. The Company believes its reputation for its product engineering support, consistent quality and reliable service have made the Company's municipal and tree grate catalogs two of the most frequently used specification design tools in the municipal casting industry. Over the past two years, the Company has begun to introduce what it calls "lightweighted" parts to the heavy municipal market. These lightweighted parts have been reengineered in order to reduce both their weight and the amount of raw materials necessary for their manufacture, while maintaining the high quality performance characteristics of the heavier version of the casting. This improvement in the design and manufacture of municipal castings has resulted in lower material costs and improved margins for this product line. The Company is able to manufacture lightweighted castings because its manufacturing processes enable it to refine castings walls down to very narrow 49 53 tolerances, many of which are currently not achievable by the Company's competitors. While only a portion of the municipal castings the Company sells are candidates for lightweighting, the Company expects to continue to increase the number of lightweighted castings which it offers for sale over the next several years. Industrial. The Company believes it is a leading manufacturer of a wide range of complex industrial castings, including castings for medium- and heavy-duty truck drive line components and farm equipment as well as castings for specific components for compressors used in HVAC systems. The Company's industrial castings have increased in complexity since the early 1990's and are generally produced in higher volumes than municipal castings. Complexity in the industrial market is determined by the intricacy of a casting's shape, the thinness of its walls and the amount of processing by a customer required before a part is suitable for use by it. OEMs and their first tier suppliers have been demanding higher complexity parts principally to reduce labor costs in their own production processes by using fewer parts to manufacture the same finished product or assembly and by using parts which require less preparation before entering the production process. The Company's industrial castings are primarily sold to a limited number of customers with whom the Company has established a close working relationship. The Company has sold to certain industrial customers for over 20 years and currently has multi-year arrangements with certain of those customers. These multi-year arrangements, which accounted for approximately 40% of the Company's industrial castings business, do not bind the customer to purchase any minimum amount of the Company's product and are not terminable at will by the customer. Customers make purchasing decisions based on, among other things, technical ability, price, service, quality assurance systems, facility capabilities and reputation. However, as in the municipal market, the Company's assistance in product engineering plays an important role in winning the award of industrial castings. The average industrial casting typically takes between 12 and 18 months to go from the design phase to full production and has an average product life cycle of approximately 8 to 10 years. The patterns for industrial castings, unlike the patterns for municipal castings, are owned by the Company's customers rather than the Company, however, such industrial patterns are not readily transferrable to other foundries without, in most cases, significant additional investment. Although foundries, including the Company, do not design industrial castings, a close working relationship between a foundry and the customer during a product launch is critical to reduce potential production problems and minimize the customer's risk of incurring lost sales or reputation damage due to a delayed launch. Involvement by a foundry early in the design process generally improves the likelihood that the customer will design a casting within the manufacturing capabilities of such foundry and also improves the likelihood that such foundry will be awarded the casting for full production. The Company is the sole sourced supplier of over 85% of the industrial castings it currently produces. Historically, the Company has retained approximately 90% of the castings it has been awarded throughout the product life cycle, which is typical for the industry. The Company believes industrial customers will continue to seek out foundries with a strong reputation for performance who are capable of providing a cost-effective combination of manufacturing technology and quality. The Company's strategy is to further its relationships with existing customers by participating in the design and production of more complex industrial castings, while seeking out selected new customers who would value the Company's performance reputation, technical ability and high level of quality and service. In addition to increasing its sales to existing customers and seeking out new customers, the Company intends to explore opportunities in austempering and machining and assembling sub-components for specific industrial customers. Austempering is the process of heat treating a ductile iron casting to increase its strength, thereby increasing the casting's ability to replace steel in additional applications. Machining and sub-assembling are value-added processes often performed by the OEM or third parties. Austempering, machining and sub-assembly are both processes which generally provide higher margins and increase a customer's reliance on the manufacturer. 50 54 SALES AND MARKETING Heavy Municipal. Over its 70 years of heavy municipal market participation, the Company has emphasized sales and marketing and believes it has built a strong reputation for customer service. The Company believes it is one of the leaders in United States heavy municipal casting production and has strong name recognition. The Company has the largest sales and marketing effort of any foundry serving the heavy municipal market, including 47 Company employees and 26 commissioned representatives. The dedicated sales force works out of regional sales offices to market the Company's municipal castings to contractors and state and local governmental entities throughout the United States. The Company operates nine regional distribution and sales centers and has two other sales offices in Oklahoma City, Oklahoma and Norwood, Pennsylvania. The Company believes this regional approach enhances its knowledge of local specifications and its position in the heavy municipal market. Industrial. The Company employs a dedicated industrial casting sales force of six people, five based in Neenah, Wisconsin and one based in Mansfield, Ohio. These six people consist of three account coordinators, who support the ongoing customer relationships and organize the scheduling and delivery of shipments, and three major account managers who work with customers' engineers and procurement representatives, Company engineers, manufacturing management and quality assurance representatives throughout all stages of the production process to ensure that the final product consistently meets or exceeds customer specifications. This team approach between sales, manufacturing, marketing, engineering and quality assurance is an integral part of the Company's marketing strategy. MANUFACTURING PROCESS The Company operates two modern foundries with an annual rated capacity of approximately 187,000 tons at a single location in Neenah, Wisconsin. The Company's foundries manufacture gray and ductile iron and cast it into intricate shapes according to customer metallurgical and dimensional specifications. Since 1985, the Company has invested approximately $100 million in its production facilities, with approximately $73 million invested from 1985 to 1990 in plant modernization and new equipment. The Company also continually invests in the improvement of process controls and product performance and believes that these investments and its significant experience in the industry have made it one of the most efficient manufacturers of industrial and heavy municipal casting products. During 1997, the Company had a combined scrap rate of 2.0%, which it believes was one of the lowest in the industry. The casting process involves using metal, wood or urethane patterns to make an impression of a casting product in a mold made primarily of sand. Cores, also made primarily of sand, are used to make the internal cavities and openings in a casting product. Once the casting impression is made in the mold, the cores are set into the mold and the mold is closed. Molten metal is then poured into the mold, fills the mold cavity and takes on the shape of the desired casting product. Once the iron has solidified and cooled, the mold is shaken from the casting and the sand is recycled. The selection of the appropriate casting method, pattern, core making equipment and sand and other raw materials depends on the final product and its complexity, specifications, and function as well as intended production volumes. Because the casting process involves many critical variables, such as choice of raw materials, design and production of tooling, iron chemistry and metallurgy, and core and molding sand properties, it is important to monitor the process parameters closely to ensure dimensional precision and metallurgical consistency. See "-- Quality Assurance." The Company continually seeks to find ways to expand the capabilities of existing technology to improve manufacturing processes. An example of this expansion is the Company's integration of Disamatic molding machines into its operations. Disamatic molding machines are considered to be among the most efficient sand molding machines because of their ability to produce high quality molds at high production rates. Disamatic molding machines are used by most of the Company's 51 55 direct competitors. Although the Company was not the first foundry to acquire Disamatic molding machines, it has significantly enhanced the equipment's range of production by combining it with core-setting capabilities which exceed those of most foundries. To further improve upon the productivity of the Disamatic molding machines, the Company has recently increased the length of two of its cooling lines, making each line among the longest lines in the world for comparable Disamatic equipment. This extension allows the Company to run its machines at higher production rates while providing sufficient inmold cooling time prior to mold shakeout to facilitate the production of high quality castings. As a result of these and other similar efforts, the Company has been able to increase productivity as measured in the number of molds per hour. Additionally, from 1992 to 1997, the Company reduced employee hours per ton from 14.8 to 9.0. The Company also achieves productivity gains by improving upon the individual steps of the casting process such as reducing the amount of time required to make a pattern change to produce a different casting product. The reduced time permits it to profitably produce castings in medium volume quantities on high volume, cost-effective equipment such as the Disamatic molding machines. Additionally, extensive effort in real time process controls permits the Company to produce a consistent, dimensionally accurate casting product which requires less time and effort in the final processing stages of production. This accuracy contributes significantly to the Company's manufacturing efficiency. Due to the Company's efforts to improve manufacturing productivity, as well as increased operating leverage, improved pricing and a shift to higher value-added industrial products, from fiscal 1992 to 1997 the Company's operating margins have increased from 5.4% to 18.8%. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." HARTLEY CONTROLS Hartley Controls, a wholly owned subsidiary of the Company, engineers, manufactures and sells customized sand control systems, which are an essential part of the casting process, to other iron foundries. The sand molding media used in all high production iron foundries is a critical element in determining the mold quality. Exacting and consistent control of this sand with respect to moisture and chemical additives is an essential element for process control, and relates directly to casting quality, scrap rate and the ability to produce complex molds for highly engineered castings. Hartley Controls is a major United States supplier of sand control systems, with over 300 installations since 1986. Hartley Controls has made investments in process technology and has several patented technologies related to sand systems, including the "Automatic Moisture Controllers," the "Even-Flo Bin," the "Automatic Compactibility Tester," the "Automatic Bond Determinator," the "Green Sand Reconditioner" and the "Sandman." Sales of these sand systems and other products represented approximately 4% of the Company's net sales for 1997. In addition, Hartley Controls has recently expanded overseas and after only three years has become a significant supplier of sand control systems in the United Kingdom. Hartley Controls is the only manufacturer to supply control systems in the United Kingdom for all brands of foundry sand mixers. Hartley Controls also currently exports sand control systems to India, with further expansion planned through a joint venture scheduled for the second quarter of calendar 1997. Hartley Controls provides the Company access to the newest technology in sand control as it becomes available. QUALITY ASSURANCE Constant testing and monitoring of the manufacturing process is important to maintain product quality. The Company has adopted sophisticated quality assurance techniques and policies for its manufacturing operations. During and after the casting process, the Company performs numerous tests, including tensile, proof-load, radiography, ultrasonic, magnetic particle and chemical analysis. The Company utilizes statistical process controls to measure and control significant process variables and casting dimensions. The results of this testing are documented in metallurgical 52 56 certifications which are provided with each shipment to most industrial customers. The Company strives to maintain systems that provide for continuous improvement of operations and personnel, emphasize defect prevention and reduce variation and waste in all areas. MANUFACTURING FACILITIES, EQUIPMENT AND PROPERTIES The Company's headquarters and two foundries are located in Neenah, Wisconsin. The first manufacturing foundry, Plant 2, produces gray and ductile iron castings and is equipped with one BMD air impulse molding line, two Hydro slinger cope and drag molding units, and one 2070 Type B Disamatic molding machine. The annual rated capacity for Plant 2 is 116,000 gst (good salable tons). The second manufacturing foundry, Plant 3, produces ductile iron castings and is equipped with one 2013 Mark IV Disamatic molding machine and one 2070 Type B Disamatic molding machine. In July, 1995, the Company completed a program in Plant 3 to gain efficiencies in material handling, labor utilization and molding line productivity. The annual rated capacity for Plant 3 is approximately 71,000 gst. Industrial and municipal castings are produced in both plants. Rated capacity is based on an assumed product mix and, due to the Company's current industrial product mix, which includes numerous complex castings, practical capacity is currently approximately 5% to 6% less than rated capacity. The Company owns seven and leases six distribution and sales centers. In early 1994, the Company closed Plant 1, its oldest and lowest capacity plant, which was primarily producing large castings for HVAC Systems. The Company closed Plant 1 because of its decision to discontinue the low volume, highly complex castings produced by Plant 1 and the significant capital expenditures that would have been necessary to modernize its equipment and facilities. DISTRIBUTION The Company sells a substantial amount of its municipal castings through its network of two warehouses, nine distribution and sales centers and two other sales offices. Industrial castings are shipped direct to customers from the Company. For many municipal and a small portion of its industrial customers, castings are delivered by Neenah Transport, Inc. ("Neenah Transport"), a wholly owned subsidiary of the Company, which operates a fleet of 29 tractors and 101 trailers that deliver products throughout the Midwest. For sales outside of the Midwest, increased transportation costs impact the ability of the Company to compete on a cost basis. Neenah Transport also backhauls raw materials for use by the Company on return trips. Neenah Transport is staffed with professional drivers who are trained in service standards and product knowledge as representatives of the Company. To the Company's knowledge, none of the Company's major heavy municipal competitors have a captive transportation subsidiary. The Company believes Neenah Transport's service and drivers provide another differentiating factor in favor of the Company. RAW MATERIALS The primary raw materials used by the Company to manufacture iron castings are steel scrap, pig iron, metallurgical coke and silica sand. While there are multiple suppliers for each of these commodities, the Company has single source arrangements with its suppliers of each of these major raw materials, with the exception of pig iron. Due to long standing relationships with each of its suppliers, the Company believes that it will continue to be able to secure raw materials from its suppliers at competitive prices. The primary energy sources for the Company's operations, electricity and natural gas, are purchased through utilities. Although the prices of all raw materials used by the Company vary, the fluctuations in the price of steel scrap are the most significant to the Company. The Company has arrangements with most of its industrial customers which require the Company to adjust industrial casting prices to reflect scrap price fluctuations. In periods of rapidly rising or falling scrap prices, these adjustments will lag the current scrap price because they are generally based on average market prices for prior periods, which periods vary by customer but are generally no longer than six months. Castings are 53 57 generally sold to the heavy municipal market on a bid basis and, after a bid is won, the price for the municipal casting subject to the bid generally cannot be adjusted for raw material price increases. However, in most cases the Company has been successful in obtaining higher municipal casting unit prices in subsequent bids to compensate for rises in scrap prices in prior periods. Rapidly fluctuating scrap prices may have a temporary adverse or positive effect on the Company's results of operations. See "Risk Factors -- Raw Materials." COMPETITION The markets for the Company's products are highly competitive. Competition is based not only on price, but also on quality of product, range of capability, level of service and reliability of delivery. The Company competes with numerous independent and captive foundries, as well as with a number of foreign iron foundries, including certain foundries located in India. The Company also competes with several large domestic manufacturers whose products are made with materials other than ductile and gray iron, such as steel or aluminum. The industry consolidation that has occurred over the past 20 years has resulted in a significant reduction in the number of smaller foundries and a rise in the share of production by larger foundries, some of which have significantly greater financial resources than the Company. Competition from India has had a strong presence in the heavy municipal market and continues to be a factor, primarily in the western and eastern coastal states, due in part to costs associated with transportation. Such competition has receded over the past 18 months, primarily as a result of increased enforcement of emission controls. As a result, Indian import volume has decreased and the price of Indian casting products has risen. Additionally, foreign companies have been, and continue to be, subject to antidumping and countervailing duty enforcement litigation which the Company believes has had a negative effect on foreign companies' ability to compete in the United States markets. There can be no assurance that these factors will continue to mitigate the impact of foreign competition, or that the Company will be able to maintain or improve its competitive position in the markets in which it competes. BACKLOG The Company's industrial business generally involves supplying all or a portion of a customer's annual requirements for a particular casting. Industrial customers generally order castings on a monthly basis. Orders for the heavy municipal market are generally received for specific casting products and cover a much larger range of castings. The Company's backlog at any given time consists only of firm industrial and municipal orders. The Company's backlog was 26,750 tons at March 31, 1997 as compared to 25,500 tons at March 31, 1996. The increase in backlog of approximately 5% was primarily the result of strengthening in the medium- and heavy-duty truck market. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." EMPLOYEES As of March 31, 1997, the Company had 910 full time employees, of whom 710 were hourly employees and 200 were salaried employees. Of the 200 salaried employees, 91 are in manufacturing and engineering, 61 are in sales and marketing, 44 are in management and administration and four are in transportation. The Local 121B of the Glass, Molders, Pottery, Plastics and Allied Workers International Union AFL-CIO is the major bargaining agent for and representative of 678 of the Company's hourly employees. The collective bargaining agreement with Local 121B was reached on January 1, 1996 and expires on December 31, 1998. The Independent Patternmakers Union of Neenah, Wisconsin is the major bargaining agent for and representative of 32 of the Company's hourly employees. The collective bargaining agreement with the Independent Patternmakers Union was reached on January 1, 1995 and expires on December 31, 1997. The Company believes that it has a good relationship with its employees. 54 58 LITIGATION The Company is involved in routine litigation incidental to its business. Such litigation is not, in the opinion of management, likely to have a material adverse effect on the financial condition or results of operation of the Company. ENVIRONMENTAL MATTERS The Company's facilities are subject to federal, state and local laws and regulations relating to the protection of the environment and worker health and safety, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. Such laws include the Federal Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Occupational Health and Safety Act. The Company believes that its operations have been and are currently in substantial compliance with applicable environmental laws, and that it has no liabilities arising under such environmental laws, except as would not be expected to have a material adverse effect on the Company's operations, financial condition or competitive position. However, some risk of environmental liability and other costs is inherent in the nature of the iron foundry business. The Company might in the future incur significant costs to meet current or more stringent compliance, cleanup or other obligations pursuant to environmental requirements. Such costs may include expenditures related to remediation of historical releases or clean-up of structures prior to demolition. Under the Federal Clean Air Act Amendments of 1990 ("CAA"), the Environmental Protection Agency must establish maximum achievable control technology ("MACT") standards for hazardous air pollutants emitted from iron foundry operations by the year 2000. In addition, Wisconsin law imposes requirements on emissions of air toxins from iron foundries and other industries. Many of the regulations that will implement the CAA and Wisconsin law have not yet been promulgated. Although it is not possible to estimate the costs of complying with the regulations until they are issued, iron foundries, including the Company, can be expected to incur significant costs over time to comply with these federal and state regulations. 55 59 MANAGEMENT The following table identifies members of the Board of Directors, key executive officers and certain other key employees of the Company.
NAME AGE POSITION - ----------------------------------- --- ------------------------------------------------- James K. Hildebrand................ 60 Chairman of the Board and Chief Executive Officer William M. Barrett................. 50 Vice President and General Manager Gary W. LaChey..................... 51 Vice President -- Finance, Treasurer and Secretary Charles M. Kurtti.................. 60 Vice President -- Manufacturing and Engineering John Z. Rader...................... 48 Vice President -- Human Resources William J. Martin.................. 49 Vice President and General Manager -- Hartley Controls Corporation Timothy J. Koller.................. 47 General Sales Manager -- Municipal Castings Frank C. Headington................ 47 Director -- Product Reliability David F. Thomas.................... 47 Director John D. Weber...................... 33 Director Brenton F. Halsey.................. 69 Director
Mr. Hildebrand is Chairman of the Board and Chief Executive Officer of the Company. Mr. Hildebrand has been President and Chief Executive Officer of Advanced Cast Products, Inc. since 1988, and will continue in that position for the foreseeable future. Previously, he served as President of the Cast Products Group of Amcast Industrial Corp. Mr. Hildebrand is also employed by ACP Holding Company which, following the consummation of the Merger, became the beneficial owner of all the common equity of both the Company and Advanced Cast Products, Inc. See "Certain Relationships and Related Transactions." Mr. Hildebrand devotes substantial time to, and be partially compensated by, Advanced Cast Products, Inc. Mr. Barrett is Vice President and General Manager of the Company. Mr. Barrett joined the Company in 1992 serving as General Sales Manager -- Industrial Castings. From 1985 to 1992, Mr. Barrett was the Vice President -- Sales for Harvard Industries Cast Products Group. Mr. LaChey is Vice President -- Finance, Treasurer and Secretary of the Company. Mr. LaChey joined the Company in 1971, serving in a variety of positions of increasing responsibility in the finance department. Mr. Kurtti is Vice President -- Manufacturing and Engineering, of the Company, a position he has held since 1991. Mr. Kurtti joined the Company in 1976 as a salesman. Mr. Kurtti has served as Director of Marketing, Director of Purchasing -- Engineering and Director -- Manufacturing and Engineering. Mr. Rader is Vice President -- Human Resources, a position he has held since 1990. Mr. Rader joined the Company in 1987, serving as Director -- Personnel until 1989 and as Director -- Human Resources until 1990. Mr. Martin is Vice President and General Manager -- Hartley Controls Corporation, a wholly owned subsidiary of the Company, a position he has held since 1996. Previously, Mr. Martin was Territory Sales Manager at Disamatic, Inc., a molding machine manufacturer, from 1986 to 1996. Mr. Koller is General Sales Manager -- Municipal Castings for the Company. Mr. Koller joined the Company in 1978, serving in a variety of positions of increasing responsibility in the sales and marketing departments. Mr. Headington is Director -- Product Reliability, a position he has held since 1991. Mr. Headington joined the Company in 1989 as Manager -- Technical Services, a position he held until 1991. 56 60 Mr. Thomas is a director of the Company. Mr. Thomas has been a Managing Director of Citicorp Venture Capital, Ltd. for more than the past five years. Mr. Thomas is a director of Lifestyles Furnishings International Ltd., Galey & Lord, Inc., Anvil Knitwear, Inc. and a number of private companies. Mr. Weber is a director of the Company. Since 1994, Mr. Weber has been a Vice President at Citicorp Venture Capital, Ltd. Previously, Mr. Weber worked at Putnam Investments from 1992 through 1994. Mr. Weber is a director of Anvil Knitwear, Inc. and a number of private companies. Mr. Halsey is a director of the Company. Mr. Halsey was the founding Chief Executive Officer and Chairman of the James River Corporation from 1969 to 1990. He continued as Chairman until 1992 when he became Chairman Emeritus. Messrs. Hildebrand, Thomas, Weber and Halsey became directors of the Company on April 30, 1997. COMPENSATION OF DIRECTORS Directors of the Company currently do not receive compensation for their services as directors. Directors of the Company are entitled to reimbursement of their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the board of directors or committees thereof. COMPENSATION OF EXECUTIVE OFFICERS The compensation of executive officers of the Company will be determined by the Board of Directors of the Company. The Company's historical benefit or compensation plans (a supplemental executive retirement plan and a deferred compensation plan) are not described herein because each were terminated and replaced by a single compensation plan with respect to the named officers in connection with the Merger (with the exception of a retirement plan for Mr. Kurtti). The following table sets forth information concerning compensation received by the five most highly compensated officers of the Company for services rendered in 1997. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION ------------------------------ -------------------- OTHER ANNUAL OPTIONS/ LTIP ALL OTHER NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) SARS(#) PAYOUTS COMPENSATION - ------------------------------ -------- ---------- --------------- ------- ------- ------------ Edmund W. Aylward, Jr.(2)..... $600,000 $1,157,793 $31,992 -- -- -- Chairman, President and Chief Executive Officer Andrew A. Aylward(2).......... 378,000 627,894 25,720 -- -- -- Vice President Thomas R. Franklin(2)......... 209,750 164,840 49,424 -- -- -- Senior Vice President and Chief Financial Officer James P. Keating, Jr.(2)...... 204,000 99,096 32,780 -- -- -- Senior Vice President Gary W. LaChey................ 138,000 40,000 26,122 -- -- -- Vice President
57 61 - --------------- (1) The named officers have participated in the Company's profit sharing, Company 401(k) contributions, and excess benefit programs. The aggregate payments made by the Company pursuant to such programs are listed as Other Annual Compensation. (2) Messrs. E.W. Aylward and A.A. Aylward resigned from their current positions in connection with the consummation of the Transactions. Mr. Keating's employment listed above terminated on June 30, 1997, though he is available to serve as a consultant to the Company. Mr. Franklin retired as an officer of the Company on February 28, 1997. EMPLOYMENT AGREEMENTS The Company has entered into an employment agreement with James P. Keating, Jr. that terminated on June 30, 1997. The Company has also entered into a consulting agreement with Mr. Keating that provides that Mr. Keating will be available to serve as a consultant to the Company from July 1, 1997 to June 30, 1999. Mr. Keating is paid $16,500 per month under the consulting agreement. MANAGEMENT INCENTIVE PLAN The Company intends to provide performance-based compensation awards to executive officers and key employees for achievement during each year as part of a bonus plan. Such compensation awards may be a function of individual performance and consolidated corporate results. The qualitative and quantitative criteria will be determined from time to time by the Board of Directors of the Company. MANAGEMENT EQUITY PARTICIPATION In connection with the Merger, (a) the Management Investors acquired units representing membership interests in ACP Products, L.L.C., which represent, in the aggregate, approximately a ten percent beneficial interest in the Company (the "Purchased Interests") and (b) the Management Investors and certain other employees of the Company are expected to be granted, over a five year period, options (the "Options") to purchase additional Purchased Interests representing, in the aggregate, approximately a two percent beneficial interest in the Company. The Options are expected to be granted periodically and to vest and become exercisable upon (i) certain threshold dates and/or (ii) the satisfaction of certain financial performance tests. Upon the termination of employment with the Company, an employee's Purchased Interests will be subject to certain repurchase provisions exercisable by ACP Products, L.L.C. or its designees. The Purchased Interests obtainable upon exercise of the Options are expected to be subject to rights and restrictions similar to those of the Purchased Interests purchased in connection with the Closing. The exercise price of the Options will be established by ACP Products, L.L.C. in consultation with the Board of Directors of the Company or a compensation committee thereof. 58 62 OWNERSHIP OF SECURITIES The Company's authorized capital stock consists of 11,000 shares of common stock, par value $100 per share (the "Common Stock"), 1,000 shares of which are issued and outstanding and owned by Holdings and are pledged to the Lenders under the Senior Bank Facilities. Holdings is a wholly-owned subsidiary of ACP Holdings which in turn is wholly-owned by ACP Products, L.L.C. The outstanding common units of ACP Products L.L.C. related to the Company consist of 185,000 Class A-3 Common Units (the "Class A Common Units"), 815,000 Class B-3 Common Units (the "Class B Common Units", and together with the Class A Common Units, the "Common Units"). Holders of Class A Common Units are entitled to one vote per Class A Common Unit on all matters to be voted upon by the holders of Class A Common Units. Holders of Class B Common Units have no right to vote on any matters to be voted on by holders of Common Units. Holders of Class B Common Units may elect at any time to convert any or all of such Units into Class A Common Units, on a Common Unit-for-Common Unit basis. Set forth below is certain information regarding the beneficial ownership of Class A Common Units by each person who beneficially owns 5.0% or more of the outstanding Class A Common Units, each director and named executive officer and all directors and named executive officers as a group. Except as indicated below, the address for each of the persons listed below is c/o Neenah Foundry Company, 2121 Brooks Avenue, Box 729, Neenah, Wisconsin 54927.
NUMBER OF VOTING PERCENTAGE OF CLASS A VOTING COMMON CLASS A NAME AND ADDRESS OF BENEFICIAL OWNER UNITS COMMON UNITS ----------------------------------------------------------- --------- ------------- Citicorp Venture Capital, Ltd.(1)(2)....................... 90,000 48.65% 399 Park Avenue New York, New York James K. Hildebrand(1)..................................... 20,000 10.81% William M. Barrett(1)...................................... 13,000 7.03% Gary W. LaChey(1).......................................... 13,000 7.03% Charles W. Kurtti(1)....................................... 13,000 7.03% John Z. Radar(1)........................................... 13,000 7.03% David F. Thomas(3)......................................... 90,000 48.65% John D. Weber(3)........................................... 90,000 48.65% Brenton F. Halsey.......................................... 0 0.00% Directors and named executive officers as a group.......... 162,000 87.57%
- --------------- (1) Such person disclaims beneficial ownership of the Company's Common Stock. See "Management -- Management Equity Participation." (2) Citicorp Venture Capital, Ltd. and its affiliates (collectively, "CVC") own 739,821.82 Class B Common Units representing 90.78% of the Class B Common Units outstanding. (3) Consists of the Class A Common Units held by CVC, which may be deemed to be beneficially owned by Messrs. Thomas and Weber. Messrs. Thomas and Weber disclaim beneficial ownership of shares held by CVC. Mr. Thomas is a managing director of CVC. Mr. Weber is a vice president of CVC. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATIONSHIP WITH ACP HOLDING COMPANY ACP Products, L.L.C. holds all of the issued and outstanding shares of capital stock of ACP Holding Company ("ACP Holdings"). ACP Holdings is the parent company of Holdings, and thus indirectly owns 100% of the Common Stock of the Company. James K. Hildebrand, who serves as the Chairman of the Board and Chief Executive Officer of the Company, currently serves as President and Chief Executive Officer of ACP Holdings and its principal operating subsidiary, Advanced Cast Products, Inc. ("Advanced Cast"). Since the Closing, Mr. Hildebrand has devoted 59 63 substantial time to, and has been partially compensated by, Advanced Cast, in addition to his role with the Company. Advanced Cast also produces iron castings for sale to the industrial medium-and heavy-duty truck market, but it has not competed with the Company in the past in any significant way and the Company does not anticipate that it will so compete with Advanced Cast in the future. SHAREHOLDER RELATIONSHIPS In connection with the Merger, the Management Investors and certain institutional investors, including Citicorp Venture Capital, Ltd., became parties to the Third Amended and Restated Limited Liability Agreement of ACP Products, L.L.C., as amended (the "L.L.C. Agreement"). The L.L.C. Agreement contains certain provisions with respect to the beneficial equity interests and corporate governance of the Company. The L.L.C. Agreement provides that the Investor Group and the Management Investors, as the only members of ACP Products, L.L.C. holding beneficial interests in the Company, have the right to direct all actions taken in respect of Holdings and the Company, including, without limitation, appointing members of the Board of Directors of the Company and of Holdings. REGISTRATION RIGHTS AGREEMENT The Company entered into a registration rights agreement (the "Registration Rights Agreement") with the Investor Group and the Management Investors. Pursuant to the terms of the Registration Rights Agreement, certain holders of the Company's Common Stock have the right to require the Company, at the Company's sole cost and expense and subject to certain limitations, to register under the Securities Act or list on any recognized stock exchange all or part of the Common Stock beneficially owned by such holders (the "Registrable Securities"). All such holders will be entitled to participate in all registrations by the Company or other holders, subject to certain limitations. In connection with all such registrations, the Company agreed to indemnify all beneficial owners of Registrable Securities against certain liabilities, including liabilities under the Securities Act and other applicable state or foreign securities laws. Registrations pursuant to the Registration Rights Agreement will be made, if applicable, on the appropriate registration form and may be underwritten registrations. DESCRIPTION OF SENIOR BANK FACILITIES On April 30, 1997, the Company entered into a credit agreement (the "Credit Agreement") with The Chase Manhattan Bank, as administrative agent and collateral agent (the "Agent") and the lenders named therein (the "Lenders") that provided term loans (the "Term Loans") of $45.0 million and a Revolving Credit Facility of $30.0 million. Chase Securities Inc. acted as advisor and arranger in connection with the Senior Bank Facilities (the "Arranger"). On July 1, 1997, the Company used the proceeds from the issuance of the Refinancing Notes to pay the Term Loans. The following is a summary description of the principal terms of the Credit Agreement following payment of the Term Loans. The Credit Agreement is available upon request from the Company. Structure. Loans under the Credit Agreement consist of a revolving credit facility (the "Revolving Credit Facility") in the amount of $30.0 million subject to a borrowing base formula (of which $15.0 million will be available for letters of credit). The Company is currently negotiating to amend the Credit Agreement to (i) increase the borrowing availability under the Revolving Credit Facility from $30.0 million to $50.0 million and (ii) eliminate all borrowing base limitations. There can be no assurance, however, that such amendment will be completed. See "Summary -- Proposed Amendments to Senior Bank Facilities." The Revolving Credit Facility is being used for general corporate purposes in the ordinary course of the Company's business and may be used for other purposes, including the financing of acquisitions. Security, Guaranty. The obligations of the Company under the Senior Bank Facilities will be unconditionally and irrevocably guaranteed, jointly and severally, by Holdings and by each existing 60 64 and subsequently acquired or organized subsidiary of the Company. In addition, the Senior Bank Facilities and the guarantees thereunder are secured by substantially all of the assets of the Company and the guarantors (collectively, the "Collateral"), including but not limited to (i) a first priority pledge of all the capital stock of the Company and of each existing and subsequently acquired or organized subsidiary of the Company and (ii) perfected first priority security interests in, and mortgages on, substantially all tangible and intangible assets of the Company and the guarantors (including but not limited to accounts receivable, documents, inventory, equipment, intellectual property, general intangibles, real property, cash and cash accounts and proceeds of the foregoing) in each case subject to certain limited exceptions. Availability. The availability of the Revolving Credit Facility is subject to various conditions precedent typical of bank loans including, among other things, the absence of any material adverse change on the part of the Company. The full amount of the Term Loans was drawn in a single drawing at the Closing of the Transactions and amounts repaid or prepaid under the Term Loans may not be reborrowed. Amounts under the Revolving Credit Facility are available on a revolving basis, subject to a borrowing base comprised of percentages of the Company's eligible accounts receivable and eligible inventories. As of March 31, 1997, on a pro forma basis after giving effect to the Offering, the other Transactions, the Refinancing and the application of the proceeds therefrom as well as such borrowing base limitations and $0.6 million of outstanding letters of credit, the Company estimates it would have had the ability to borrow approximately $24.5 million under the Revolving Credit Facility. Amortization, Interest. The Revolving Credit Facility is a five year facility and bears interest at a rate per annum equal (at the Company's option) to: (i) Adjusted LIBOR plus 2.5% or (ii) the Alternate Base Rate plus 1.5%, in each case subject to certain reductions based on the Company's financial performance. Amounts under the Revolving Credit Facility not paid when due bear interest at a default rate equal to 2.0% above the otherwise applicable rate. Prepayments. The Revolving Credit Facility permits the Company to permanently reduce revolving credit commitments, in whole or in part, at any time. Any prepayment of Adjusted LIBOR loans other than at the end of an interest period will be subject to reimbursement of breakage costs. Fees. The Company is required to pay the lenders, on a quarterly basis, a commitment fee equal to 1/2 of 1% per annum on the undrawn portion of the commitments, subject to reductions based upon the Company's financial performance. The Company is also required to pay (i) a per annum letter of credit fee equal to the applicable margin from time to time for Adjusted LIBOR loans under the Revolving Credit Facility on the aggregate face amount of outstanding letters of credit under the Revolving Credit Facility, (ii) a fronting bank fee for the letter of credit issuing bank, (iii) annual administration fees, and (iv) agent, arrangement and other similar fees. Covenants. The Revolving Credit Facility contains a number of covenants that, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness or amend other debt instruments, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, change the business conducted by the Company or its subsidiaries, make capital expenditures, or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. In addition, under the Revolving Credit Facility, the Company is required to comply with a consolidated leverage ratio, a consolidated net worth test and a consolidated interest coverage ratio. The Revolving Credit Facility also contains provisions that prohibit any modification of the Indenture in any manner adverse to the Lenders and that will limit the Company's ability to refinance or otherwise prepay the Notes without the consent of such Lenders. Events of Default. The Revolving Credit Facility contains customary events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross-defaults and 61 65 cross-acceleration to certain other indebtedness, certain events of bankruptcy and insolvency, ERISA events, judgment defaults, actual or asserted invalidity of any security interest and change of control. DESCRIPTION OF NOTES GENERAL The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) the New Notes will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and (ii) holders of New Notes will not be entitled to rights of holders of the Old Notes under the Registration Rights Agreement which terminate upon the consummation of the Exchange Offer. The Old Notes have been, and the New Notes are to be, issued under an Indenture, dated as of (the "Indenture"), among the Company, the Guarantor Subsidiaries and United States Trust Company of New York, as Trustee (the "Trustee"). The following summary of the material provisions of the Indenture and the Notes does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part thereof by the Trust Indenture Act of 1939, as amended ("TIA"). Capitalized terms used herein and not otherwise defined have the meanings set forth in the section "-- Certain Definitions" below. Principal of, premium, if any, and interest on the Notes will be payable, and the Notes may be exchanged or transferred, at the office or agency of the Company in the Borough of Manhattan, the City of New York (which initially shall be the corporate trust office of the Trustee at 114 West 47th Street, New York, N.Y. 10036, Attn: Gerard Ganey), except that, at the option of the Company, payment of interest may be made by check mailed to the registered holders of the Notes at their registered addresses. The Notes may be issued only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. TERMS OF THE NOTES The Notes are unsecured senior subordinated obligations of the Company, limited to $150.0 million aggregate principal amount, and will mature on May 1, 2007. Each Note will bear interest at a rate per annum shown on the front cover of this Prospectus from the Issue Date or from the most recent date to which interest has been paid or provided for, payable semiannually to Holders of record at the close of business on the April 15 or October 15 immediately preceding the interest payment date on May 1 and November 1 of each year, commencing November 1, 1997. OPTIONAL REDEMPTION Except as set forth below, the Notes are not redeemable at the option of the Company prior to May 1, 2002. On and after such date, the Notes will be redeemable, at the Company's option, in whole or in part, at any time upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the 62 66 relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period commencing on May 1 of the years set forth below:
REDEMPTION YEAR PRICE ----------------------------------------------------------------- ---------- 2002............................................................. 105.5625% 2003............................................................. 103.7083% 2004............................................................. 101.8542% 2005 and thereafter.............................................. 100.0000%
In addition, at any time and from time to time on or prior to May 1, 2000, the Company may redeem in the aggregate up to 40% of the original aggregate principal amount of the Notes with the cash proceeds to it of one or more Public Equity Offerings following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount thereof) of 111.125% plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption); provided, however, that at least 60% of the original aggregate principal amount of the Notes must remain outstanding after each such redemption. The Notes will be subject to redemption at the option of the Company, prior to May 1, 2002, at any time within 180 days after a Change of Control on not less than 30 nor more than 60 days' prior notice to each Holder of Notes to be redeemed, in amounts of $1,000 or an integral multiple thereof, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. Each Holder of Notes will also have certain rights to require the Company to purchase such Notes upon the occurrence of a Change of Control. See "-- Change of Control" below. SELECTION In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Note of $1,000 in original principal amount or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. RANKING The indebtedness evidenced by the Notes is unsecured Senior Subordinated Indebtedness of the Company. The payment of the principal of, premium (if any) and interest on the Notes is subordinate in right of payment, as set forth in the Indenture, to all existing and future Senior Indebtedness of the Company, ranks pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of the Company and is senior in right of payment to all existing and future Subordinated Obligations of the Company. The Notes will also be effectively subordinated to any Secured Indebtedness of the Company to the extent of the value of the assets securing such indebtedness. However, payment from the money or the proceeds of U.S. Government Obligations held in any defeasance trust described under "Defeasance" below is not subordinated to any Senior Indebtedness or subject to the restrictions described herein. The indebtedness evidenced by a Subsidiary Guaranty is unsecured Senior Subordinated Indebtedness of the Guarantor Subsidiary issuing such Subsidiary Guaranty. The payment of a Subsidiary Guaranty is subordinate in right of payment, as set forth in the Indenture, to all existing and future Senior indebtedness of such Guarantor Subsidiary, ranks pari passu in right of payment with the existing and 63 67 future Senior Subordinated Indebtedness of such Guarantor Subsidiary and will be senior in right of payment to all existing and future Subordinated Obligations of such Guarantor Subsidiary. Each Subsidiary Guaranty is also effectively subordinated to any Secured Indebtedness of the Guarantor Subsidiary to the extent of the value of the assets securing such indebtedness. As of March 31, 1997, after giving pro forma effect to the Transactions, the Refinancing and the application of the proceeds therefrom, the Company would have had outstanding $0.1 million of Senior Indebtedness, excluding $0.6 million of outstanding letters of credit, $197.6 million aggregate amount of Senior Subordinated Indebtedness including the Indebtedness represented by the Notes, and no indebtedness that is subordinate and junior in right of payment to the indebtedness represented by the Notes. As of March 31, 1997, and after giving effect to the Transactions, the Refinancing and the application of the proceeds therefrom, as well as borrowing base limitations and $0.6 million of outstanding letters of credit, the Company estimates it would have had the ability to borrow approximately $24.5 million under the Revolving Credit Facility. Although the Indenture contains limitations on the amount of additional Indebtedness that the Company and its Guarantor Subsidiaries may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness of the Company or a Guarantor Subsidiary, as the case may be. See "Certain Covenants -- Limitation on Indebtedness" below. "Senior Indebtedness" of the Company means all principal of, premium (if any), accrued interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and other amounts owing with respect to all Indebtedness of the Company, and including all Bank Indebtedness, whether outstanding on the Issue Date or thereafter incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is expressly provided that such obligations are not superior in right of payment to the Notes; provided, however, that Senior Indebtedness shall not include (1) any obligation of the Company to any Subsidiary, (2) any liability for federal, foreign, state, local or other taxes owed or owing by the Company, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness or obligation of the Company which is subordinate or junior in any respect (other than as a result of the Indebtedness being unsecured) to any other Indebtedness or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock or (6) any Indebtedness Incurred in violation of the Indenture. "Senior Indebtedness" of any Guarantor Subsidiary has a correlative meaning. Only Indebtedness of the Company or a Guarantor Subsidiary that is Senior Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty in accordance with the provisions of the Indenture. The Notes and each Subsidiary Guaranty in all respects ranks pari passu with all other Senior Subordinated Indebtedness of the Company and the relevant Guarantor Subsidiary, respectively. The Company and each Guarantor Subsidiary has agreed in the Indenture that it will not incur, directly or indirectly, any Indebtedness which is subordinate or junior in ranking in any respect to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness, or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness of the Company or a Guarantor Subsidiary is not deemed to be subordinated or junior to Secured Indebtedness, as the case may be, merely because it is unsecured. The Company may not pay principal of, or premium (if any) or interest on, the Notes or make any deposit pursuant to the provisions described under "-- Defeasance" below, and may not otherwise purchase, redeem or otherwise retire any Notes other than from funds held in a defeasance trust pursuant to the provisions described under "-- Defeasance" below (collectively, "pay the Notes"), if (i) any Senior Indebtedness of the Company is not paid when due or (ii) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior 64 68 Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full. However, the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the holders of the Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the holders of the Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full). Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness have, or the Representative of such holders has, accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. Upon any payment or distribution of the assets of the Company upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property, the holders of Senior Indebtedness of the Company will be entitled to receive payment in full of the Senior Indebtedness of the Company before the Noteholders are entitled to receive any payment and until the Senior Indebtedness of the Company is paid in full, any payment or distribution to which Noteholders would be entitled but for the subordination provisions of the Indenture will be made to holders of the Senior Indebtedness of the Company as their respective interests may appear. If a payment or distribution is made to Noteholders that due to the subordination provisions should not have been made to them, such Noteholders are required to hold such payment or distribution in trust for the holders of Senior Indebtedness and pay it over to them as their respective interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness or the Representative of such holders of the acceleration. The Company may not pay the Notes until five Business Days after such holders or the Representative of the holders of the Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. The terms of the subordination provisions described above with respect to the Company's obligations under the Notes apply equally to a Guarantor Subsidiary and the obligations of such Guarantor Subsidiary under its Subsidiary Guaranty. By reason of such subordination provisions contained in the Indenture, in the event of insolvency, creditors of the Company or a Guarantor Subsidiary who are holders of Senior 65 69 Indebtedness of the Company or a Guarantor Subsidiary, as the case may be, may recover more, ratably, than the Noteholders, and creditors of the Company who are not holders of Senior Indebtedness of the Company or of Senior Subordinated Indebtedness (including the Notes) may recover less, ratably, than holders of Senior Indebtedness of the Company. SUBSIDIARY GUARANTIES Each of Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. (the "Initial Guarantors," and together with all future issuers of Subsidiary Guaranties, the "Guarantor Subsidiaries") jointly and severally as primary obligors and not merely as sureties, irrevocably Guarantee on an unsecured senior subordinated basis the performance and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the Indenture and the Notes, whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise (all such obligations fully and unconditionally guaranteed by the Guarantor Subsidiaries being herein called the "Guaranteed Obligations"). The Guarantor Subsidiaries have agreed to pay, in addition to the amount stated above, any and all expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under the Subsidiary Guaranties. Each Subsidiary Guaranty is limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Guarantor Subsidiary without rendering such Subsidiary Guaranty voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. On or after the Issue Date, the Company will cause each Restricted Subsidiary which Incurs Indebtedness to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes. See "Certain Covenants -- Future Guarantor Subsidiaries" below. Each Subsidiary Guaranty is a continuing guarantee and shall (a) remain in full force and effect until payment in full of all the Guaranteed Obligations, (b) be binding upon each Guarantor Subsidiary and (c) enure to the benefit of and be enforceable by the Trustee, the Holders and their successors, transferees and assigns. A Subsidiary Guaranty will be released upon the sale of the capital stock, or all or substantially all of the assets, of the applicable Guarantor Subsidiary if such sale is made in compliance with the Indenture. Each of the Company's Guarantor Subsidiaries also Guarantee Indebtedness of the Company Incurred under the terms of the Senior Bank Facilities. Because the operations of the Company are conducted through its Subsidiaries, and the Guaranties issued by the Guarantor Subsidiaries are secured by pledges of substantially all the assets of the Guarantor Subsidiaries, the Notes effectively subordinated to creditors of the Company under the Senior Bank Facilities. See "Risk Factors -- Holding Company Structure." CHANGE OF CONTROL Upon the occurrence of any of the following events (each a "Change of Control"), each Holder will have the right to require the Company to repurchase all or any part of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), pursuant to the offer described below and the other procedures set forth in the Indenture; provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to purchase the Notes pursuant to this covenant in the event that it has exercised its rights to redeem all of the Notes as described under "-- Optional Redemption": (a) prior to the earlier to occur of the first public offering of Voting Stock of ACP Holdings, Holdings or the Company, the Permitted Holders cease to be entitled (by "beneficial owner- 66 70 ship" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of Voting Stock, contract or otherwise) to elect or cause the election of directors of the Company having a majority of the total voting power of the Board of Directors of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (a), the Permitted Holders shall be deemed to beneficially own any Voting Stock of a corporation (the "specified corporation") held by any other corporation (the "parent corporation") so long as one or more of the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent corporation); (b) after the first public offering of Voting Stock of ACP Holdings, Holdings or the Company, any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Permitted Holders, is or becomes the beneficial owner (as defined in clause (a) above), directly or indirectly, of Voting Stock that represents more than 40% of the aggregate ordinary voting power of all classes of the Voting Stock of ACP Holdings, Holdings or the Company voting together as a single class, and either (x) the Permitted Holders beneficially own (as defined in clause (a) above), directly or indirectly, in the aggregate Voting Stock that represents a lesser percentage of the aggregate ordinary voting power of all classes of the Voting Stock of ACP Holdings, Holdings, or the Company as the case may be, voting together as a single class, than such other person or group and are not entitled (by voting power, contract or otherwise) to elect directors of ACP Holdings, Holdings or the Company having a majority of the total voting power of the board of directors of ACP Holdings, Holdings or the Company, as the case may be, or (y) such other person or group is entitled to elect directors of ACP Holdings, Holdings or the Company having a majority of the total voting power of the board of directors of ACP Holdings, Holdings or the Company; (c) after the first public offering of Voting Stock of ACP Holdings, Holdings or the Company, during any period of not greater than two consecutive years beginning after the Issue Date, individuals who at the beginning of such period constituted the board of directors of ACP Holdings, Holdings or the Company, as the case may be (together with any new directors whose election by such board of directors, or whose nomination for election by shareholders was approved by the Permitted Holders or by such board of directors, in each case by a vote of a majority of the directors of ACP Holdings, Holdings or the Company, as the case may be, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to have a majority of the total voting power of the board of directors of ACP Holdings, Holdings or the Company, as the case may be; or (d) any sale, lease, or other transfer (in one transaction or in a series of related transactions) is made by the Company or its Restricted Subsidiaries of all or substantially all of the consolidated assets of the Company and its Restricted Subsidiaries to any Person. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating, among other things: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or any portion of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes or any portion thereof purchased. 67 71 The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described above by virtue thereof. The Change of Control purchase feature is a result of negotiations between the Company and the Initial Purchasers. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company or Holdings would decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. The occurrence of a Change of Control would constitute a default under the Senior Bank Facilities. Future Senior Indebtedness of the Company may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a repurchase may be limited by the Company's then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any repurchases required in connection with a Change of Control. The Company's failure to purchase the Notes in connection with a Change of Control would result in a default under the Indenture. CERTAIN COVENANTS The Indenture will contain covenants including, among others, the following: Limitation on Indebtedness. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness (other than pursuant to the following paragraph (b)) unless on the date of such Incurrence the Consolidated Coverage Ratio exceeds 2.00 to 1. (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness consisting of the Term Loans in an aggregate principal amount outstanding of up to $45.0 million less (A) the amount of any scheduled principal payments thereon and (B) the aggregate amount of all repayments of principal actually made thereunder since the Issue Date with Net Available Cash from Asset Dispositions pursuant to clause (a)(iii)(A) of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"); (ii) Indebtedness consisting of revolving credit, working capital or letters of credit financing in an aggregate principal amount at any time outstanding not in excess of the greater of $35.0 million and the Borrowing Base in effect from time to time (in each case less the aggregate amount of all repayments of principal actually made thereunder since the Issue Date with Net Available Cash from Asset Dispositions pursuant to clause (a)(iii)(A) of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"); (iii) Indebtedness of the Company owing to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness (except to the 68 72 Company or a Wholly Owned Subsidiary) will be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness of the Company represented by the Notes; (v) any Indebtedness of the Company and its Restricted Subsidiaries (other than the Indebtedness described in clauses (i), (ii) or (iii) above) outstanding on the Issue Date; (vi) Indebtedness of the Company and its Restricted Subsidiaries (A) in respect of judgment, appeal, surety, performance and other like bonds, bankers' acceptances and letters of credit provided by the Company and its Restricted Subsidiaries in the ordinary course of their business and which do not secure other Indebtedness and (B) under Commodity Agreements, Currency Agreements and Interest Rate Agreements that are designed to protect the Company and its Restricted Subsidiaries against fluctuations in commodity prices (for raw materials used by them), interest rates or currency exchange rates and not for the purposes of speculation; (vii) Indebtedness represented by Guarantees by the Company of Indebtedness of a Restricted Subsidiary, or in respect of letters of credit provided by the Company to support such Indebtedness, or Guarantees by a Restricted Subsidiary of Indebtedness of the Company or a Restricted Subsidiary, or in respect of letters of credit provided by a Restricted Subsidiary to support such Indebtedness; provided, however, that only Indebtedness that is Incurred in compliance with this covenant may be guaranteed pursuant to this clause (vii); (viii) Purchase Money Indebtedness, industrial revenue bonds or similar Indebtedness and Capitalized Lease Obligations of the Company and its Restricted Subsidiaries in an aggregate principal amount at any time outstanding not in excess of 10% of Total Assets; (ix) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments, in connection with the acquisition or disposition of any business, assets or Subsidiary of the Company permitted under the Indenture; (x) Indebtedness of the Company and its Restricted Subsidiaries, to the extent the proceeds thereof are immediately used after the Incurrence thereof to purchase Notes tendered in an offer to purchase made as a result of a Change of Control; (xi) Indebtedness of the Company or a Restricted Subsidiary owed to (including obligations in respect of letters of credit for the benefit of) any Person in connection with liability insurance provided by such Person to the Company or such Restricted Subsidiary, pursuant to reimbursement or indemnification obligations to such Person, in each case Incurred in the ordinary course of business; (xii) Indebtedness of the Company consisting of guarantees of up to an aggregate principal amount of $2.0 million of borrowings by Management Investors in connection with purchases of Voting Stock of Holdings on or after the Issue Date and in accordance with "-- Certain Covenants -- Limitation on Restricted Payments;" (xiii) Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount at any time outstanding not in excess of $15.0 million which Indebtedness may be incurred pursuant to clause (ii) above; and (xiv) any Refinancing Indebtedness incurred in respect of any Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (i), (ii), (v), (viii), (x) or (xiv) of this paragraph (b). (c) Notwithstanding the foregoing, the Company may not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Company unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of the Company. In addition, the 69 73 Company may not Incur any Secured Indebtedness which is not Senior Indebtedness of the Company unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Notes) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A Guarantor Subsidiary may not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Guarantor Subsidiary unless such Indebtedness is Senior Subordinated Indebtedness of such Guarantor Subsidiary or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Guarantor Subsidiary. In addition, a Guarantor Subsidiary may not incur any Secured Indebtedness which is not Senior Indebtedness of such Guarantor Subsidiary unless contemporaneously therewith effective provision is made to secure the Subsidiary Guaranty equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Subsidiary Guaranty) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to: (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of equal or greater value); (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary; (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement, Investment or payment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default will have occurred and be continuing (or would result therefrom); (2) the Company could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the Issue Date to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income will be a deficit, minus 100% of such deficit); (B) 100% of the aggregate net proceeds received by the Company (including the fair market value (as determined in good faith by the Board of Directors, whose determination 70 74 will be conclusive and evidenced by a resolution of the Board of Directors) of property received by the Company; provided, however, that such property is related, ancillary or complementary to any business of the Company and the Restricted Subsidiaries conducted on the Issue Date) as a capital contribution or from the issue or sale of Capital Stock (other than Disqualified Stock) of the Company or Holdings subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries to the extent the purchase by such plan or trust is financed by Indebtedness of such plan or trust and for which the Company or a Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary) of any Indebtedness of the Company or its Restricted Subsidiaries issued subsequent to the Issue Date and convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or other property (other than such Capital Stock) distributed by the Company or any Restricted Subsidiary upon such conversion or exchange) (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares or scrip); (D) the aggregate Net Cash Proceeds received subsequent to the Issue Date by the Company or Holdings (other than from any Restricted Subsidiary) upon the exercise of any options or warrants to purchase Capital Stock (other than Disqualified Stock) of the Company or Holdings; and (E) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) payments of dividends, repayments of the principal of loans, return of capital or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") or the receipt of proceeds from the sale or other disposition of any portion of any Investment in an Unrestricted Subsidiary not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments. (b) The provisions of the foregoing paragraph (a) will not prohibit: (i) any purchase, redemption, retirement or other acquisition of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries to the extent the purchase by such plan or trust is financed by Indebtedness of such plan or trust and for which the Company or a Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); provided, however, that (A) such purchase, redemption, retirement or other acquisition will be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale to the extent so used will be excluded from clause (iv)(B) of paragraph (a) above; (ii) any purchase, defeasance, retirement, redemption or other acquisition of (A) Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be 71 75 Incurred pursuant to paragraph (b) of the covenant described under "-- Limitation on Indebtedness" or (B) Subordinated Obligations of a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of any Restricted Subsidiary or the Company which is permitted to be Incurred pursuant to paragraph (b) of the covenant described under "-- Limitation of Indebtedness"; provided, however, that such purchase, defeasance, retirement, redemption or other acquisition will be excluded in the calculation of the amount of Restricted Payments; (iii) any purchase, redemption, retirement or other acquisition of Disqualified Stock made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock; provided, however, that such purchase, redemption, retirement or other acquisition will be excluded in the calculation of the amount of Restricted Payments; (iv) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"; provided, however, that such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments; (v) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the Notes pursuant to the covenant described under "-- Change of Control" above (including the purchase of all Notes tendered), any purchase, defeasance, retirement, redemption or other acquisition of Subordinated Obligations required pursuant to the terms thereof as a result of such Change of Control; provided, however, that such purchase, defeasance, retirement, redemption or other acquisition will be included in the calculation of the amount of Restricted Payments; (vi) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that such dividend will be included in the calculation of the amount of Restricted Payments; (vii) the repurchase, for cash or notes, of shares of, or options or warrants to purchase shares of, or payments to Holdings to enable Holdings to repurchase shares of, or options or warrants to purchase shares of, Capital Stock of Holdings, the Company or any of the Subsidiaries of the Company from present or former Management Investors in an amount not in excess of $2.0 million in any one year and $5.0 million in the aggregate; provided, however, that the amount of such repurchase will be included in the calculation of the amount of Restricted Payments; (viii) payments in lieu of fractional shares in amount not in excess of $250,000 in the aggregate; (ix) payments by the Company to Holdings to pay Federal, state and local taxes to the extent such taxes are attributable to the Company and its Restricted Subsidiaries; provided, however, that such payments will be excluded from the calculation of the amount of Restricted Payments; (x) loans, advances, dividends or distributions by the Company to Holdings to pay dividends on the common stock of Holdings following a Public Equity Offering of such stock; but only to the extent that such loans, advances, dividends or distributions do not exceed 6% per annum of the net proceeds received by the Company in such Public Equity Offering; provided, however, that the amount of such loans, advances, dividends or distributions will be included in the amount of Restricted Payments; or (xi) in each case to the extent such payments by Holdings are attributable to the Company and its Restricted Subsidiaries, payments by the Company to Holdings not to exceed an amount necessary to permit Holdings to (A) make payments in respect to its indemnification obligations owing to directors, officers or other Persons under Holding's charter or by-laws or 72 76 pursuant to written agreements with any such Person, (B) make payments in respect of its other operational expenses (other than taxes) incurred in the ordinary course of business, or (C) make payments in respect of indemnification obligations and costs and expenses incurred by Holdings in connection with any offering of common stock of Holdings; provided, however, that all such payments will be included in the calculation of the amount of Restricted Payments. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness owed to the Company, (ii) make any loans or advances to the Company or (iii) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness entered into prior to the date on which such Restricted Subsidiary was acquired or designated as a Restricted Subsidiary by the Company (other than as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company); (3) any encumbrance or restriction pursuant to (x) an agreement constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this covenant or this clause (3) or contained in any amendment to an agreement referred to in clause (1) or (2) of this covenant or this clause (3) or (y) Indebtedness Incurred pursuant to clause (i) or (ii) of paragraph (b) of the covenant described above under "-- Limitation on Indebtedness;" provided, however, that the encumbrances and restrictions contained in (A) any such refinancing agreement or amendment referred to in clause (x) above are, collectively, no more restrictive in any material respect than the encumbrances and restrictions contained in such agreements (as determined in good faith by the Company) and (B) any instrument relating to any Indebtedness referred to in clause (y) above, are, collectively, no more restrictive in any material respect than the encumbrances and restrictions contained in the Senior Bank Facilities as in effect on the Issue Date (as determined in good faith by the Company); (4) in the case of clause (iii) above, any encumbrance or restriction contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary which are not prohibited by the covenant described under "-- Limitation on Liens" to the extent such encumbrances or restrictions restrict the transfer of the property or assets subject to such security agreements or mortgages; (5) any encumbrance or restriction existing under or by reason of applicable law; (6) customary non-assignment provisions of any licensing agreement or of any lease; (7) any encumbrance or restriction contained in contracts for sales of assets otherwise permitted by the Indenture; (8) with respect to a Restricted Subsidiary, any encumbrance or restriction imposed pursuant to an agreement that has been entered into for the sale of all or substantially all of the Capital Stock of such Restricted Subsidiary; and (9) Purchase Money Obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (iii) of this covenant. 73 77 Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless: (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value, as may be determined (and shall be determined, to the extent an Asset Disposition (or a series of related Asset Dispositions) involves a fair market value greater than $1.0 million) in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors (including as to the value of all non-cash consideration), of the shares and assets subject to such Asset Disposition; (ii) in the case of an Asset Disposition (or a series of related Asset Dispositions) having a fair market value of $1.0 million or more, at least 80% (or 100% in the case of lease payments) of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents; and (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness), to prepay, repay or purchase Senior Indebtedness of the Company or a Wholly Owned Subsidiary or, in the case of a sale by a Restricted Subsidiary which is not a Wholly Owned Subsidiary, to prepay, repay or purchase Senior Indebtedness of such Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 365 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of Net Available Cash after application in accordance with clause (A), to the extent the Company or such Restricted Subsidiary elects, to reinvest (or enter into a binding contract to do so) in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary), within 365 days from the later of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an Offer (as defined below) to purchase Notes pursuant to and subject to the conditions set forth in section (b) of this covenant and (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to fund (to the extent consistent with any other applicable provision of the Indenture) any corporate purpose; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this covenant, the Company and its Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions in any year which are not applied in accordance with this covenant exceed $5.0 million in such year. For the purposes of clause (ii) of this covenant, the following are deemed to be cash: (w) the assumption of Indebtedness of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition, (x) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash, (y) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Disposition, to the extent that the Company and each other Restricted Subsidiary is released from any Guarantee of such Indebted- 74 78 ness in connection with such Asset Disposition, and (z) consideration consisting of Indebtedness of the Company or any Restricted Subsidiary. (b) In the event of an Asset Disposition that requires the purchase of Notes pursuant to clause (a)(iii)(C) of this covenant, the Company will be required to purchase Notes tendered pursuant to an offer, commenced within 30 days following the expiration of the 365 day period referred to in clause (a)(iii)(B) of this covenant (or, if the Company so elects, at any time within such 365 day period), by the Company for the Notes (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase in accordance with the procedures (including prorationing in the event of oversubscription) set forth in the Indenture. If the aggregate purchase price of Notes tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Notes, the Company will apply the remaining Net Available Cash in accordance with clause (a)(iii)(D) of this covenant and upon completion of the purchase of the Notes tendered pursuant to the Offer, the remaining amount of Net Available Cash, if any, will be reset at zero. The Company will not be required to make an Offer for Notes pursuant to this covenant if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (A) and (B) of section (a)(iii) of this covenant) is less than $5.0 million (which lesser amount will be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate and (ii) that , in the event such Affiliate Transaction involves an aggregate amount in excess of $1.0 million, are not in writing and have not been approved by a majority of the members of the Board of Directors having no material direct or indirect financial interest in or with respect to such Affiliate Transaction. In addition, if such Affiliate Transaction involves an amount in excess of $5.0 million, a fairness opinion must be obtained from a nationally recognized appraisal or investment banking firm. (b) The provisions of the foregoing paragraph (a) will not prohibit (i) any Restricted Payment or Permitted Investment permitted to be made pursuant to the covenant described under "-- Limitation on Restricted Payments," (ii) fees, compensation or employee benefit arrangements paid to, and any indemnity provided for the benefit of, directors, officers or employees of the Company, Holdings or any Subsidiary of the Company in the ordinary course of business or any Indebtedness permitted to be Incurred pursuant to clause (xiii) of paragraph (b) of the covenant described under "-- Limitation on Indebtedness," or any payments in respect thereof, (iii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (iv) transactions pursuant to agreements entered into or in effect on the Issue Date, including amendments thereto entered into after the Issue Date, provided that the terms of any such amendment are not, in the aggregate, less favorable to the Company or such Restricted Subsidiary than the terms of such agreement prior to such amendment, (v) loans or advances to employees that are Affiliates of the Company in the ordinary course of business, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time, (vi) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries (so long as the other 75 79 stockholders of any participating Restricted Subsidiaries which are not Wholly Owned Subsidiaries are not themselves Affiliates of the Company) or (vii) payments with respect to Indebtedness Incurred pursuant to clause (ix) of paragraph (b) of the covenant described under "-- Limitation on Indebtedness." Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company will not sell any shares of Capital Stock of a Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock, except (i) to the Company or a Wholly Owned Subsidiary, (ii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, (iii) directors' qualifying shares or (iv) in a Public Equity Offering as a result of or after which a Public Market exists. The proceeds of any sale of such Capital Stock permitted by clause (ii) must be treated as Net Available Cash from an Asset Disposition and must be applied in accordance with the terms of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock." Limitation on Liens. (a) The Company will not, and will not permit any Guarantor Subsidiary to, directly or indirectly, create or permit to exist any Lien (the "Initial Lien") on any of its property or assets (including Capital Stock), whether owned on the Issue Date or thereafter acquired, securing any Indebtedness other than Senior Indebtedness of the Company, in the case of the Company, or Senior Indebtedness of a Guarantor Subsidiary, in the case of a Guarantor Subsidiary, unless contemporaneously therewith effective provision is made to secure the Notes and, in respect of Liens on any Guarantor Subsidiary's property or assets, the Subsidiary Guaranty of such Guarantor Subsidiary equally and ratably with (or on a senior basis to, in the case of Indebtedness expressly subordinated in right of payment to the Notes and such Subsidiary Guaranty) such obligation for so long as such obligation is so secured. The preceding sentence will not require the Company or any Restricted Subsidiary to equally and ratably secure the Notes if the Initial Lien consists of Permitted Liens. (b) Any Lien created for the benefit of the Holders of the Notes pursuant to the foregoing paragraph (a) shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien. SEC Reports. Notwithstanding that the Company may not be required to be or remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the Commission (after the date the Exchange Offer or Shelf Registration Statement described under "-- Exchange and Registration Rights Agreement" below becomes effective), and provide (both prior to and after such effective date) the Trustee and Noteholders and prospective Noteholders (upon request) with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Exchange Act. The Company also will comply with the other provisions of TIA Sec. 314(a). Future Guarantor Subsidiaries. The Company will cause (a) each Restricted Subsidiary that is a Domestic Subsidiary which Incurs Indebtedness and (b) each Restricted Subsidiary that is not a Domestic Subsidiary and that after the Issue Date enters into a Guarantee of any of the obligations of the Company, Holdings or any of the Company's Subsidiaries pursuant to the Senior Bank Facilities to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will Guarantee payment of the Notes; provided, however, that such Subsidiary shall not be required to execute and deliver a supplemental indenture pursuant to this section in the event that such Subsidiary is a party to the Indenture or the Supplemental Indenture at the time of such Incurrence of Indebtedness. Each Subsidiary Guaranty will be limited to an amount not to exceed the maximum amount that can be Guaranteed by that Subsidiary without rendering the Subsidiary Guaranty, as it relates to such Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Limitation on Lines of Business. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than (i) a Related Business and (ii) the making of 76 80 Permitted Investments and the operations of any business that is part of a Permitted Investment. Holdings will not engage in any business other than managing its investment in the Company. Limitation on Sale/Leaseback Transactions. The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless (i) the Company or such Restricted Subsidiary would be entitled to Incur Indebtedness in an amount equal to the Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to the covenant described under "-- Limitation on Indebtedness" and (ii) the net cash proceeds received by the Company or any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair market value (in the case of Sale/Leaseback Transactions involving amounts in excess of $1.0 million, as determined by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors) of such property and (iii) the transfer of such property is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described under "-- Limitation on Sale of Assets and Subsidiary Stock." MERGER AND CONSOLIDATION The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") will be a corporation, limited liability company, limited partnership or business trust organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) will expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default will have occurred and be continuing; (iii) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness under paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; (iv) immediately after giving effect to such transaction, the Successor Company will have Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction and (v) the Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets will not be released from the obligation to pay the principal of and interest on the Notes. DEFAULTS An Event of Default is defined in the Indenture as: (i) a default in any payment of interest on any Note when due (whether or not such payment is prohibited by the provisions described under "Ranking" above), continued for 30 days; 77 81 (ii) a default in the payment of principal of any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise (whether or not such payment is prohibited by the provisions described under "Ranking" above); (iii) the failure by the Company to comply with its obligations under the covenant described under "Merger and Consolidation" above; (iv) the failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under "Change of Control" or "Certain Covenants" above (in each case, other than a failure to purchase Notes); (v) the failure by the Company or any Guarantor Subsidiary to comply for 60 days after notice with its other agreements contained in the Notes or the Indenture; (vi) the failure by the Company or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default, if the total amount of such Indebtedness unpaid or accelerated exceeds $5.0 million or its foreign currency equivalent (the "cross acceleration provision"); (vii) certain events of bankruptcy, insolvency or reorganization of the Company or a Restricted Subsidiary (the "bankruptcy provisions"); (viii) the rendering of any judgment or decree in excess of $5.0 million or its foreign currency equivalent (net of amounts paid within 30 days of any such judgment or decree under any insurance, indemnity, bond, surety or similar instrument) against the Company or a Restricted Subsidiary by a court or other adjudicatory authority of competent jurisdiction for which the Company or the Restricted Subsidiary, as applicable, is not fully insured by a third Person and (A) an enforcement proceeding is commenced with respect to such judgment or decree or (B) such judgment or decree remains outstanding the later of (i) the day which is the sixtieth day after the judgment is rendered and (ii) the day on which any right to appeal expires (the "judgment default provision"); or (ix) any Subsidiary Guaranty ceases to be in full force and effect (except as contemplated by the terms thereof) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Subsidiary Guaranty and such Default continues for 10 days. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. However, a default under clauses (iv) or (v) will not constitute an Event of Default until the Trustee or the Holders of 25% in principal amount of the outstanding Notes notify the Company of the default and the Company does not cure such default within the time specified in clauses (iv) and (v) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes by notice to the Company may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such 78 82 Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Noteholders. In addition, the Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Notes then outstanding and any past default and its consequences or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected, no amendment may (i) reduce the amount of Notes whose Holders must consent to an amendment or waiver, (ii) reduce the rate of or extend the time for payment of interest on any Note, (iii) reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "Optional Redemption" above, (v) make any Note payable in money other than that stated in the Note, (vi) impair the right of any Holder to receive payment of principal of and interest on such Holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes, (vii) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions or (viii) make any change in any Subsidiary Guaranty that would adversely affect the Noteholders. Without the consent of any Holder, the Company and Trustee may amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation of the obligations of the Company under the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add further Guaranties 79 83 with respect to the Notes, to release Guarantor Subsidiaries when permitted by the Indenture, to secure the Notes, to add to the covenants of the Company for the benefit of the Noteholders or to surrender any right or power conferred upon the Company, to make any change that does not adversely affect the rights of any Holder or to comply with any requirement of the Commission in connection with the qualification of the Indenture under the TIA. The consent of the Noteholders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, the Company is required to mail to Noteholders a notice briefly describing such amendment. However, the failure to give such notice to all Noteholders, or any defect therein, will not impair or affect the validity of the amendment. TRANSFER AND EXCHANGE A Noteholder may transfer or exchange Notes in accordance with the Indenture. Upon any transfer or exchange, the registrar and the Trustee may require a Noteholder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Noteholder to pay any taxes required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption or to transfer or exchange any Note for a period of 15 days prior to a selection of Notes to be redeemed. The Notes will be issued in registered form and the registered holder of a Note will be treated as the owner of such Note for all purposes. DEFEASANCE The Company at any time may terminate all its obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Company at any time may terminate its obligations under the covenants described under "Certain Covenants," the operation of the cross acceleration provision, the bankruptcy default provisions with respect to Subsidiaries and the judgment default provision described under "Defaults" above and the limitations contained in clauses (iii) and (iv) under "Merger and Consolidation" above ("covenant defeasance"). If the Company exercises its legal defeasance option or its covenant defeasance option, each Guarantor Subsidiary will be released from all of its obligations with respect to its Subsidiary Guaranty. The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (iv), (vi), (vii) (with respect to Restricted Subsidiaries only), (viii) (with respect to Significant Subsidiaries only), (ix) or (x) under "Defaults" above or because of the failure of the Company to comply with clause (iii) or (iv) under "Merger and Consolidation" above. Defeasance options with respect to the Notes may be exercised to any redemption date or the applicable maturity date. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in 80 84 the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law). CONCERNING THE TRUSTEE United States Trust Company of New York is to be the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. GOVERNING LAW The Indenture provides that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. CERTAIN DEFINITIONS "ACP Holdings" means ACP Holding Company, a Delaware corporation. "ACP Products, L.L.C." means ACP Products, L.L.C., a Delaware limited liability company. "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock), including improvements to existing assets, to be used by the Company or a Restricted Subsidiary in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that, in the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "-- Certain Covenants -- Limitation on Transactions with Affiliates" only, "Affiliate" shall also mean any beneficial owner of shares representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Applicable Premium" means, with respect to a Note, the greater of (i) 1.0% of the then outstanding principal amount of such Note and (ii) the excess of (A) the present value of all remaining required interest and principal payments due on such Note, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (B) the then outstanding principal amount of such Note. "Asset Disposition" means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Restricted Subsidiaries (including any disposition by means of a merger, consolidation or similar transaction) other than (i) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (ii) a disposition of inventory, in the ordinary course of business consistent with past practices of the Company and its Subsidiaries; (iii) dispositions with a fair market value of less than $500,000 in the aggregate in any fiscal year; (iv) a disposition of properties and assets that is governed by the provisions under the first paragraph of "-- Merger and Consolidation" above; and (v) for purposes of the provisions described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, a disposition subject to the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments." 81 85 "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate assumed in making calculations in accordance with FAS 13) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Senior Bank Facilities or any refinancing or replacements thereof including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Borrowing Base" means, as of the date of determination, an amount equal to the sum, without duplication, of (i) 80% of the net book value of the Company's accounts receivable at such date and (ii) 50% of the net book value of the Company's inventories at such date. Net book value shall be determined in accordance with GAAP and shall be that reflected on the most recent available balance sheet (it being understood that the accounts receivable and inventories of an acquired business may be included if such acquisition has been completed on or prior to the date of determination). "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP. The amount of Indebtedness represented by a Capitalized Lease Obligation shall be the capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last scheduled payment of rent or any other amount due under the relevant lease. "Citicorp" means Citicorp, a Delaware corporation. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Agreement" means one or more of the following agreements entered into by a Person and one or more financial institutions: commodity future contracts, forward contracts, options or other similar arrangements or agreements designed to protect against fluctuations in the price of, or the shortage of supply of, commodities from time to time. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination (determined, for the four fiscal quarters ending prior to the Issue Date, or any thereof, on a pro forma basis to give effect to the Neenah Merger as if it had occurred at the beginning of such period) to (ii) Consolidated Interest Expense for such four fiscal quarters (determined, for the four fiscal quarters ending prior to the 82 86 Issue Date, or any thereof, on a pro forma basis to give effect to the Neenah Merger as if it had occurred at the beginning of such period); provided, however, that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness and the application of the proceeds thereof as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that in the case of Indebtedness to finance seasonal fluctuations in working capital needs Incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four quarter period); (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have disposed of any assets constituting all or substantially all of the assets of an operating unit of a business (a "Disposal"), (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Disposal for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and (y) Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Disposal for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of the assets of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness in connection therewith) as if such Investment or acquisition occurred on the first day of such period; and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Disposal or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Disposal, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). If any Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest and is being 83 87 given pro forma effect, then (i) if any interest had accrued on such Indebtedness prior to the date of determination, the interest expense on such Indebtedness shall be computed by applying a fixed or floating rate of interest as selected by the Company or such Restricted Subsidiary for the interest period immediately preceding such determination or (ii) if no interest accrued on such Indebtedness prior to the date of determination, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company or such Restricted Subsidiary, either a fixed or floating rate. If any Indebtedness which is being given pro forma effect was Incurred under a revolving credit facility that was in effect throughout the applicable period, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period. "Consolidated Interest Expense" means, for any period, the total consolidated interest expense of the Company and its Restricted Subsidiaries for such period, plus, to the extent Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense, (i) interest expense attributable to Capitalized Lease Obligations and Attributable Debt, (ii) amortization of debt discount, (iii) capitalized interest, (iv) noncash interest expense, (v) commissions, discounts and other fees and charges with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Interest Rate Agreements, (vii) the interest portion of any deferred payment obligation for goods or services, (viii) interest actually paid by the Company or any Restricted Subsidiary on any Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary, (ix) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or a Wholly Owned Subsidiary) in connection with Indebtedness Incurred by such plan or trust and (x) the earned discount or yield with respect to the sale of receivables (without duplication of amounts included in Consolidated Net Income); but in no event shall include (i) amortization of debt issuance costs, (ii) Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries of the Company and Disqualified Stock of the Company held by Persons other than the Company or a Wholly Owned Subsidiary, or (iii) interest Incurred in connection with Investments in discontinued operations. "Consolidated Net Income" means, for any period, the consolidated net income (loss) of the Company and its Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income, (ii) for purposes of subclause (a)(3)(A) of the covenant described under "Limitation on Restricted Payments" only, any net income (loss) of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition, (iii) any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (iv) any gain (or loss) realized upon the sale or other disposition of any asset of the Company or its Consolidated 84 88 Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person, (v) any extraordinary gain or loss, and (vi) the cumulative effect of a change in accounting principles after the Issue Date. Notwithstanding the foregoing, for the purpose of the covenant described under "Certain Covenants -- Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof. Notwithstanding anything to the contrary in the covenant described under "Certain Covenants -- Limitations on Restricted Payments," all amounts paid to Holdings pursuant to clause (b)(xi)(B) of such covenant shall be deducted in computing Consolidated Net Income. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and the Restricted Subsidiaries, determined on a Consolidated basis, as of the end of the most recent fiscal quarter of the Company ending at least 45 days prior to the taking of any action for the purpose of which the determination is being made, as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Consolidated Non-Cash Charges" of any Person means, for any period, the aggregate depreciation, amortization and other non-cash charges of such Person and its Consolidated Subsidiaries for such period, on a Consolidated basis, as determined in accordance with GAAP (excluding any such other non-cash charge which consists of an accrual or reserve for cash charges for any future period). "Consolidation" means the consolidation of the accounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreement or other similar agreement or arrangement as to which such Person is a party or a beneficiary. "CVC" means Citicorp Venture Capital, Ltd., a New York corporation. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend at least $25.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to ninety-one days after the Stated Maturity of the Notes. Disqualified Stock shall not include any Capital Stock that is not otherwise Disqualified Stock if by its terms the holders have the right to require the issuer to repurchase such stock upon a Change of Control (or upon events substantially similar to a Change of Control). 85 89 "Domestic Subsidiary" means a Subsidiary that is incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia. "EBITDA" for any period means the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest Expense and (iii) Consolidated Non-Cash Charges, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income (loss) of such Subsidiary was included in calculating Consolidated Net Income. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, in statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture shall be computed in conformity with GAAP. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person through an agreement enforceable by or for the benefit of the holder of such Indebtedness and any such 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 Indebtedness or other obligation of such other Person (whether arising to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, 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. "Guarantor Subsidiary" means any Person that has issued a Subsidiary Guaranty. Upon consummation of the Neenah Merger and execution and delivery of the Supplemental Indenture, the term "Guarantor Subsidiary" shall include each of the Initial Guarantors. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Commodity Agreement, Interest Rate Agreement or Currency Agreement. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "Holdings" means NFC Castings, Inc., a Delaware corporation, any Person succeeding to its ownership, and successors thereto. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such person at the time it becomes a Restricted Subsidiary; provided further, however, that in the case of a discount security, the accretion of original issue discount on such security shall not be considered an Incurrence of Indebtedness if (but only if) at the time of issuance of such security, the Company elects to treat the whole face amount of such security as Incurred at such time (and such Incurrence is then permitted in accordance with the terms of the Indenture). "Indebtedness" means, with respect to any Person on any date of determination (without duplication), (i) the principal of indebtedness of such Person for borrowed money; (ii) the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; 86 90 (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto) other than letters of credit or similar instruments supporting Trade Payables entered into in the ordinary course of business of such Person to the extent that such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed not later than the third business day following such drawing; (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than twelve months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (v) all Capitalized Lease Obligations and all Attributable Debt of such Person; (vi) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and (ix) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Initial Guarantors" means Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc., each a Wisconsin corporation. "Interest Rate Agreement" means, with respect to any Person, any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance or loan (other than advances or loans to customers or suppliers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the Person making such loan or advance) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments," only (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Notes were originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). 87 91 "Management Investors" means the officers and employees of ACP Holdings, ACP Products, L.L.C., Holdings, the Company or a Subsidiary of the Company who acquire Voting Stock of ACP Holdings, ACP Products, L.L.C., Holdings or the Company on or after the Issue Date. "Moody's" means Moody's Investors Service, Inc. and its successors. "NC Merger" means NC Merger Company, a Wisconsin corporation. "Neenah Merger" means the merger of NC Merger Company with and into the Company under the terms of the Agreement and Plan of Reorganization (as amended) by and among Holdings, the Company and NC Merger Company and dated November 20, 1996. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or from an escrow account or otherwise, in each case only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of (i) all legal, title and recording expenses, commissions and other expenses (including fees and expenses of counsel and investment bankers) incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such asset disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (iv) appropriate amounts to be provided by the party or parties making such Asset Disposition as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Disposition. "Net Cash Proceeds" with respect to any issuance or sale of Capital Stock, means the proceeds of such issuance or sale in the form of cash, including payments in respect of deferred payment obligations when received in form of, or stock or other assets when disposed for, cash, net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, filing and registration fees, trustee's fees, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means (i) CVC and its Affiliates and Permitted Transferees and (ii) the Management Investors and their Permitted Transferees. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) the Company, (ii) a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (iii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (iv) Temporary Cash Investments; (v) receivables owing 88 92 to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (vi) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vii) loans or advances to employees made in the ordinary course of business and not exceeding $1.0 million in the aggregate outstanding at any one time; (viii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix) securities received as consideration in sales of assets made in compliance with the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"; (x) other Investments, of any type, provided that the amount of such Investments made after the Issue Date in reliance on this clause (x) and outstanding at any time does not exceed 7.5% of Total Assets; or (xi) Guarantees relating to Indebtedness which is permitted to be Incurred under the covenant described under "-- Limitation on Indebtedness." "Permitted Liens" means with respect to any Person: (a) Liens to secure Indebtedness permitted under the provisions described under clause (b)(i) or (ii) under "Certain Covenants -- Limitation on Indebtedness"; (b) pledges or deposits made or other Liens granted by (1) such Person under workmen's compensation laws, unemployment insurance laws or similar legislation, (2) in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or (3) to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (c) Liens imposed by law, such as carriers', warehousemen's, mechanics', employees' and other like Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments, awards, decrees or orders of any court or other governmental authority against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review; (d) Liens for property taxes not yet due or payable or subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings; (e) Liens in favor of issuers of surety, performance, judgment, appeal and other like bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; (f) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning provisions, carveouts, conditional waivers or other restrictions as to the use of real properties or minor irregularities of title (and with respect to leasehold interests, mortgages, obligations, Liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property, with or without consent of the lessee) or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially impair the use of such properties in the operation of the business of such Person; (g) Liens existing or provided for under written arrangements existing on the Issue Date; (h) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of such Person; 89 93 (i) Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligations; (j) Liens to secure any refinancing, refunding, replacement, renewal, repayment or extension (or successive refinancings, refundings, replacements, renewals, repayments or extensions) as a whole, or in part, of any Indebtedness secured by any Lien referred to in clause (g), (i), (l), (m) or (n); provided, however, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (g), (i), (l), (m) and (n) at the time the original Lien became a Permitted Lien and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, replacement, renewal, repayment or extension; (k)(i) mortgages, liens, security interests, restrictions or encumbrances that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary or the Company has easement rights or on any real property leased by the Company and subordination or similar agreements relating thereto and (ii) any condemnation or eminent domain proceedings affecting any real property; (l) Liens on property, assets or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created, Incurred or assumed by such Person in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; (m) Liens on property or assets at the time the Company or a Restricted Subsidiary acquired the property or assets, including any acquisition by means of a merger or consolidation with or into the Company or a Restricted Subsidiary; provided, however, that such Liens are not created in connection with, or in contemplation of, such acquisition; provided further, however, that the Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; and (n) any Lien on stock or other securities of an Unrestricted Subsidiary that secures Indebtedness of such Unrestricted Subsidiary. "Permitted Transferee" means (a) with respect to CVC (i) Citicorp, any direct or indirect wholly owned subsidiary of Citicorp, and any officer, director or employee of CVC, Citicorp or any wholly owned subsidiary of Citicorp, (ii) any spouse or lineal descendant (including by adoption and stepchildren) of the officers, directors and employees to in clause (a)(i) above or (iii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of one or more of the persons described in clause (a)(i) or (ii) above and (b) with respect to any officer or employee of ACP Products, L.L.C., ACP Holdings, Holdings, the Company or a Subsidiary of the Company (i) any spouse or lineal descendant (including by adoption and stepchildren) of such officer or employee and (ii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of such officer or employee, any of the persons described in clause (b)(i) above or any combination thereof. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. 90 94 "Public Equity Offering" means an underwritten public offering of common stock of ACP Holdings, the Company or Holdings (or, for purposes of the covenant described under "-- Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries," any Restricted Subsidiary) pursuant to an effective registration statement (other than a registration statement on Form S-4, S-8 or any successor or similar forms) under the Securities Act (whether alone or in conjunction with any secondary public offering); provided, however, that if any such offering is an offering of the common stock of ACP Holdings, only the net proceeds thereof that are contributed to the Company shall be taken into consideration for the purposes of this definition. "Public Market" means any time after (x) a Public Equity Offering has been consummated and (y) at least 15% of the total issued and outstanding common stock of ACP Holdings, the Company or Holdings (or, for purposes of the covenant described under "-- Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries," any Restricted Subsidiary) has been distributed by means of an effective registration statement under the Securities Act. "Purchase Money Indebtedness" means Indebtedness (i) consisting of the deferred purchase price of an asset or assets (including Capital Stock and the assets of an ongoing business) including additions and improvements, any conditional sale obligation, any obligation under any title retention agreement or any other purchase money obligation, or (ii) incurred to finance the acquisition by the Company or a Restricted Subsidiary of an asset or assets (including Capital Stock and the assets of a Related Business) including additions and improvements; provided in the case of clause (i) that the Average Life of such Indebtedness is less than the anticipated useful life of assets having an aggregate fair market value representing more than 50% of the aggregate fair market value of all assets so acquired and that in the case of clauses (i) and (ii) such Indebtedness is incurred within 180 days after the acquisition by the Company or Restricted Subsidiary of such asset or assets, or is in existence with respect to any asset or other property at the time such asset or property is acquired. "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances" and "refinanced" shall have a correlative meaning) any Indebtedness existing on the Issue Date or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in the Indenture) and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of that or another Restricted Subsidiary of the Company), including Indebtedness that refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced, (iii) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or, if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or, if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus the amount of any premium reasonably determined by the Company or such Restricted Subsidiary, as applicable, as necessary at the time of such refinancing to accomplish such refinancing or required pursuant to the terms thereof, plus the amount of expenses of the Company or such Restricted Subsidiary, as applicable, Incurred in connection with such refinancing and (iv) if the Indebtedness being refinanced is subordinated in right of payment to the Notes, such Refinancing Indebtedness is subordinated in right of payment to the Notes to the extent of the Indebtedness being refinanced provided further, however, that Refinancing Indebtedness shall not include Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "Related Business" means any business of the Company and the Restricted Subsidiaries as conducted on the Issue Date and any business related, ancillary or complementary thereto. 91 95 "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc. and its successors. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or such Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Senior Bank Facilities" means the credit agreement dated as of the Issue Date, as amended, waived or otherwise modified from time to time, among Holdings, the Company, the lenders party thereto from time to time and The Chase Manhattan Bank, a New York banking corporation, as agent (except to the extent that any such amendment, waiver or other modification thereto would be prohibited by the terms of the Indenture). "Senior Subordinated Indebtedness" means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes and is not subordinated by its terms to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of clause (w)(1) or (2) of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the purchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is expressly subordinate in right of payment to the Notes pursuant to a written agreement. "Subordinated Obligation" of any Guarantor Subsidiary shall have a correlative meaning. "Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or members of any other governing body thereof is at the time owned or controlled, directly or indirectly, by (i) such Person or (ii) one or more Subsidiaries of such Person. "Subsidiary Guaranty" means any Guarantee of the Notes which may from time to time be executed and delivered pursuant to the terms of the Indenture. Each such Subsidiary Guaranty shall be in the form prescribed in the Indenture. "Temporary Cash Investments" means any of the following: (i) any investment in direct obligations (x) of the United States of America or any agency thereof or obligations Guaranteed by the United States of America or any agency thereof or (y) of any foreign country recognized by the United States of America rated at least "A" by S&P or "A-1" by Moody's, (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 365 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of 92 96 the United States of America, any state thereof or any foreign country recognized by the United States of America having capital and surplus in excess of $250.0 million (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act), (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 365 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's, (vi) any money market deposit accounts issued or offered by a domestic commercial bank or a commercial bank organized and located in a country recognized by the United States of America, in each case, having capital and surplus in excess of $250.0 million (or the foreign currency equivalent thereof), or investments in money market funds complying with the risk limiting conditions of Rule 2a-7 (or any successor rule) of the Commission under the Investment Company Act of 1940, as amended, and (vii) similar investments approved by the Board of Directors in the ordinary course of business. "Term Loans" means the Tranche A Term Loans and the Tranche B Term Loans made pursuant to the Senior Bank Facilities. "Total Assets" means, at any date of determination, the total consolidated assets of the Company and its Restricted Subsidiaries, as set forth on the Company's then most recent consolidated balance sheet. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled by, and published in, the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for redemption of the Notes following a Change of Control (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the then remaining Average Life to Stated Maturity of the Notes; provided, however, that if the Average Life to Stated Maturity of the Notes is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the Average Life to Stated Maturity of the Notes is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such in the Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly 93 97 formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total Consolidated assets of $1,000 or less or (B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled "Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "Limitation on Indebtedness" and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders) is owned by the Company or another Wholly Owned Subsidiary (including shares held of record by a nominee for the benefit of the Company or another Wholly Owned Subsidiary). 94 98 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following discussion (including the opinion of counsel described below) is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the "Service") will not take a contrary view, and no ruling from the Service has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. The Company recommends that each holder consult such holder's own tax advisor as to the particular tax consequences of exchanging such holder's Old Notes for New Notes, including the applicability and effect of any state, local or foreign tax laws. Kirkland & Ellis, counsel to the Company, has advised the Company that in its opinion, the exchange of the Old Notes for New Notes pursuant to the Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the New Notes will not be considered to differ materially in kind or extent from the Old Notes. Rather, the New Notes received by a holder will be treated as a continuation of the Old Notes in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging Old Notes for New Notes pursuant to the Exchange Offer. 95 99 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. Each of the Company and the Guarantor Subsidiaries has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer to use in connection with any such resale. In addition, until , 1997 (90 days after the date of this Prospectus), all dealers effecting transactions in the New Notes may be required to deliver a prospectus. Neither the Company nor the Guarantor Subsidiaries will receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company and each of the Guarantor Subsidiaries has jointly and severally agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Old Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Old Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the Notes offered hereunder will be passed upon for the Company and the Guarantor Subsidiaries by Kirkland & Ellis, New York, New York. Cravath, Swaine & Moore, New York, New York has acted as counsel for the Initial Purchasers. EXPERTS The consolidated financial statements of the Company at March 31, 1996 and 1997, and for each of the three years in the period ended March 31, 1997, appearing in this Prospectus and in the Registration Statement, and the financial statement schedule included in the Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein and in the Registration Statement, and are included herein in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 96 100 CHANGE IN INDEPENDENT AUDITORS The Company's consolidated financial statements at March 31, 1995, 1996 and 1997 and for the years ended March 31, 1994, 1995, 1996 and 1997 were audited by Ernst & Young LLP. The consolidated financial statements at March 31, 1993 and 1994 and for the year ended March 31, 1993 were audited by Schenck & Associates SC. During the two most recent years preceding the change in independent auditors, there were no disagreements with Schenck & Associates SC on any matter of accounting principles or practices, financial statement disclosures or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Schenck & Associates SC would have caused them to make reference thereto in their report on the consolidated financial statements for such years. 97 101 NEENAH FOUNDRY COMPANY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Ernst & Young LLP, Independent Auditors..................................... F-2 Consolidated Balance Sheets as of March 31, 1996 and 1997............................. F-3 Consolidated Statements of Income for the years ended March 31, 1995, 1996 and 1997... F-4 Consolidated Statements of Changes in Stockholders' Equity for the years ended March 31, 1995, 1996 and 1997............................................................. F-5 Consolidated Statements of Cash Flows for the years ended March 31, 1995, 1996 and 1997................................................................................ F-6 Notes to Consolidated Financial Statements............................................ F-7
F-1 102 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Board of Directors Neenah Foundry Company (formerly Neenah Corporation -- see Note 1) We have audited the accompanying consolidated balance sheets of Neenah Foundry Company (the Company) as of March 31, 1996 and 1997, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 1996 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Milwaukee, Wisconsin April 29, 1997, except for Notes 1 and 10 as to which the date is July 1, 1997 F-2 103 NEENAH FOUNDRY COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
MARCH 31, --------------------- 1996 1997 -------- -------- ASSETS Current assets: Cash and cash equivalents.......................................... $ 10,126 $ 22,403 Accounts receivable, less allowance for doubtful accounts of $386 at March 31, 1996 and 1997...................................... 20,831 21,423 Inventories........................................................ 13,324 13,956 Other current assets............................................... -- 401 Deferred income taxes.............................................. 2,253 2,325 -------- -------- Total current assets....................................... 46,534 60,508 Property, plant and equipment: Land............................................................... 847 847 Buildings and improvements......................................... 14,972 15,063 Machinery and equipment............................................ 97,749 101,655 -------- -------- 113,568 117,565 Less accumulated depreciation...................................... 79,840 86,186 -------- -------- 33,728 31,379 Other assets....................................................... 2,695 1,982 -------- -------- $ 82,957 $ 93,869 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................... $ 8,124 $ 8,497 Dividends payable.................................................. 2,220 -- Income taxes payable............................................... 517 573 Accrued wages and employee benefits................................ 5,516 5,545 Other accrued liabilities.......................................... 1,937 2,052 Current portion of long-term debt.................................. 107 134 -------- -------- Total current liabilities.................................. 18,421 16,801 Long-term debt....................................................... 134 -- Pension obligations.................................................. 1,737 -- Postretirement benefit obligations................................... 5,300 5,667 Deferred income taxes................................................ 2,575 2,544 -------- -------- Total liabilities.......................................... 28,167 25,012 Commitments and contingencies (Note 5) Stockholders' equity: Preferred stock, par value $100 per share: Authorized 3,000 shares; no shares issued and outstanding....... -- -- Common stock, par value $100 per share: Class A (voting): Authorized 1,000 shares; issued and outstanding, 620 shares... 62 62 Class B (nonvoting): Authorized 10,000 shares; issued and outstanding, 3,820 shares....................................................... 382 382 Retained earnings.................................................. 57,268 71,335 Notes receivable from owners to finance stock purchase............. (2,922) (2,922) -------- -------- Total stockholders' equity................................. 54,790 68,857 -------- -------- $ 82,957 $ 93,869 ======== ========
See accompanying notes. F-3 104 NEENAH FOUNDRY COMPANY CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
YEAR ENDED MARCH 31, ---------------------------------- 1995 1996 1997 -------- -------- -------- Net sales............................................... $160,621 $166,951 $165,426 Cost of sales........................................... 120,981 121,631 116,736 -------- -------- -------- Gross profit............................................ 39,640 45,320 48,690 Selling, general and administrative expenses............ 16,673 16,983 17,547 -------- -------- -------- Operating income........................................ 22,967 28,337 31,143 Net interest income (expense)........................... (397) 481 1,162 -------- -------- -------- Income before income taxes.............................. 22,570 28,818 32,305 Provision for income taxes.............................. 8,866 11,676 12,467 -------- -------- -------- Net income.............................................. $ 13,704 $ 17,142 $ 19,838 ======== ======== ========
See accompanying notes. F-4 105 NEENAH FOUNDRY COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
COMMON STOCK --------------------------------- NOTES RECEIVABLE PREFERRED STOCK CLASS A CLASS B FROM OWNERS --------------- --------------- --------------- RETAINED TO FINANCE STOCK SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT EARNINGS PURCHASE TOTAL ------ ------ ------ ------ ------ ------ -------- ---------------- ------- Balance at April 1, 1994........ 1,468 $ 147 719 $ 72 4,920 $ 492 $40,140 $ (2,922) $37,929 Redemption and retirement of stock........ (1,468) (147) (99) (10) (1,100) (110) (5,932) -- (6,199) Dividends declared: Preferred -- $4.50 per share...... -- -- -- -- -- -- (5) -- (5) Common -- $475 per share...... -- -- -- -- -- -- (2,231) -- (2,231) Net income..... -- -- -- -- -- -- 13,704 -- 13,704 ---- --- --- ------ ---- ------- ------- ------- Balance at March 31, 1995....... -- -- 620 62 3,820 382 45,676 (2,922) 43,198 Common dividends declared -- $1,250 per share........ -- -- -- -- -- -- (5,550) -- (5,550) Net income..... -- -- -- -- -- -- 17,142 -- 17,142 ---- --- --- ------ ---- ------- ------- ------- Balance at March 31, 1996....... -- -- 620 62 3,820 382 57,268 (2,922) 54,790 Common dividends declared -- $1,300 per share........ -- -- -- -- -- -- (5,771) -- (5,771) Net income..... -- -- -- -- -- -- 19,838 -- 19,838 ---- --- --- ------ ---- ------- ------- ------- Balance at March 31, 1997....... -- $ -- 620 $ 62 3,820 $ 382 $71,335 $ (2,922) $68,857 ==== === === ====== ==== ======= ======= =======
See accompanying notes. F-5 106 NEENAH FOUNDRY COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED MARCH 31, ---------------------------------- 1995 1996 1997 -------- -------- -------- OPERATING ACTIVITIES Net income.............................................. $ 13,704 $ 17,142 $ 19,838 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation....................................... 6,842 6,776 6,881 Deferred income taxes.............................. 2,862 1,863 (103) Other.............................................. (274) 48 (103) Changes in operating assets and liabilities: Accounts receivable.............................. (3,384) 439 (592) Inventories...................................... (142) (603) (632) Other current assets............................. 186 27 (401) Accounts payable................................. 684 (2,653) 373 Income taxes payable............................. 526 (585) 56 Accrued liabilities.............................. 1,388 (1,261) 144 Pension obligations.............................. 900 859 (2,349) Postretirement benefit obligations............... 289 221 367 -------- -------- -------- Net cash provided by operating activities..... 23,581 22,273 23,479 INVESTING ACTIVITIES Purchase of property, plant and equipment............. (3,665) (7,275) (4,546) Proceeds from life insurance policy................... -- -- 1,439 Other................................................. 253 (24) 3 -------- -------- -------- Net cash used in investing activities......... (3,412) (7,299) (3,104) FINANCING ACTIVITIES Dividends paid........................................ (1,411) (4,440) (7,991) Redemption of stock................................... (6,199) -- -- Proceeds from long-term debt.......................... 70,529 16,370 -- Payments on long-term debt............................ (82,968) (17,016) (107) -------- -------- -------- Net cash used in financing activities......... (20,049) (5,086) (8,098) -------- -------- -------- Increase in cash and cash equivalents................... 120 9,888 12,277 Cash and cash equivalents at beginning of year.......... 118 238 10,126 -------- -------- -------- Cash and cash equivalents at end of year................ $ 238 $ 10,126 $ 22,403 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid for: Interest........................................... $ 624 $ 84 $ 39 Income taxes....................................... 5,478 10,398 12,515
See accompanying notes. F-6 107 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 1995, 1996 AND 1997 (IN THOUSANDS) 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS Prior to July 1, 1997, Neenah Foundry Company was one of three wholly owned subsidiaries of Neenah Corporation, a holding company with no significant assets or operations other than its holdings in the common stock of its subsidiaries. On July 1, 1997, Neenah Foundry Company merged into Neenah Corporation and the surviving company changed its name to Neenah Foundry Company (the Company). The Company operates in one business segment for financial reporting purposes: the manufacture of gray and ductile iron castings. The Company manufactures castings sold directly to industrial and municipal customers throughout the United States and several foreign countries either directly or through representatives. Industrial castings are custom-engineered and are produced for customers in several industries, with a concentration in the medium and heavy-duty truck components, farm equipment, and heating, ventilation, and air-conditioning industries. Heavy municipal castings include manhole covers and frames, storm sewer frames and grates, trench drain systems, tree grates and specialty castings for a variety of applications. Industrial castings are generally sold to large, well-established companies, with two customers accounting for 18% and 15% of net sales in fiscal 1995, 17% and 9% of net sales in fiscal 1996, and 16% and 10% of net sales in fiscal 1997. Combined receivables from these two customers totaled $4,974 and $6,651 at March 31, 1996 and 1997, respectively. Municipal castings are sold to a large number of customers. The Company's accounts receivable generally are unsecured. The Company has two wholly owned subsidiaries -- Neenah Transport, Inc. (Transport) and Hartley Controls Corporation (Hartley). Transport is a common and contract carrier licensed to operate in the continental United States. The majority of Transport's revenues are derived from transport services provided to the Company. Hartley designs and manufactures customized sand control systems for the foundry industry, which are sold and serviced throughout the United States and several foreign countries. Hartley and Transport each account for less than 10% of consolidated net sales, net income and total assets. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Transport and Hartley. All significant intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS For purposes of the consolidated statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. F-7 108 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Cash equivalents, consisting principally of investments in commercial paper, totaled $11,598 and $23,028 at March 31, 1996 and 1997, respectively. The cost of these debt securities, which are considered as "available for sale" for financial reporting purposes, approximates fair value at both March 31, 1996 and 1997. There were no realized gains or losses recognized on these securities during any of the three years in the period ended March 31, 1997. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined on the last-in, first-out (LIFO) method for substantially all inventories except for supplies, for which cost is determined on the first-in, first-out (FIFO) method. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. Expenditures for additions and improvements are capitalized while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed as incurred. Depreciation for financial reporting purposes is provided over the estimated useful lives of the respective assets, using accelerated and straight-line methods. Depreciation expense includes amortization of machinery and equipment recorded under capitalized leases. REVENUE RECOGNITION Revenue from the sale of castings and sand control systems is recognized upon shipment to the customer. ADVERTISING COSTS Advertising costs are expensed as incurred, and amounted to $467, $527 and $524 for the years ended March 31, 1995, 1996 and 1997, respectively. INCOME TAXES Deferred income taxes are provided for temporary differences between the financial reporting and income tax basis of the Company's assets and liabilities and are measured using currently enacted tax rates and laws. FINANCIAL INSTRUMENTS The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at March 31, 1996 and 1997 does not differ materially from the carrying value of such instruments recorded in the accompanying consolidated balance sheets, as follows:
MARCH 31, ------------------- 1996 1997 ------- ------- Cash and cash equivalents...................................... $10,126 $22,403 Accounts receivable............................................ 20,831 21,423 Accounts payable............................................... (8,124) (8,497) Long-term debt................................................. (241) (134)
F-8 109 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NEW ACCOUNTING STANDARDS The Company adopted FASB Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Assets to Be Disposed Of," and SFAS No. 123, "Accounting for Stock-Based Compensation," on April 1, 1996 and SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," on January 1, 1997. The adoption of these standards did not have any effect on the Company's consolidated financial statements. In accordance with SFAS No. 121, the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. The Company is required to adopt AICPA Statement of Position 96-1, "Environmental Remediation Liabilities," on April 1, 1997. The pending adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements. 2. INVENTORIES Inventories consist of the following:
MARCH 31, ------------------- 1996 1997 ------- ------- Raw materials.................................................. $ 2,214 $ 2,017 Work in process and finished goods............................. 13,957 14,324 Supplies....................................................... 4,886 4,860 ------- ------- Inventories at FIFO cost....................................... 21,057 21,201 Excess of FIFO cost over LIFO cost............................. (7,733) (7,245) ------- ------- $13,324 $13,956 ======= =======
3. LONG-TERM DEBT Long-term debt consists of the following:
MARCH 31, ------------- 1996 1997 ---- ---- Capital lease obligations............................................ $241 $134 Less current portion................................................. 107 134 ---- ---- $134 $ -- ==== ====
The Company has a revolving credit agreement (the Agreement) with a bank that provides for borrowings up to $25,000 through July 31, 1998. Interest is payable monthly on outstanding borrowings at the bank's Reference Rate (8.25% at March 31, 1997). The Agreement contains an option that allows the Company to designate a portion (minimum of $2,000) of the borrowings to bear a fixed rate of interest for a specified period of time. Borrowings under the Agreement are unsecured and a quarterly fee is charged by the bank on the unused portion of the facility. The capital lease obligations consist of leases for a propane system and semi-tractors and trailers. Included in machinery and equipment is $567 and $397, and included in accumulated depreciation is $272 and $179 at March 31, 1996 and 1997, respectively, related to these capital leases. F-9 110 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. NOTES RECEIVABLE FROM OWNERS The notes receivable from owners of $2,922 are due April 1, 1999, with interest adjusted annually to the Company's borrowing rate plus .1%. The proceeds of the notes receivable were used to purchase 1,461 shares of Company Class B common stock from other shareholders, and are secured by such common stock. These notes were repaid by the owners prior to the consummation of the plan of reorganization described in Note 10. 5. COMMITMENTS AND CONTINGENCIES The Company leases warehouse space, machinery and equipment, office equipment and vehicles under operating leases. Rent expense under these operating leases for the years ended March 31, 1995, 1996 and 1997 amounted to $850, $996 and $1,088, respectively. Minimum rental payments due under these operating leases for subsequent fiscal years are as follows: 1998........................................................................ $ 736 1999........................................................................ 586 2000........................................................................ 287 2001........................................................................ 115 ------ $1,724 ======
The Company is involved in a number of product liability claims, none of which, in the opinion of management, is expected to have a material adverse effect on the consolidated financial statements. The Company is partially self-insured for workers compensation claims. An accrued liability is recorded for claims incurred but not yet paid or reported, with such accrual based on current and historical claim information. The accrual may ultimately be settled for an amount greater or lesser than the recorded amount. Adjustments of the accrual are recorded in the period in which they are determined. As of March 31, 1997, the Company had outstanding letters of credit in the aggregate amount of $595, which secure certain workers compensation and other obligations. 6. INCOME TAXES The provision for income taxes consists of the following:
YEAR ENDED MARCH 31, ------------------------------ 1995 1996 1997 ------ ------- ------- Current: Federal............................................ $5,556 $ 9,147 $11,554 State.............................................. 448 666 1,016 ------ ------- ------- 6,004.. 9,813 12,570 Deferred............................................. 2,862 1,863 (103) ------ ------- ------- $8,866 $11,676 $12,467 ====== ======= =======
F-10 111 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The difference between the provision for income taxes and income taxes computed using the statutory U.S. federal income tax rate of 35% is as follows:
YEAR ENDED MARCH 31, ------------------------------ 1995 1996 1997 ------ ------- ------- Provision at statutory rate.......................... $7,900 $10,086 $11,307 State income taxes, net of federal tax benefit....... 801 1,126 1,318 Other................................................ 165 464 (158) ------ ------- ------- Provision for income taxes........................... $8,866 $11,676 $12,467 ====== ======= =======
The components of the Company's deferred income tax assets and liabilities are as follows:
MARCH 31, ------------------- 1996 1997 ------- ------- Deferred income tax liabilities: Tax depreciation in excess of book depreciation.............. $(5,621) $(5,156) Employee benefit plans....................................... (602) (441) Other........................................................ (437) (127) ------- ------- (6,660) (5,724) Deferred income tax assets: Inventories.................................................. 560 560 Employee benefit plans....................................... 3,316 3,128 Accrued vacation............................................. 825 855 Other accrued liabilities.................................... 672 790 State tax credit carryforwards............................... 676 -- Other........................................................ 289 172 ------- ------- 6,338 5,505 ------- ------- Net deferred income tax liability.............................. $ (322) $ (219) ======= ======= Included in the consolidated balance sheets as: Current deferred income tax asset............................ $ 2,253 $ 2,325 Noncurrent deferred income tax liability..................... (2,575) (2,544) ------- ------- $ (322) $ (219) ======= =======
The Company has not recorded a valuation allowance with respect to any deferred tax assets at March 31, 1996 or 1997. 7. EMPLOYEE BENEFIT PLANS DEFINED BENEFIT PENSION PLANS The Company sponsors two defined benefit pension plans covering substantially all hourly employees and previously sponsored a defined benefit supplemental executive retirement plan (SERP) which covered certain salaried employees. During the year ended March 31, 1997, the Company purchased nonparticipating annuity contracts to settle the vested benefit obligations under the SERP. Retirement benefits for the pension plans are based on years of credited service and defined benefit rates while retirement benefits for the SERP were based on compensation levels. The Company funds the pension plans based on an actuarially determined cost method allowable under Internal Revenue Service regulations. The SERP was unfunded. F-11 112 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table reconciles the funded status of the plans, as of December 31, 1995 and 1996 (the Company uses a measurement date as of December 31), to the amounts included in the consolidated balance sheets at March 31, 1996 and 1997:
1996 1997 ------------------------- ------------------------- UNDERFUNDED OVERFUNDED UNDERFUNDED OVERFUNDED PLANS PLAN PLAN PLAN ----------- ---------- ----------- ---------- Accumulated benefit obligations............ $(3,944) $(19,805) $(845) $(20,150) Effect of assumed increases in compensation on SERP.................................. (2,593) -- -- -- ------- -------- ----- -------- Projected benefit obligations.............. (6,537) (19,805) (845) (20,150) Plan assets at fair value (consisting principally of pooled investment funds and an investment contract with an insurance company)....................... 697 21,110 735 22,169 ------- -------- ----- -------- Projected benefit obligations less than (in excess of) plan assets................... (5,840) 1,305 (110) 2,019 Unrecognized net loss (gain)............... 2,055 (1,940) (8) (2,966) Unrecognized prior service cost............ 259 4,833 160 4,452 Unrecognized net transition obligation (asset).................................. 782 (2,695) (21) (2,411) Adjustment to recognize additional minimum liability................................ (503) -- (131) -- ------- -------- ----- -------- Prepaid (accrued) pension obligation, at December 31, 1995 and December 31, 1996, respectively............................. (3,247) 1,503 (110) 1,094 Contributions between January 1 and March 31, 1996 and 1997, respectively.......... 7 -- -- -- ------- -------- ----- -------- Prepaid (accrued) pension obligations...... $(3,240) $ 1,503 $(110) $ 1,094 ======= ======== ===== ======== Net pension asset (obligation) included in the consolidated balance sheets.......... $(1,737) $ 984 ======= =====
Components of net periodic pension cost are as follows:
YEAR ENDED MARCH 31, ------------------------------- 1995 1996 1997 ------- ------- ------- Service cost -- benefits earned during the year..... $ 822 $ 880 $ 820 Interest cost on projected benefit obligations...... 1,437 1,545 1,742 Actual return on plan assets........................ (1,412) (1,450) (1,531) Net amortization and deferral....................... 217 203 220 ------- ------- ------- $ 1,064 $ 1,178 $ 1,251 ======= ======= =======
As a result of the settlement of the SERP, the Company recognized a curtailment gain of $1,317 and a settlement loss of $878 during the year ended March 31, 1997. The discount rate used in estimating the projected benefit obligations and in determining the interest component of pension expense for the following year for all plans was 7.5% for all years. The annual rate of compensation increase assumed for the SERP in estimating the projected benefit obligations was 6.5% for all years. The assumed long-term rate of return on plan assets used in determining pension expense was 7.5% for all years. F-12 113 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PROFIT-SHARING AND SAVINGS RETIREMENT PLAN The Company sponsors a Profit-Sharing and Savings Retirement Plan covering substantially all salaried employees. The plan allows participants to make 401(k) contributions in an amount from 1% to 5% of their compensation. The Company matches 50% of the participants contributions. The Company may make additional voluntary contributions to the plan as determined annually by the Board of Directors. Total Company contributions amounted to $859, $891 and $915 for the years ended March 31, 1995, 1996 and 1997, respectively. POSTRETIREMENT BENEFITS The Company sponsors defined benefit postretirement health care plans covering substantially all salaried employees and their dependents. Benefits are provided from the date of retirement for the duration of the employee's life up to a maximum of $1 million per individual. Retirees' contributions to the plans are based on years of service and age at retirement. The Company funds benefits as incurred. The following table reconciles the funded status of the postretirement benefit plans to the amounts included in the consolidated balance sheets at March 31:
1996 1997 ------ ------ Accumulated postretirement benefit obligations: Retirees....................................................... $2,047 $1,830 Fully eligible active participants............................. 654 810 Other active participants...................................... 2,534 2,784 ------ ------ 5,235 5,424 Plan assets...................................................... -- -- ------ ------ 5,235 5,424 Unrecognized net gain............................................ 65 243 ------ ------ Accrued postretirement benefit obligations....................... $5,300 $5,667 ====== ======
Components of net periodic postretirement benefit cost are as follows:
YEAR ENDED MARCH 31, ---------------------- 1995 1996 1997 ---- ---- ---- Service cost................................................ $164 $176 $193 Interest cost on accumulated postretirement benefit obligations............................................... 340 361 370 Net amortization and deferral............................... (4) (4) (5) ---- ---- ---- $500 $533 $558 ==== ==== ====
The weighted-average discount rate used in determining the accumulated postretirement benefit obligations for both plans was 7.5% for all years, and the healthcare cost trend rate was projected to have annual increases of 8.5%. The healthcare cost trend rate assumption has a significant effect on the amounts reported. Increasing the healthcare cost trend rate by one percentage point would increase the accumulated postretirement benefit obligations as of March 31, 1997 by $1,014 and would increase postretirement benefit expense for the year ended March 31, 1997 by $131. F-13 114 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 8. STOCKHOLDERS' EQUITY The Company has a Restrictive Stock Transfer Agreement with certain of its stockholders which permits the transfer of its stock held by such stockholders to permitted transferees, as defined. In the event a stockholder wishes to sell stock to a third party who is not a permitted transferee, the stock must first be offered for sale to the Company. If the Company accepts the offer of sale, the purchase price is based on a formula, as defined. The purchase price will be financed by a promissory note payable in ten equal annual installments with interest at the prime rate less 1%. The Restrictive Stock Transfer Agreement was terminated concurrently with the consummation of the plan of reorganization described in Note 10. 9. UNAUDITED QUARTERLY RESULTS
YEAR ENDED MARCH 31, 1996 ------------------------------------------------------ QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 --------- --------- --------- --------- Net sales............................ $ 46,277 $ 44,454 $ 39,015 $ 37,205 Gross profit......................... 12,976 12,243 10,199 9,902 Net income........................... 5,325 5,024 3,839 2,954
YEAR ENDED MARCH 31, 1997 ------------------------------------------------------ QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 --------- --------- --------- --------- Net sales............................ $ 44,309 $ 45,430 $ 37,815 $ 37,872 Gross profit......................... 13,140 13,613 10,825 11,112 Net income........................... 5,178 5,558 4,635 4,467
10. SUBSEQUENT EVENTS On April 30, 1997, pursuant to an Agreement and Plan of Reorganization with NC Merger Company and NFC Castings, Inc., Neenah Corporation was acquired by NFC Castings, Inc. using (i) $45,000 of cash equity contributed by NFC Castings, Inc., (ii) $45,000 of term loans borrowed under Senior Bank Facilities, (iii) proceeds from the issuance of $150,000 of unsecured Senior Subordinated Notes in a Rule 144A private placement and (iv) Company cash. The consideration for the acquisition is subject to a closing date net worth adjustment. On July 1, 1997 the Company issued $45 million principal amount of Senior Subordinated Notes and used the proceeds to pay the term loans borrowed under the Senior Bank Facilities. As described in Note 1, on July 1, 1997, Neenah Foundry Company, the principal operating subsidiary of Neenah Corporation, merged into Neenah Corporation. Transport and Hartley, wholly owned subsidiaries of the Company, fully, unconditionally, jointly and severally guarantee the Senior Subordinated Notes issued in the private placement discussed above. The following is summarized combined financial information of the wholly owned subsidiaries. Net sales includes net sales to Neenah Foundry Company of $4,181, $4,090 and $4,012 for the years ended March 31, 1995, 1996 and 1997, respectively. Separate financial statements of the guarantor subsidiaries are not sepa- F-14 115 NEENAH FOUNDRY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) rately presented because, in the opinion of management, such financial statements are not material to investors.
MARCH 31, --------------------- 1996 1997 ------ ------ Current assets............................................. $1,494 $1,867 Noncurrent assets.......................................... 1,661 1,918 Current liabilities........................................ 941 1,006 Noncurrent liabilities..................................... 401 453
YEAR ENDED MARCH 31, -------------------------- 1995 1996 1997 ------ ------ ------ Net sales................................................. $9,131 $9,795 $9,971 Gross profit.............................................. 2,719 3,165 3,247 Net income................................................ 501 651 513
F-15 116 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. - ------------------------------------------------------ TABLE OF CONTENTS Available Information................ 2 Prospectus Summary................... 3 Risk Factors......................... 16 Use of Proceeds...................... 21 Capitalization....................... 22 Selected Consolidated Financial and Other Data......................... 23 Unaudited Pro Forma Consolidated Financial Information.............. 26 Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 33 Exchange Offer....................... 38 Business............................. 44 Management........................... 56 Ownership of Securities.............. 59 Certain Relationships and Related Transactions....................... 59 Description of Senior Bank Facilities......................... 60 Description of Notes................. 62 Certain United States Federal Income Tax Considerations................. 95 Plan of Distribution................. 96 Legal Matters........................ 96 Experts.............................. 96 Change in Independent Auditors....... 97 Index to Consolidated Financial Statements......................... F-1
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. LOGO -------------------- PROSPECTUS -------------------- OFFER TO EXCHANGE ITS 11 1/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 FOR 11 1/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 , 1997 117 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION+. SEC Registration Fee...................................................... $51,724 Blue Sky Fees and Expenses................................................ * Printing Expenses......................................................... * Accounting Fees and Expenses.............................................. * Legal Fees and Expenses................................................... * Trustee's Fees and Expenses............................................... * Miscellaneous............................................................. * -------- Total........................................................... $ -- ========
- --------------- + Estimated * To be completed by amendment. ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Sections 180.0850 to 180.0859 of the Wisconsin Statutes require a corporation to indemnify any director or officer who is a party to any threatened, pending or completed civil, criminal, administrative or investigative action, suit, arbitration or other proceeding, whether formal or informal, which involves foreign, federal, state or local law and which is brought by or in the right of the corporation or by any other person. A corporation's obligation to indemnify any such person includes the obligation to pay any judgment, settlement, penalty, assessment, forfeiture or fine, including any excise tax assessed with respect to an employee benefit plan, and all reasonable expenses including fees, costs, charges, disbursements, attorney's and other expenses except in those cases in which liability was incurred as a result of the breach or failure to perform a duty which the director or officer owes to the corporation and the breach or failure to perform constitutes: (i) a willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director or officer has a material conflict of interest; (ii) a violation of criminal law, unless the person has reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful; (iii) a transaction from which the person derived an improper personal profit; or (iv) willful misconduct. Unless otherwise provided in a corporation's articles of incorporation or by-laws or by written agreement, an officer or director seeking indemnification is entitled to indemnification if approved in any of the following manners: (i) by majority vote of a disinterested quorum of the board of directors, or if such quorum of disinterested directors cannot be obtained, by a majority vote of a committee or two or more disinterested directors; (ii) by independent legal counsel; (iii) by a panel of three arbitrators; (iv) by affirmative vote of shareholders; (v) by a court; or (vi) with respect to any additional right to indemnification granted by any other method permitted in Section 180.0859 of the Wisconsin Statutes. Reasonable expenses incurred by a director or officer who is a party to a proceeding may be reimbursed by a corporation at such time as the director or officer furnishes to the corporation written affirmation of his good faith belief that he has not breached or failed to perform his duties and a written undertaking to repay any amounts advanced if it is determined that indemnification by the corporation is not required. The indemnification provisions of Sections 180.0850 to 180.0859 are not exclusive. A corporation may expand an officer's or director's right to indemnification (i) in its articles of incorporation or II-1 118 by-laws; (ii) by written agreement, (iii) by resolution of its board of directors; or (iv) by resolution of a majority of all of the corporation's voting shares then issued and outstanding. As permitted by Section 180.0859, the Registrant has adopted indemnification provisions in its By-Laws which closely track the statutory indemnification provisions with certain exceptions. In particular, Article VIII of the Registrant's By-Laws provides that payment or reimbursement of expenses, subject to certain limitations, will be mandatory rather than permissive. The Registrant maintains and has in effect insurance policies covering all of their respective directors and officers against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits. See Exhibit Index (b) Financial Statement Schedules. ITEM 22. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and (4) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (5) The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new II-2 119 registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 20 or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (6) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (7) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (8) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (9) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-3 120 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Neenah, State of Wisconsin, on July 25, 1997. NEENAH FOUNDRY COMPANY By: /s/ JAMES K. HILDEBRAND ------------------------------------ Name: James K. Hildebrand Title: Chairman and Chief Executive Officer POWER OF ATTORNEY The undersigned hereby severally constitute and appoint Gary W. LaChey for the undersigned in any and all capacities, with the power of substitution, to sign any amendment to this Registration Statement, and to file the same with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the date indicated.
SIGNATURE CAPACITY DATE - ------------------------------------- ------------------------------------- --------------- /s/ JAMES K. HILDEBRAND Chairman of the Board and Chief July 25, 1997 - ------------------------------------- Executive Officer James K. Hildebrand /s/ WILLIAM M. BARRETT Vice President and General Manager July 25, 1997 - ------------------------------------- William M. Barrett /s/ GARY W. LACHEY Vice President -- Finance, Treasurer July 25, 1997 - ------------------------------------- and Secretary Gary W. LaChey /s/ CHARLES M. KURTTI Vice President -- Manufacturing and July 25, 1997 - ------------------------------------- Engineering Charles M. Kurtti /s/ DAVID F. THOMAS Director July 25, 1997 - ------------------------------------- David F. Thomas /s/ JOHN D. WEBER Director July 25, 1997 - ------------------------------------- John D. Weber /s/ BRENTON F. HALSEY Director July 25, 1997 - ------------------------------------- Brenton F. Halsey
II-4 121 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Neeneh, State of Wisconsin, on July 25, 1997. Hartley Controls Corporation By: /s/ JAMES K. HILDEBRAND ------------------------------------ Name: James K. Hildebrand Title: Chairman and President POWER OF ATTORNEY The undersigned hereby severally constitute and appoint Gary W. LaChey for the undersigned in any and all capacities, with the power of substitution, to sign any amendment to this Registration Statement, and to file the same with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE - ------------------------------------- --------------------------------------- -------------- /s/ JAMES K. HILDEBRAND Chairman and President July 25, 1997 - ------------------------------------- James K. Hildebrand /s/ WILLIAM J. MARTIN Vice President and General Manager July 25, 1997 - ------------------------------------- William J. Martin /s/ GARY W. LACHEY Vice President -- Finance, Treasurer July 25, 1997 - ------------------------------------- and Secretary Gary W. LaChey /s/ JOHN Z. RADER Vice President -- Human Resources July 25, 1997 - ------------------------------------- John Z. Rader /s/ JOHN D. WEBER Director and Vice President and July 25, 1997 - ------------------------------------- Assistant Secretary John D. Weber /s/ DAVID F. THOMAS Director July 25, 1997 - ------------------------------------- David F. Thomas /s/ BRENTON F. HALSEY Director July 25, 1997 - ------------------------------------- Brenton F. Halsey
II-5 122 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Neenah, State of Wisconsin, on July 25, 1997. NEENAH TRANSPORT, INC. By: /s/ JAMES K. HILDEBRAND ------------------------------------ Name: James K. Hildebrand Title: Chairman and President POWER OF ATTORNEY The undersigned hereby severally constitute and appoint Gary W. LaChey for the undersigned in any and all capacities, with the power of substitution, to sign any amendment to this Registration Statement, and to file the same with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE - ------------------------------------------ ----------------------------------- -------------- /s/ JAMES K. HILDEBRAND Chairman and President July 25, 1997 - ------------------------------------------ James K. Hildebrand /s/ GARY W. LACHEY Vice President -- Finance, July 25, 1997 - ------------------------------------------ Treasurer and Secretary Gary W. LaChey /s/ JOHN Z. RADER Vice President -- Human Resources July 25, 1997 - ------------------------------------------ John Z. Rader /s/ JOHN D. WEBER Director and Vice President and July 25, 1997 - ------------------------------------------ Assistant Secretary John D. Weber /s/ DAVID F. THOMAS Director July 25, 1997 - ------------------------------------------ David F. Thomas /s/ BRENTON F. HALSEY Director July 25, 1997 - ------------------------------------------ Brenton F. Halsey
II-6 123 EXHIBIT INDEX
EXHIBITS - -------- 2.1 Agreement and Plan of Reorganization, dated November 20, 1996, by and among NFC Castings, Inc., NC Merger Company and Neenah Corporation.** 2.2 First Amendment to Agreement and Plan of Reorganization, dated as of January 13, 1997, by and among NFC Castings, Inc., NC Merger Company and Neenah Corporation.* 2.3 Second Amendment to Agreement and Plan of Reorganization, dated as of February 21, 1997, by and among NFC Castings, Inc., NC Merger Company and Neenah Corporation.* 2.4 Third Amendment to Agreement and Plan of Reorganization, dated as of April 3, 1997, by and among NFC Castings, Inc., NC Merger Company and Neenah Corporation.* 2.5 Merger Agreement, made as of July 1, 1997, by and between Neenah Corporation and Neenah Foundry Company.* 3.1 Restated Articles of Incorporation of Neenah Foundry Company.** 3.2 By-laws of Neenah Foundry Company.** 3.3 [Intentionally omitted]. 3.4 [Intentionally omitted]. 3.5 Restated Articles of Incorporation of Hartley Controls Corporation.** 3.6 By-laws of Hartley Controls Corporation.+ 3.7 Restated Articles of Incorporation of Neenah Transport, Inc. 3.8 By-laws of Neenah Transport, Inc.+ 4.1 Indenture dated as of April 30, 1997 among NC Merger Company and United States Trust Company of New York.* 4.2 Purchase Agreement dated as of April 23, 1997 among NC Merger Company, Chase Securities Inc. and Morgan Stanley & Co. Incorporated.* 4.3 Exchange and Registration Rights Agreement dated as of April 30, 1994 among Neenah Corporation, Neenah Foundry Company, Hartley Controls Corporation, Neenah Transport, Inc. and Chase Securities, Inc.* 4.4 First Supplemental Indenture, dated as of April 30, 1997 among Neenah Corporation, Neenah Foundry Company, Neenah Transport, Inc. and Hartley Controls Corporation and United States Trust Company of New York.* 4.5 Letter Agreement, dated as of April 30, 1997 among Neenah Corporation, Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. and Chase Securities Inc. and Morgan Stanley & Co. Incorporated.* 4.6 Form of Global Note related to the Indenture dated as of April 23, 1997.* 4.7 Indenture dated as of July 1, 1997 among Neenah Corporation, Neenah Foundry Company, Neenah Transport, Inc., Hartley Controls Corporation and United States Trust Company of New York.* 4.8 Purchase Agreement dated as of June 26, 1997 among Neenah Corporation, Neenah Foundry Company, Hartley Controls Corporation, Neenah Transport, Inc. and Chase Securities Inc.* 4.9 Exchange and Registration Rights Agreement dated as of July 1, 1997 by and between Neenah Corporation, Neenah Foundry Company, Hartley Controls Corporation, Neenah Transport, Inc. and Chase Securities, Inc.* 4.10 Form of Global Note related to the Indenture dated as of July 1, 1997.* 5.1 Opinion of Kirkland & Ellis.* 8.1 Opinion of Kirkland & Ellis as to federal income tax consequences.* 10.1 Master Lease Agreement between Neenah Foundry Company and Bank One Leasing Corporation dated December 14, 1992.+
124
EXHIBITS - -------- 10.2 Agreement between Neenah Foundry Company and Rockwell International Corporation effective April 1, 1995. (Subject to request for confidential treatment)* 10.3 Letter Agreement between Neenah Foundry Company and Eaton Corporation dated April 4, 1996. (Subject to request for confidential treatment)* 10.4 [Intentionally omitted]. 10.5 1996-1998 Collective Bargaining Agreement between Neenah Foundry Company and Local 121B Glass, Molders, Pottery, Plastics and Allied Workers International Union AFL-CIO-CLC.* 10.6 1995-1997 Collective Bargaining Agreement between Neenah Foundry Company and The Independent Patternmakers Union of Neenah, Wisconsin.* 10.7 Credit Agreement, dated as of April 30, 1997 among Chase Manhattan Bank, N.A., NFC Castings, Inc. and NC Merger Company.* 10.8 Employment Agreement dated September 9, 1994 between the Neenah Corporation Neenah Foundry Company, Hartley Controls Corporation, Neenah Transport, Inc. and James P. Keating, Jr.** 10.9 Consulting Agreement dated September 9, 1994 between the Neenah Foundry Company and the Guarantors and James P. Keating, Jr.** 10.10 First Amendment to Employment Agreement, dated September 9, 1994, between Neenah Foundry Company, Neenah Corporation, Hartley Controls Corporation and James P. Keating, Jr.* 10.11 Pledge Agreement dated as of April 30, 1997, among NC Merger Company, a Wisconsin corporation, NFC Castings, Inc., a Delaware corporation.* 10.12 Subsidiary Guarantee Agreement dated as of April 30, 1997, among each of the subsidiaries listed of NC Merger Company, a Wisconsin corporation, and The Chase Manhattan Bank, a New York banking corporation, as collateral agent for the secured parties.* 10.13 Parent Guarantee Agreement dated as of April 30, 1997, between NFC Castings, Inc., a Delaware corporation and The Chase Manhattan Bank, a New York banking corporation, as collateral agent for the secured parties.* 10.14 Security Agreement dated as of April 30, 1997, among NC Merger Company, a Wisconsin corporation, each subsidiary of the borrower and The Chase Manhattan Bank, a New York banking corporation, as collateral agent for the secured parties.* 10.15 Form of Mortgage.* 12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.* 21.1 Subsidiaries of the Registrant.* 23.1 Consent of Ernst & Young LLP.* 23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1). 24.1 Powers of Attorney (included in signature page).** 25.1 Statement of Eligibility of Trustee on Form T-1.* 99.1 Form of Letter of Transmittal.** 99.2 Form of Notice of Guaranteed Delivery.** 99.3 Form of Tender Instructions.*
- --------------- * Filed herewith ** Previously filed + To be filed by amendment EX-2.2 2 1ST AMENDMENT TO AGREEMENT AND PLAN OF REORGAN. 1 Exhibit 2.2 FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION This First Amendment to Agreement and Plan of Reorganization is dated as of January 13, 1997 by and among NFC Castings, Inc., a Delaware corporation ("Parent"), NC Merger Company, a Wisconsin corporation ("Newco"), and Neenah Corporation, a Wisconsin corporation (the "Company"). RECITALS Parent, Newco and the Company entered into an Agreement and Plan of Reorganization dated as of November 20, 1996 ("Agreement") pursuant to which they agreed to consummate a transaction in which Parent would acquire the Company for cash through a reverse triangular merger of Newco with and into the Company, whereby all of the outstanding shares of the capital stock of the Company would be converted into the right to receive cash and all of the outstanding shares of the capital stock of Newco would be converted into shares of the capital stock of the Company, upon the terms and subject to the conditions set forth in the Agreement. The parties desire to amend certain provisions of the Agreement in the manner and to the extent set forth herein, to extend the closing date and the outside date for such transaction. Accordingly, in consideration of the premises and of the mutual agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. AMENDMENT OF THE AGREEMENT. 1.1 Closing Date. Sections 2.2, 9.1(b)(ii) and 9.1(c)(ii) of the Agreement are amended by substituting the date "February 20, 1997" for the date "January 31, 1997" each place it appears. 1.2 Outside Date. Sections 9.1(b)(iii) and 9.1(c)(iii) of the Agreement are amended by substituting the date "February 21, 1997" for the date "February 15, 1997" each place it appears. 2. RATIFICATION. Except as expressly amended by this Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect. The Agreement, as amended hereby, and all rights and powers created thereby and thereunder are in all respects ratified and confirmed. 3. COUNTERPARTS. This Amendment may be signed in any number of counterparts, all of which taken together shall constitute one fully-executed agreement. 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written. NFC CASTINGS, INC. /s/ NFC Castings, Inc. By:________________________________ Title:_____________________________ NC MERGER COMPANY /s/ NC Merger Company By:________________________________ Title:_____________________________ NEENAH CORPORATION /s/ Neenah Corporation By:________________________________ Title:_____________________________ -2- EX-2.3 3 SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORG. 1 Exhibit 2.3 SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION This Second Amendment to Agreement and Plan of Reorganization (the "Second Amendment") is dated as of February 21, 1997 by and among NFC Castings, Inc., a Delaware corporation ("Parent"), NC Merger Company, a Wisconsin corporation ("Newco"), and Neenah Corporation, a Wisconsin corporation (the "Company"). RECITALS Parent, Newco and the Company entered into an Agreement and Plan of Reorganization dated as of November 20, 1996 ("Agreement and Plan of Reorganization") pursuant to which they agreed to consummate a transaction in which Parent would acquire the Company for cash through a reverse triangular merger of Newco with and into the Company, whereby all of the outstanding shares of the capital stock of the Company would be converted into the right to receive cash and all of the outstanding shares of the capital stock of Newco would be converted into shares of the capital stock of the Company, upon the terms and subject to the conditions set forth in the Agreement and Plan of Reorganization. Parent, Newco and the Company entered into a First Amendment to Agreement and Plan of Reorganization dated as of January 13, 1997 ("First Amendment") pursuant to which they agreed to amend certain provisions of the Agreement and Plan of Reorganization. (The Agreement and Plan of Reorganization, as amended by the First Amendment, is referred to herein as the "Agreement".) The parties desire to further amend certain provisions of the Agreement in the manner and to the extent set forth herein. Accordingly, in consideration of the premises and of the mutual agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. AMENDMENT OF THE AGREEMENT. 1.1 Closing Date. Sections 2.2, 9.1(b)(ii) and 9.1(c)(ii) of the Agreement are amended by substituting the date "April 11, 1997" for the date "February 20, 1997" each place it appears. 1.2 Outside Date. Sections 9.1(b)(iii) and 9.1(c)(iii) of the Agreement are amended by substituting the date "April 11, 1997" for the date "February 21, 1997" each place it appears. 1.3 Definitions. Section 1.1 of the Agreement is amended by amending the definitions of "Merger Price" and "Merger Price Per Share" to read in their entirety as follows: "Merger Price" shall mean the sum of $240,000,000.00 less an amount equal to the Settlement Adjustment Amount, to be delivered by Newco pursuant to Article II of this Agreement, subject to later 2 adjustment as provided in Section 2.6(e) of this Agreement. "Merger Price Per Share" shall mean the quotient determined by dividing the Merger Price to be delivered by Newco at Closing by the total number of shares of the Company Common Stock issued and outstanding immediately prior to the Effective Time. (For illustration purposes only, based on the total issued and outstanding shares of Company Common Stock set forth in Section 3.1(c) of this Agreement, the Merger Price Per Share would equal $54,060.14 less the amount determined by dividing the Settlement Adjustment Amount by the number 4439.50.) 1.4 Definitions. Section 1.1 of the Agreement is amended by adding thereto the following additional defined terms: "Former Shareholder" shall mean any former holder of any shares of capital stock of the Company, whose shares of capital stock were repurchased by the Company at any time prior to the date of this Agreement. "Former Shareholder Claim" shall mean any claim, demand, cause of action, suit, obligation or liability whatsoever, in law or equity, known or unknown, whether or not asserted or assertable, and whether or not paid or settled, that any Former Shareholder (and such Former Shareholder's directors, officers, employees, stockholders, heirs, successors, assigns and agents) had, has or may have against, or that has been, might have been or may be asserted against, the Company, any of the Subsidiaries or any of the Company Shareholders, or any of the respective directors, officers, employees, stockholders, heirs, successors, assigns or agents of the Company, any of the Subsidiaries or any of the Company Shareholders, including without limitation any claim, demand, cause of action, suit, obligation or liability arising from or in connection with any sale or conveyance of any of such Former Shareholder's or any other Person's shares of the capital stock of the Company, including any claim, demand, cause of action, suit, obligation or liability based upon an allegation that such Former Shareholder did not receive fair value for his or her shares of the capital stock of the Company at the time such shares were repurchased by the Company or any other allegation in connection with such repurchase or in connection with the transactions contemplated by this Agreement. "Former Shareholder Release" shall mean a Confidential Settlement Agreement and Release substantially in the form of Exhibit H attached to this Agreement and otherwise in substance and amount reasonably acceptable to Parent and the Company. -2- 3 "Recent Former Shareholder" shall mean any of the following Former Shareholders: James P. Keating, Jr., Mary K. and James H. Russell, Jr., Katherine K. Wilson, Dan E. Johnson and the Neenah Foundry Foundation, Inc. "Recent Former Shareholder Claim" shall mean any claim, demand, cause of action, suit, obligation or liability whatsoever, in law or equity, known or unknown, whether or not asserted or assertable, and whether or not paid or settled, that any Recent Former Shareholder (and such Recent Former Shareholder's directors, officers, employees, stockholders, heirs, successors, assigns and agents) had, has or may have against, or that has been, might have been or may be asserted against, the Company, any of the Subsidiaries or any of the Company Shareholders, or any of the respective directors, officers, employees, stockholders, heirs, successors, assigns or agents of the Company, any of the Subsidiaries or any of the Company Shareholders, arising from or in connection with any sale or conveyance of any of such Recent Former Shareholder's or any other Person's shares of the capital stock of the Company, including any claim, demand, cause of action, suit, obligation or liability based upon an allegation that such Recent Former Shareholder did not receive fair value for his or her shares of the capital stock of the Company at the time such shares were repurchased by the Company or any other allegation in connection with such repurchase or in connection with the transactions contemplated by this Agreement. "Settlement Adjustment Amount" shall mean one-half (1/2) of the aggregate amount actually paid by Parent or Newco to the Recent Former Shareholders in exchange for obtaining Former Shareholder Releases from them, provided, however, that in no event shall the Settlement Adjustment Amount exceed $2,000,000.00. 1.5 Payments to Recent Former Shareholders. Article II of the Agreement is amended by adding thereto, after Section 2.3 thereof, the following additional Section 2.3A: 2.3A Payments by Parent or Newco to Recent Former Shareholders. At the Closing, Parent or Newco shall pay to each of the Recent Former Shareholders the settlement amount recited in the Former Shareholder Release applicable to such Recent Former Shareholder. 1.6 Escrow Deposit. Section 2.5(a) of the Agreement is amended to read in its entirety as follows: (a) Immediately after the Effective Time, the Paying Agent shall deposit or shall cause to be deposited with the Escrow Agent by wire transfer of -3- 4 immediately available funds, a portion of the Merger Price equal to $12,000,000.00 less an amount equal to the Settlement Adjustment Amount (the "Escrow Deposit"), to be held by the Escrow Agent in accordance with Section 8.2 of this Agreement and in accordance with the Escrow Agreement. 1.7 Post-Closing Adjustment. Section 2.6(a) of the Agreement is amended by replacing the period at the end of clause (ii) thereof with a semi-colon and adding thereto the following additional clauses (iii), (iv) and (v): (iii) no reserves, accruals or other liabilities for any Former Shareholder Claims shall be established with respect to the Company or any Subsidiary, and the Closing Date Balance Sheet and the Final Closing Date Balance Sheet shall contain no such reserves, accruals or liabilities; and (iv) no expense for any accrual or payment of any portion of any Former Shareholder Claims, whether in settlement thereof or otherwise, shall be allowed or taken into account in computing the net income of the Company for the interim period ending immediately prior to the Effective Time on the Closing Date; and (v) no reduction or decrease shall be made in any asset account of the Company or any Subsidiary for any payments made to the Recent Former Shareholders pursuant to Section 2.3A of this Agreement to the extent any such payments are considered or deemed to have been made by the Company or any Subsidiary. 1.8 Approval of Supplemental Disclosures. Section 5.7(b) of the Agreement is amended by adding the following sentence to the end thereof: Notwithstanding the immediately preceding sentence, for purposes of this Agreement, including without limitation Section 6.1 of this Agreement, Parent hereby consents to all of the updates and supplements to the Disclosure Schedule set forth in the First Addendum to Disclosure Schedule to Agreement and Plan of Reorganization dated as of January 28, 1997 (except for the matter regarding the Recent Former Shareholders disclosed as new Item 7 under Section 3.10) and in the Second Addendum to Disclosure Schedule to Agreement and Plan of Reorganization dated as of February 7, 1997, and accordingly such updates and supplements (except for such matter regarding the Recent Former Shareholders disclosed as new Item 7 under Section 3.10) shall be taken into account for purposes of Section 6.1 of this Agreement. -4- 5 1.9 Minimum Cash on Hand. Section 6.17 of the Agreement is amended to read in its entirety as follows: 6.17 Minimum Cash on Hand. The Company and its Subsidiaries on a consolidated basis shall have at least $18,000,000 cash and cash equivalents on hand at Closing (net of checks issued but not yet presented), less the amount of any payments made to the Recent Former Shareholders pursuant to Section 2.3A of this Agreement to the extent any such payments are considered or deemed to have been made by the Company or any Subsidiary. 1.10 Conditions Precedent to Parent's and Newco's Obligations. Article VI of the Agreement is amended by adding thereto the following additional Section 6.18: 6.18 Former Shareholder Releases. Parent shall have received an irrevocable, duly executed Former Shareholder Release from each of the Recent Former Shareholders, the continued effectiveness of each of which as to the applicable Recent Former Shareholder is conditioned only upon payment to such Recent Former Shareholder at or before the Closing of the settlement amount recited in the Former Shareholder Release applicable to such Recent Former Shareholder. 1.11 Conditions Precedent to Company's Obligations. Article VII of the Agreement is amended by adding thereto the following additional Section 7.10: 7.10 Former Shareholder Releases. Parent shall have received, and Parent shall have delivered to the Company Representative a true and correct copy of, an irrevocable, duly executed Former Shareholder Release from each of the Recent Former Shareholders, the continued effectiveness of each of which as to the applicable Recent Former Shareholder is conditioned only upon payment to such Recent Former Shareholder at or before the Closing of the settlement amount recited in the Former Shareholder Release applicable to such Recent Former Shareholder. 1.12 Indemnification on Behalf of Company Shareholders -- Limitations. Section 8.2(b) of the Agreement is amended by replacing the period at the end of clause (xiii) thereof with "; and" and adding thereto the following additional clause (xiv): (xiv) for any Recent Former Shareholder Claims or Losses attributable thereto. 1.13 Termination of Agreement. Section 9.1(b) of the Agreement is amended by adding thereto the following additional clause (iv): -5- 6 (iv) the condition provided for in Section 6.18 of this Agreement has not been satisfied, or waived by Parent or Newco in writing, by March 14, 1997; or 1.14 Termination of Agreement. Section 9.1(c) of the Agreement is amended by replacing the period at the end of clause (iv) thereof with "; or" and adding thereto the following additional clause (v): (v) the condition provided for in Section 7.10 of this Agreement has not been satisfied, or waived by the Company in writing, by March 14, 1997. 1.15 Exhibits. The Agreement is amended by adding thereto as Exhibit H the form of Confidential Settlement Agreement and Release attached hereto as Exhibit H, and the schedule of Exhibits is modified accordingly. 1.16 Exhibits and Schedules. Prior to Closing, the exhibits and schedules to the Agreement shall be amended to the extent necessary to reflect the amendments to the Agreement set forth in this Second Amendment. 2. RATIFICATION. Except as expressly amended by this Second Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect. The Agreement, as amended hereby, and all rights and powers created thereby and thereunder are in all respects ratified and confirmed. 3. COUNTERPARTS. This Second Amendment may be signed in any number of counterparts, all of which taken together shall constitute one fully-executed agreement. -6- 7 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed as of the day and year first above written. NFC CASTINGS, INC. /s/ NFC Castings, Inc. By:________________________________ Title:_____________________________ NC MERGER COMPANY /s/ NC Merger Company By:________________________________ Title:_____________________________ NEENAH CORPORATION /s/ Neenah Corporation By:________________________________ Title:_____________________________ -7- EX-2.4 4 THIRD AMENDMENT TO AGREEMENT AND PLAN OF REORG. 1 Exhibit 2.4 THIRD AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION This Third Amendment to Agreement and Plan of Reorganization (the "Third Amendment") is dated as of April 3, 1997 by and among NFC Castings, Inc., a Delaware corporation ("Parent"), NC Merger Company, a Wisconsin corporation ("Newco"), and Neenah Corporation, a Wisconsin corporation (the "Company"). RECITALS Parent, Newco and the Company entered into an Agreement and Plan of Reorganization dated as of November 20, 1996 ("Agreement and Plan of Reorganization") pursuant to which they agreed to consummate a transaction in which Parent would acquire the Company for cash through a reverse triangular merger of Newco with and into the Company, whereby all of the outstanding shares of the capital stock of the Company would be converted into the right to receive cash and all of the outstanding shares of the capital stock of Newco would be converted into shares of the capital stock of the Company, upon the terms and subject to the conditions set forth in the Agreement and Plan of Reorganization. Parent, Newco and the Company entered into a First Amendment to Agreement and Plan of Reorganization dated as of January 13, 1997 ("First Amendment") pursuant to which they agreed to amend certain provisions of the Agreement and Plan of Reorganization and a Second Amendment to Agreement and Plan of Reorganization dated as of February 21, 1997 ("Second Amendment") pursuant to which they agreed to amend certain provisions of the Agreement and Plan of Reorganization and the First Amendment. (The Agreement and Plan of Reorganization, as amended by the First Amendment and the Second Amendment, is referred to herein as the "Agreement".) The parties desire to further amend certain provisions of the Agreement in the manner and to the extent set forth herein. Accordingly, in consideration of the premises and of the mutual agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. AMENDMENT OF THE AGREEMENT. 1.1 Closing Date. Sections 2.2, 9.1(b)(ii) and 9.1(c)(ii) of the Agreement are amended by substituting the date "May 2, 1997" for the date "April 11, 1997" each place it appears. 1.2 Outside Date. Sections 9.1(b)(iii) and 9.1(c)(iii) of the Agreement are amended by substituting the date "May 2, 1997" for the date "April 11, 1997" each place it appears. 1.3 Definitions. Section 1.1 of the Agreement is amended by amending the definition of "Settlement Adjustment Amount" to read in its entirety as follows: 2 "Settlement Adjustment Amount" shall mean an amount equal to the sum of (i) one-half (1/2) of the aggregate amount actually paid or to be paid at Closing by Parent or Newco to the Recent Former Shareholders (other than the Neenah Foundry Foundation, Inc.) in exchange for obtaining Former Shareholder Releases from them plus (ii) the total amount actually paid or to be paid at Closing by Parent or Newco to Neenah Foundry Foundation, Inc. as a Recent Former Shareholder in exchange for obtaining a Former Shareholder Release from it, provided, however, that in no event shall the aggregate Settlement Adjustment Amount exceed $3,159,785. 1.4 Termination of Agreement. Section 9.1(b) of the Agreement is amended by amending clause (iv) thereof to read in its entirety as follows: (iv) the condition provided for in Section 6.18 of this Agreement has not been satisfied, or waived by Parent or Newco in writing, by April 15, 1997; or 1.5 Termination of Agreement. Section 9.1(c) of the Agreement is amended by amending clause (v) thereof to read in its entirety as follows: (v) the condition provided for in Section 7.10 of this Agreement has not been satisfied, or waived by the Company in writing, by April 15, 1997. 1.6 Exhibits and Schedules. Prior to Closing, the exhibits and schedules to the Agreement shall be amended to the extent necessary to reflect the amendments to the Agreement set forth in this Third Amendment. 2. RATIFICATION. Except as expressly amended by this Third Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect. The Agreement, as amended hereby, and all rights and powers created thereby and thereunder are in all respects ratified and confirmed. 3. COUNTERPARTS. This Third Amendment may be signed in any number of counterparts, all of which taken together shall constitute one fully-executed agreement. -2- 3 IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed as of the day and year first above written. NFC CASTINGS, INC. /s/ NFC Cashings, Inc. By:________________________________ Title:_____________________________ NC MERGER COMPANY /s/ NC Merger Company By:________________________________ Title:_____________________________ NEENAH CORPORATION /s/ Neenah Corporation By:________________________________ Title:_____________________________ -3- EX-2.5 5 MERGER AGREEMENT 1 EXHIBIT 2.5 MERGER AGREEMENT THIS MERGER AGREEMENT (this "Merger Agreement") is made as of July 1, 1997, by and between NEENAH CORPORATION ("Neenah"), a Wisconsin corporation, and NEENAH FOUNDRY COMPANY ("NFC"), a Wisconsin corporation and the wholly owned subsidiary of Neenah. RECITALS A. The respective boards of directors of NFC and Neenah have determined that the Merger is advisable and generally to the advantage of NFC and Neenah and the respective shareholders of NFC and Neenah, and, by resolutions duly adopted, have approved the Merger, including this Merger Agreement. B. The respective shareholders of NFC and the Neenah, by resolutions duly adopted have approved the Merger, including this Merger Agreement. NOW, THEREFORE, in consideration of the Recitals and of the mutual provisions, agreements and covenants herein contained, NFC and Neenah hereby agree as follows: 1. The Merger. At the Effective Time, NFC shall be merged with and into Neenah which shall be the surviving corporation pursuant to the provisions of the Wisconsin Business Corporation Law (the "Surviving Corporation"). 2. Effective Time. Upon the filing of the Articles of Merger with the Wisconsin Department of Financial Institutions, the Merger shall be effective and the date and time of the filing of the Articles of Merger shall be the "Effective Time" as that term is used herein. 3. Effect of Merger. At the Effective Time, the corporate identity, existence, purposes, powers, franchises, rights and immunities of Neenah shall continue in the Surviving Corporation unaffected and unimpaired by the Merger and the corporate identity, existence, purposes, powers, franchises, rights and immunities of NFC shall be merged into the Surviving Corporation and the Surviving Corporation shall be fully vested therewith. The separate existence of NFC, except insofar as otherwise specifically provided by law, shall cease at the Effective Time whereupon NFC and the Surviving Corporation shall be and become one single corporation. 4. Directors and Officers. The officers and directors of Neenah in office immediately prior to the Effective Time shall be the officers and directors of the Surviving Corporation and shall hold their respective positions from and after the Effective Time until their successors have been appointed or elected and qualified. 2 5. Articles of Incorporation; Bylaws. The Articles of Incorporation and Bylaws of Neenah in effect immediately prior to the Effective Time shall be the Articles of Incorporation and Bylaws of the Surviving Corporation except that Article I of the Articles of Incorporation of the Surviving Corporation shall be amended to read as follows: "The name of the corporation shall be Neenah Foundry Company." After the Effective Time, the Articles of Incorporation and Bylaws of the Surviving Corporation may be amended in accordance with their terms and as provided by applicable law. 6. Effect on Shares. The issued shares of NFC shall not be converted in any manner, but each said share which is issued immediately prior to the Effective Time shall, at the Effective Time, be surrendered and extinguished. 7. Tax Consequences. The merger of NFC into Neenah is intended to qualify as a tax-free liquidation under Section 332 of the Internal Revenue Code of 1986, as amended. 8. Abandonment. The Merger may be abandoned at any time prior to the Effective Time in which case this Merger Agreement shall be void and of no further force and effect. 9. Miscellaneous. This Merger Agreement shall be governed by and construed in accordance with the internal laws of the State of Wisconsin. This Merger Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which counterparts together constitute a single instrument. -2- 3 IN WITNESS WHEREOF, this Merger Agreement has been executed by duly authorized officers of the parties hereto on the date first above written. NEENAH CORPORATION By: ------------------------------------- Name: Title: Attest: ---------------------------------- --------------------, Secretary NEENAH FOUNDRY COMPANY By: -------------------------------------- Name: Title: Attest: ---------------------------------- --------------------, Secretary -3- EX-4.1 6 INDENTURE DATED APRIL 30, 1997 1 EXHIBIT 4.1 EXECUTION COPY ================================================================================ NC MERGER COMPANY 11-1/8% Senior Subordinated Notes due 2007 Obligations to be assumed by Neenah Corporation and guaranteed by Neenah Foundry Company, Neenah Transport, Inc. and Hartley Controls Corporation -------------------------------------- INDENTURE Dated as of April 30, 1997 -------------------------------------- Trustee, United States Trust Company of New York ================================================================================ 2 1 TABLE OF CONTENTS Page ---- ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions.............................................. 1 SECTION 1.02. Other Definitions........................................ 28 SECTION 1.03. Incorporation by Reference of Trust Indenture Act.......................................... 29 SECTION 1.04. Rules of Construction.................................... 29 ARTICLE II The Securities SECTION 2.01. Form and Dating.......................................... 30 SECTION 2.02. Execution and Authentication............................. 31 SECTION 2.03. Registrar and Paying Agent............................... 32 SECTION 2.04. Paying Agent To Hold Money in Trust...................... 33 SECTION 2.05. Securityholder Lists..................................... 34 SECTION 2.06. Transfer and Exchange.................................... 34 SECTION 2.07. Replacement Securities................................... 35 SECTION 2.08. Outstanding Securities................................... 36 SECTION 2.09. Temporary Securities..................................... 36 SECTION 2.10. Cancelation.............................................. 36 SECTION 2.11. Defaulted Interest....................................... 37 SECTION 2.12. CUSIP Numbers............................................ 37 SECTION 2.13. Book-Entry Provisions for U.S. Global Security................................................. 37 SECTION 2.14. Special Transfer Provisions.............................. 39 ARTICLE III Redemption SECTION 3.01. Notices to Trustee....................................... 44 SECTION 3.02. Selection of Securities to be Redeemed......................................... 44 SECTION 3.03. Notice of Redemption..................................... 45 3 2 SECTION 3.04. Effect of Notice of Redemption........................... 46 SECTION 3.05. Deposit of Redemption Price.............................. 47 SECTION 3.06. Securities Redeemed in Part.............................. 47 SECTION 3.07. Optional Redemption...................................... 47 ARTICLE IV Covenants SECTION 4.01. Payment of Securities.................................... 48 SECTION 4.02. SEC Reports.............................................. 48 SECTION 4.03. Limitation on Indebtedness............................... 49 SECTION 4.04. Limitation on Restricted Payments........................ 52 SECTION 4.05. Limitation on Restrictions on Distributions from Subsidiaries........................ 56 SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock....................................... 58 SECTION 4.07. Limitation on Transactions with Affiliates............................................. 62 SECTION 4.08. Change of Control........................................ 63 SECTION 4.09. Compliance Certificate................................... 64 SECTION 4.10. Further Instruments and Acts............................. 65 SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries........................................... 65 SECTION 4.12. Limitation on Liens...................................... 65 SECTION 4.13. Limitation on Sale/Leaseback Transactions........................................... 66 SECTION 4.14. Limitation on Lines of Business.......................... 66 SECTION 4.15. Future Guarantor Subsidiaries............................ 66 ARTICLE V Successor Company SECTION 5.01. When Company May Merge or Transfer Assets................................................. 67 ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default........................................ 68 SECTION 6.02. Acceleration............................................. 70 SECTION 6.03. Other Remedies........................................... 71 4 3 SECTION 6.04. Waiver of Past Defaults.................................. 71 SECTION 6.05. Control by Majority...................................... 71 SECTION 6.06. Limitation on Suits...................................... 72 SECTION 6.07. Rights of Holders to Receive Payment........................................ 72 SECTION 6.08. Collection Suit by Trustee............................... 72 SECTION 6.09. Trustee May File Proofs of Claim......................... 72 SECTION 6.10. Priorities............................................... 73 SECTION 6.11. Undertaking for Costs.................................... 73 SECTION 6.12. Waiver of Stay or Extension Laws......................... 74 SECTION 6.13. Restoration of Rights and Remedies....................... 74 ARTICLE VII Trustee SECTION 7.01. Duties of Trustee........................................ 74 SECTION 7.02. Rights of Trustee........................................ 76 SECTION 7.03. Individual Rights of Trustee............................. 76 SECTION 7.04. Trustee's Disclaimer..................................... 77 SECTION 7.05. Notice of Defaults....................................... 77 SECTION 7.06. Reports by Trustee to Holders............................ 77 SECTION 7.07. Compensation and Indemnity............................... 77 SECTION 7.08. Replacement of Trustee................................... 78 SECTION 7.09. Successor Trustee by Merger.............................. 79 SECTION 7.10. Eligibility; Disqualification............................ 80 SECTION 7.11. Preferential Collection of Claims Against Company ....................................... 80 ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance............................................. 80 SECTION 8.02. Conditions to Defeasance................................. 82 SECTION 8.03. Application of Trust Money............................... 83 SECTION 8.04. Repayment to Company..................................... 83 SECTION 8.05. Indemnity for Government Obligations............................................ 84 SECTION 8.06. Reinstatement............................................ 84 ARTICLE IX Amendments 5 4 SECTION 9.01. Without Consent of Holders............................... 84 SECTION 9.02. With Consent of Holders.................................. 85 SECTION 9.03. Compliance with Trust Indenture Act...................... 87 SECTION 9.04. Revocation and Effect of Consents and Waivers................................................ 87 SECTION 9.05. Notation on or Exchange of Securities.......................................... 87 SECTION 9.06. Trustee to Sign Amendments............................... 88 SECTION 9.07. Payment for Consent...................................... 88 ARTICLE X Subordination of the Securities SECTION 10.01. Agreement to Subordinate................................. 88 SECTION 10.02. Liquidation, Dissolution, Bankruptcy..................... 89 SECTION 10.03. Default on Senior Indebtedness of the Company............................................ 89 SECTION 10.04. Acceleration of Payment of Securities.................... 90 SECTION 10.05. When Distribution Must Be Paid Over...................... 90 SECTION 10.06. Subrogation.............................................. 90 SECTION 10.07. Relative Rights.......................................... 91 SECTION 10.08. Subordination May Not Be Impaired by Company................................................ 91 SECTION 10.09. Rights of Trustee and Paying Agent....................... 91 SECTION 10.10. Distribution or Notice to Representative................. 92 SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To Accelerate.................................... 92 SECTION 10.12. Trust Moneys Not Subordinated............................ 92 SECTION 10.13. Trustee Entitled to Rely................................. 92 SECTION 10.14. Trustee to Effectuate Subordination...................... 93 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company..................... 93 SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination Provisions............................... 93 SECTION 10.17. Trustee's Compensation Not Prejudiced.................... 94 ARTICLE XI Subsidiary Guaranties SECTION 11.01. Subsidiary Guaranties.................................... 94 6 5 SECTION 11.02. Limitation on Liability.................................. 96 SECTION 11.03. Successors and Assigns................................... 96 SECTION 11.04. No Waiver................................................ 97 SECTION 11.05. Modification............................................. 97 SECTION 11.06. Execution of Supplemental Indenture for Future Guarantor Subsidiaries...................... 97 ARTICLE XII Subordination of the Subsidiary Guaranties SECTION 12.01. Agreement to Subordinate................................. 98 SECTION 12.02. Liquidation, Dissolution, Bankruptcy..................... 98 SECTION 12.03. Default on Senior Indebtedness of a Guarantor Subsidiary..................................... 98 SECTION 12.04. Demand for Payment....................................... 100 SECTION 12.05. When Distribution Must Be Paid Over...................... 100 SECTION 12.06. Subrogation.............................................. 100 SECTION 12.07. Relative Rights.......................................... 100 SECTION 12.08. Subordination May Not Be Impaired by a Guarantor Subsidiary................................... 101 SECTION 12.09. Rights of Trustee and Paying Agent....................... 101 SECTION 12.10. Distribution or Notice to Representative................. 101 SECTION 12.11. Article XII Not To Prevent Events of Default or Limit Right To Accelerate.................................... 102 SECTION 12.12. Trustee Entitled to Rely................................. 102 SECTION 12.13. Trustee to Effectuate Subordination...................... 102 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of a Guarantor Subsidiary............................................. 103 SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Guarantor Subsidiary on Subordination Provisions............................ 103 7 6 ARTICLE XIII Miscellaneous SECTION 13.01. Trust Indenture Act Controls............................. 103 SECTION 13.02. Notices.................................................. 103 SECTION 13.03. Communication by Holders with Other Holders................................................ 104 SECTION 13.04. Certificate of Opinion as to Conditions Precedent.............................................. 104 SECTION 13.05. Statements Required in Certificate or Opinion................................................ 105 SECTION 13.06. When Securities Disregarded.............................. 105 SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.............................................. 105 SECTION 13.08. Legal Holidays........................................... 105 SECTION 13.09. Governing Law............................................ 106 SECTION 13.10. No Recourse Against Others............................... 106 SECTION 13.11. Successors............................................... 106 SECTION 13.12. Multiple Originals....................................... 106 SECTION 13.13. Table of Contents; Headings.............................. 106 Exhibit A - Form of Face of Initial Security Exhibit B - Form of Face of Exchange Security Exhibit C - Form of Transferee Letter of Representation Exhibit D - Form of First Supplemental Indenture Exhibit E - Form of Supplemental Indenture Exhibit F - Form of Certificate to be Delivered upon Termination of Restricted Period Exhibit G - Form of Certificate to be Delivered in Connection with Transfers to Non-QIB Institutional Accredited Investors Exhibit H - Form of Certificate to be Delivered in Connection with Transfers pursuant to Regulation S 8 CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- --------- 310(a)(1) ................................................... 7.10 (a)(2) ................................................... 7.10 (a)(3) ................................................... N.A. (a)(4) ................................................... N.A. (b) ................................................... 7.08; 7.10 (c) ................................................... N.A. 311(a) ................................................... 7.11 (b) ................................................... 7.11 (c) ................................................... N.A. 312(a) ................................................... 2.05 (b) ................................................... 11.03 (c) ................................................... 11.03 313(a) ................................................... 7.06 (b)(1) ................................................... N.A. (b)(2) ................................................... 7.06 (c) ................................................... 11.02 (d) ................................................... 7.06 314(a) ................................................... 4.02; 4.09; 11.02 (b) ................................................... N.A. (c)(1) ................................................... 11.04 (c)(2) ................................................... 11.04 (c)(3) ................................................... N.A. (d) ................................................... N.A. (e) ................................................... 13.05 (f) ................................................... 4.12 315(a) ................................................... 7.01 (b) ................................................... 7.05; 11.02 (c) ................................................... 7.01 (d) ................................................... 7.01 (e) ................................................... 6.11 316(a)(last sentence) ................................................... 13.06 (a)(1)(A) ................................................... 6.05 (a)(1)(B) ................................................... 6.04 (a)(2) ................................................... N.A. (b) ................................................... 6.07 317(a)(1) ................................................... 6.08 (a)(2) ................................................... 6.09 (b) ................................................... 2.04 318(a) ................................................... 11.01 N.A. means Not Applicable. - ---------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture. CONFORMED COPY 9 INDENTURE dated as of April 30, 1997, among NC MERGER COMPANY, a Wisconsin corporation (the "Company"), and United States Trust Company of New York, a New York banking corporation (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 11-1/8% Senior Subordinated Notes due 2007 (the "Initial Securities") and, when and if issued pursuant to a registered exchange for Initial Securities, the Company's 11-1/8% Series B Senior Subordinated Notes due 2007 (the "Exchange Securities"). ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions. "ACP Holdings" means ACP Holding Company, a Delaware corporation. "ACP Products, L.L.C." means ACP Products, L.L.C., a Delaware limited liability company. "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock), including improvements to existing assets, to be used by the Company or a Restricted Subsidiary in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that, in the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the 10 2 ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Section 4.07 only, "Affiliate" shall also mean any beneficial owner of shares representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Applicable Premium" means, with respect to a Security, the greater of (i) 1.0% of the then outstanding principal amount of such Security and (ii) the excess of (A) the present value of all remaining required interest and principal payments due on such Security, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (B) the then outstanding principal amount of such Security. "Asset Disposition" means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Restricted Subsidiaries (including any disposition by means of a merger, consolidation or similar transaction) other than: (i) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (ii) a disposition of inventory, in the ordinary course of business consistent with past practices of the Company and its Subsidiaries and (iii) dispositions with a fair market value of less than $500,000 in the aggregate in any fiscal year; (iv) a disposition of properties and assets that is governed by the provisions of Section 5.01(i)-(v); and (v) for purposes of Section 4.06 only, a disposition subject to Section 4.04. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate assumed in making calculations in accordance with FAS 13) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the 11 3 products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Senior Bank Facilities or any refinancing or replacements thereof including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Borrowing Base" means, as of the date of determination, an amount equal to the sum, without duplication, of (i) 80% of the net book value of the Company's accounts receivable at such date and (ii) 50% of the net book value of the Company's inventories at such date. Net book value shall be determined in accordance with GAAP and shall be that reflected on the most recent available balance sheet (it being understood that the accounts receivable and inventories of an acquired business may be included if such acquisition has been completed on or prior to the date of determination). "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP. The amount of Indebtedness represented by a Capitalized Lease Obligation shall be the 12 4 capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last scheduled payment of rent or any other amount due under the relevant lease. "Change of Control" means the occurrence of any of the following events: (a) prior to the earlier to occur of the first public offering of Voting Stock of ACP Holdings, the Company or Holdings, the Permitted Holders cease to be entitled (by "beneficial ownership" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of Voting Stock, contract or otherwise) to elect or cause the election of directors of the Company having a majority of the total voting power of the Board of Directors of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (a), the Permitted Holders shall be deemed to beneficially own any Voting Stock of a corporation (the "specified corporation") held by any other corporation (the "parent corporation") so long as one or more of the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent corporation); (b) after the first public offering of Voting Stock of ACP Holdings, the Company or Holdings, any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Permitted Holders, is or becomes the beneficial owner (as defined in clause (a) above), directly or indirectly, of Voting Stock that represents more than 40% of the aggregate ordinary voting power of all classes of the Voting Stock of ACP Holdings, the Company or Holdings, voting together as a single class, and either (x) the Permitted Holders beneficially own (as defined in clause (a) above), directly or indirectly, in the aggregate Voting Stock that represents a lesser percentage of the aggregate ordinary voting power of all classes of the Voting Stock of ACP Holdings, the Company or Holdings, as the case may be, voting together as a single class, than such other person or group and are not entitled (by voting power, contract or otherwise) to elect directors of ACP Holdings, the Company or Holdings having a 13 5 majority of the total voting power of the board of directors of ACP Holdings, Holdings or the Company, as the case may be, or (y) such other person or group is entitled to elect directors of ACP Holdings, the Company or Holdings having a majority of the total voting power of the board of directors of ACP Holding, Holdings or the Company; (c) after the first public offering of Voting Stock of ACP Holdings, Holdings or the Company, during any period of not greater than two consecutive years beginning after the Issue Date, individuals who at the beginning of such period constituted the board of directors of ACP Holdings, Holdings or the Company, as the case may be (together with any new directors whose election by such board of directors or whose nomination for election by shareholders was approved by the Permitted Holders or by such board of directors, in each case by a vote of a majority of the directors of ACP Holdings, the Company or Holdings, as the case may be, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to have a majority of the total voting power of the board of directors of ACP Holdings, Holdings or the Company, as the case may be; or (d) any sale, lease, or other transfer (in one transaction or in a series of related transactions) is made by the Company or its Restricted Subsidiaries of all or substantially all of the consolidated assets of the Company and its Restricted Subsidiaries to any Person. "Citicorp" means Citicorp, a Delaware corporation. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Agreement" means one or more of the following agreements entered into by a Person and one or more financial institutions: commodity future contracts, forward contracts, options or other similar arrangements or agreements designed to protect against fluctuations in the price of, or the shortage of supply of, commodities from time to time. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, 14 6 means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. In particular, upon consummation of the Neenah Merger and execution and delivery of the First Supplemental Indenture, the "Company" shall mean Neenah Corporation. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination (determined, for the four fiscal quarters ending prior to the Issue Date, or any thereof, on a pro forma basis to give effect to the Neenah Merger as if it had occurred at the beginning of such period) to (ii) Consolidated Interest Expense for such four fiscal quarters (determined, for the four fiscal quarters ending prior to the Issue Date, or any thereof, on a pro forma basis to give effect to the Neenah Merger as if it had occurred at the beginning of such period); provided, however, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness and the application of the proceeds thereof as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that in the case of Indebtedness to finance seasonal fluctuations in working capital needs Incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four quarter period); (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have disposed of any assets constituting all or substantially all of the assets of an operating unit of a business (a "Disposal"), (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Disposal for such 15 7 period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and (y) Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Disposal for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of the assets of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness in connection therewith) as if such Investment or acquisition occurred on the first day of such period; and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Disposal or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Disposal, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount 16 8 of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). If any Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest and is being given pro forma effect, then (i) if any interest had accrued on such Indebtedness prior to the date of determination, the interest expense on such Indebtedness shall be computed by applying a fixed or floating rate of interest as selected by the Company or such Restricted Subsidiary for the interest period immediately preceding such determination or (ii) if no interest accrued on such Indebtedness prior to the date of determination, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company or such Restricted Subsidiary, either a fixed or floating rate. If any Indebtedness which is being given pro forma effect was Incurred under a revolving credit facility that was in effect throughout the applicable period, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period. "Consolidated Interest Expense" means, for any period, the total consolidated interest expense of the Company and its Restricted Subsidiaries for such period, plus, to the extent Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense: (i) interest expense attributable to Capitalized Lease Obligations and Attributable Debt; (ii) amortization of debt discount; (iii) capitalized interest; (iv) noncash interest expense; (v) commissions, discounts and other fees and charges with respect to letters of credit and bankers' acceptance financing; (vi) net costs associated with Interest Rate Agreements; (vii) the interest portion of any deferred payment obligation for goods or services; (viii) interest actually paid by the Company or any Restricted Subsidiary on any Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary; (ix) the cash contributions to any employee stock ownership plan or similar trust to the extent such 17 9 contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or a Wholly Owned Subsidiary) in connection with Indebtedness Incurred by such plan or trust; and (x) the earned discount or yield with respect to the sale of receivables (without duplication of amounts included in Consolidated Net Income); but in no event shall include (i) amortization of debt issuance costs; (ii) Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries of the Company and Disqualified Stock of the Company held by Persons other than the Company or a Wholly Owned Subsidiary; or (iii) interest Incurred in connection with Investments in discontinued operations. "Consolidated Net Income" means, for any period, the consolidated net income (loss) of the Company and its Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income; (ii) for purposes of Section 4.04(a)(3)(A) only, any net income (loss) of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could 18 10 have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) any extraordinary gain or loss; and (vi) the cumulative effect of a change in accounting principles after the Issue Date. Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.04(a)(3)(D). Notwithstanding anything to the contrary in Section 4.04, all amounts paid to Holdings pursuant to Section 4.04(b)(xi)(B) shall be deducted in computing Consolidated Net Income. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and the Restricted Subsidiaries, determined on a Consolidated basis, as of the end of the most recent fiscal quarter of the Company ending at least 45 days prior to the taking of any action for the purpose of which the determination is being made, as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. 19 11 "Consolidated Non-Cash Charges" of any Person means, for any period, the aggregate depreciation, amortization and other non-cash charges of such Person and its Consolidated Subsidiaries for such period, on a Consolidated basis, as determined in accordance with GAAP (excluding any such other non-cash charge which requires an accrual or reserve for cash charges for any future period). "Consolidation" means the consolidation of the accounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" shall not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreement or other similar agreement or arrangement as to which such Person is a party or a beneficiary. "CVC" means Citicorp Venture Capital, Ltd., a New York corporation. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Definitive Securities" means Securities that are in the form of Exhibit A or Exhibit B attached hereto that do not include the information called for by footnote 1 thereof. "Depositary" means, with respect to the Securities issuable or issued in whole or in part in global form, the Person specified in Section 2.03 as the Depositary with respect to the Securities, until a successor shall have been appointed and becomes such pursuant to the applicable provisions of this Indenture, and thereafter, "Depositary" shall mean or include such successor. "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend at least $25,000,000 and is specifically designated by the Company in the instrument evidencing or 20 12 governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock; or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to ninety-one days after the Stated Maturity of the Securities. Disqualified Stock shall not include any Capital Stock that is not otherwise Disqualified Stock if by its terms the holders have the right to require the issuer to repurchase such stock upon a Change of Control (or upon events substantially similar to a Change of Control). "Domestic Subsidiary" means a Subsidiary that is incorporated or organized under the laws of the United States of America, any state thereof or the District of Columbia. "EBITDA" for any period means the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) income tax expense; (ii) Consolidated Interest Expense; and (iii) Consolidated Non-Cash Charges, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income (loss) of such Subsidiary was included in calculating Consolidated Net Income. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement dated as of the Issue Date by and among the Initial Purchasers, the Neenah Corporation and the Initial Guarantors, as such agreement may be amended, modified, or supplemented from time to time in accordance with the terms thereof. "Exchange Offer" shall have the meaning set forth in the Exchange and Registration Rights Agreement. 21 13 "Exchange Offer Registration Statement" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "First Supplemental Indenture" means the First Supplemental Indenture to be entered into in connection with the Neenah Merger, which shall be substantially in the form of Exhibit D hereto. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, in statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "Global Security" means a Security that is in the form of Exhibit A or Exhibit B hereto that includes the information called for by footnote 1 thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person through an agreement enforceable by or for the benefit of the holder of such Indebtedness and any such 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 Indebtedness or other obligation of such other Person (whether arising to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, 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. "Guarantor Subsidiary" means any Person that has issued a Subsidiary Guaranty. Upon consummation of the Neenah Merger and execution and delivery of the First Supplemental Indenture, the term "Guarantor Subsidiary" shall include each of the Initial Guarantors. 22 14 "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Commodity Agreement, Interest Rate Agreement or Currency Agreement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Holdings" means NFC Castings, Inc., a Delaware corporation, any Person acceding to its ownership, and successors thereto. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary; provided further, however, that in the case of a discount security, the accretion of original issue discount on such security shall not be considered an Incurrence of Indebtedness if (but only if) the Company elects to treat the whole face amount of such security as Incurred at such time (and such Incurrence is then permitted in accordance with the terms of this Indenture). "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (i) the principal of indebtedness of such Person for borrowed money; (ii) the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto) other than letters of credit or similar instruments supporting Trade Payables entered into in the ordinary course of business of such Person to the extent that such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed not later than the third business day following such drawing; (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price 23 15 is due more than twelve months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (v) all Capitalized Lease Obligations and all Attributable Debt of such Person; (vi) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and (ix) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Indenture as amended or supplemented from time to time. "Initial Guarantors" means Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc., each a Wisconsin corporation. "Initial Purchasers" means Chase Securities Inc. and Morgan Stanley & Co. Incorporated. "Interest Rate Agreement" means, with respect to any Person, any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge 24 16 agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance loan (other than advances or loans to customers or suppliers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the Person making such loan or advance) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04 only, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Initial Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Management Investors" means the officers and employees of ACP Products, L.L.C., ACP Holdings, Holdings, the Company or a Subsidiary of the Company who acquire Voting Stock of ACP Products, L.L.C., ACP Holdings, Holdings or the Company on or after the Issue Date. "Moody's" means Moody's Investors Service, Inc., and its successors. 25 17 "Neenah Corporation" means Neenah Corporation, a Wisconsin corporation. "Neenah Merger" means the merger of the Company with and into Neenah Corporation under the terms of the Agreement and Plan of Reorganization (as amended) by and among the Company, Holdings and Neenah Corporation dated November 20, 1996. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable, or from an escrow account or otherwise, in each case only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of: (i) all legal, title and recording expenses, commissions and other expenses (including fees and expenses of counsel and investment bankers) incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition; (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition; (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition; and (iv) appropriate amounts to be provided by the party or parties making such Asset Disposition as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Disposition. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the proceeds of such issuance or sale in the form of cash, including payments in respect of deferred payment obligations when received in form of, or stock or other assets when disposed for, cash, net of attorneys' fees, accountants' fees, underwriters' or 26 18 placement agents' fees, discounts or commissions and brokerage, filing and registration fees, trustee's fees, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers, one of whom shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means (i) CVC and its Affiliates and Permitted Transferees and (ii) the Management Investors and their Permitted Transferees. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (i) the Company; (ii) a Restricted Subsidiary or a Person which shall, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (iii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (iv) Temporary Cash Investments; (v) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms, provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (vi) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vii) loans or advances to employees made in the ordinary course of business and not exceeding $1,000,000 in the aggregate outstanding at any one time; (viii) stock, obligations or securities received in settlement of debts 27 19 created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix) securities received as consideration in sales of assets made in compliance with Section 4.06; (x) other Investments, of any type, provided that the amount of such Investments made after the Issue Date in reliance on this clause (x) and outstanding at any time does not exceed 7.5% of Total Assets; or (xi) Guarantees relating to Indebtedness which is permitted to be Incurred under Section 4.03. "Permitted Liens" means with respect to any Person, (a) Liens to secure Indebtedness permitted under the provisions described under clause (b)(i) or (ii) under Section 4.03; (b) pledges or deposits made or other Liens granted by (1) such Person under workmen's compensation laws, unemployment insurance laws or similar legislation, (2) in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or (3) to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business, (c) Liens imposed by law, such as carriers', warehousemen's, mechanics', employees' and other like Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments, awards, decrees or orders of any court or other governmental authority against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review; (d) Liens for property taxes not yet due or payable or subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings; (e) Liens in favor of issuers of surety, performance, judgment, appeal and other like bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; (f) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning provisions, carveouts, conditional waivers or other restrictions as to the use of real properties or minor irregularities of title (and with respect to leasehold interests, mortgages, obligations, Liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property, with or without consent of the 28 20 lessee) or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially impair the use of such properties in the operation of the business of such Person; (g) Liens existing or provided for under written arrangements existing on the Issue Date; (h) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of such Person; (i) Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligations; (j) Liens to secure any refinancing, refunding, replacement, renewal, repayment or extension (or successive refinancings, refundings, replacements, renewals, repayments or extensions) as a whole, or in part, of any Indebtedness secured by any Lien referred to in clause (g), (i), (l), (m) or (n); provided, however, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (g), (i), (l), (m) or (n) at the time the original Lien became a Permitted Lien and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, replacement, renewal, repayment or extension; (k)(i) mortgages, liens, security interests, restrictions or encumbrances that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary or the Company has easement rights or on any real property leased by the Company and subordination or similar agreements relating thereto and (ii) any condemnation or eminent domain proceedings affecting any real property; (l) Liens on property, assets or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created, Incurred or assumed by such Person in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; (m) Liens on property or assets at the time the Company or a Restricted Subsidiary acquired the property or assets, including any acquisition by means of a merger or consolidation with or into the Company or a Restricted Subsidiary; provided, however, that such Liens are not created in connection with, or in contemplation of, such acquisition; provided further, 29 21 however, that the Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; and (n) any Lien on stock or other securities of an Unrestricted Subsidiary that secures Indebtedness of such Unrestricted Subsidiary. "Permitted Transferee" means (a) with respect to CVC (i) Citicorp, any direct or indirect wholly owned subsidiary of Citicorp, and any officer, director or employee of CVC, Citicorp or any wholly owned subsidiary of Citicorp; (ii) any spouse or lineal descendant (including by adoption and stepchildren) of the officers, directors and employees in clause (a)(i) above or (iii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of one or more of the persons described in clause (a)(i) or (ii) above and (b) with respect to any officer or employee of ACP Products, L.L.C., ACP Holdings, Holdings, the Company or a Subsidiary of the Company (i) any spouse or lineal descendant (including by adoption and stepchildren) of such officer or employee and (ii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of such officer or employee, any of the persons described in clause (b)(i) above or any combination thereof. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock," as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security that is due or overdue or is to become due at the relevant time. "Private Placement Legend" means the legend set forth under such caption in the form of Initial Security in Exhibit A hereto. 30 22 "Public Equity Offering" means an underwritten primary public offering of common stock of ACP Holdings, Company or Holdings (or, for purposes of Section 4.11(d), any Restricted Subsidiary) pursuant to an effective registration statement (other than a registration statement on Form S-4, S-8 or any successor or similar forms) under the Securities Act (whether alone or in conjunction with any secondary public offering); provided, however, that if any such offering is an offering of the common stock of ACP Holdings, only the net proceeds thereof that are contributed to the Company shall be taken into consideration for purposes of this definition. "Public Market" means any time after (x) a Public Equity Offering has been consummated and (y) at least 15% of the total issued and outstanding common stock of ACP Holdings, the Company or Holdings (or, for purposes of Section 4.11, any Restricted Subsidiary) has been distributed by means of an effective registration statement under the Securities Act. "Purchase Agreement" means the Purchase Agreement dated April 23, 1997 among the Company and the Initial Purchasers. "Purchase Money Indebtedness" means Indebtedness (i) consisting of the deferred purchase price of an asset or assets (including Capital Stock and the assets of an ongoing business) including additions and improvements, any conditional sale obligation, any obligation under any title retention agreement or any other purchase money obligation or (ii) incurred to finance the acquisition by the Company or a Restricted Subsidiary of an asset or assets (including Capital Stock and the assets of a Related Business), including additions and improvements; provided that in the case of clause (i) the Average Life of such Indebtedness is less than the anticipated useful life of assets having an aggregate fair market value representing more than 50% of the aggregate fair market value of all assets so acquired and that in the case of clauses (i) and (ii) such Indebtedness is incurred within 180 days after the acquisition by the Company or Restricted Subsidiary of such asset or assets, or is in existence with respect to any asset or other property at the time such asset or property is acquired. "Redemption Date" means the date on which the Securities are optionally redeemed pursuant to Section 3.07. 31 23 "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances" and "refinanced" shall have a correlative meaning) any Indebtedness existing on the Issue Date or Incurred in compliance with this Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in this Indenture) and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of that or another Restricted Subsidiary of the Company), including Indebtedness that refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced; (ii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced; (iii) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or, if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or, if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus the amount of any premium reasonably determined by the Company or such Restricted Subsidiary, as applicable, as necessary at the time of such refinancing to accomplish such refinancing or required pursuant to the terms thereof, plus the amount of expenses of the Company or such Restricted Subsidiary, as applicable, Incurred in connection with such refinancing; and (iv) if the Indebtedness being refinanced is subordinated in right of payment to the Securities, such Refinancing Indebtedness is subordinated in right of payment to the Securities to the extent of the Indebtedness being refinanced; provided further, however, that Refinancing Indebtedness shall not include Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "Registered Exchange Offer" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Related Business" means any business of the Company and the Restricted Subsidiaries as conducted on the Issue Date and any business related, ancillary or complementary thereto. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. 32 24 "S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc., and its successors. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or such Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" of the Company means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Securities" means, collectively, the Initial Securities and, when and if issued as provided in the Exchange and Registration Rights Agreement, the Exchange Securities. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to the Global Security (as appointed by the Depository), or any successor entity thereto and shall initially be the Trustee. "Senior Bank Facilities" means the credit agreement dated as of the Issue Date, as amended, waived or otherwise modified from time to time, among Holdings, the Company, the lenders party thereto from time to time, and The Chase Manhattan Bank, a New York banking corporation, as agent (except to the extent that any such amendment, waiver or other modification thereto would be prohibited by the terms of this Indenture). "Senior Indebtedness" of the Company means all principal of, premium (if any), accrued interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and other amounts owing with respect to all Indebtedness of the Company, and including all Bank 33 25 Indebtedness, whether outstanding on the Issue Date or thereafter incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is expressly provided that such obligations are not superior in right of payment to the Notes; provided, however, that Senior Indebtedness shall not include (1) any obligation of the Company to any Subsidiary, (2) any liability for federal, foreign, state, local or other taxes owed or owing by the Company, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness or obligation of the Company which is subordinate or junior in any respect (other than as a result of the Indebtedness being unsecured) to any other Indebtedness or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock or (6) any Indebtedness Incurred in violation of this Indenture. "Senior Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Senior Subordinated Indebtedness" means the Securities and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Securities and is not subordinated by its terms to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Shelf Registration Statement" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of clause (w)(1) or (2) of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the purchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). 34 26 "Subordinated Obligation" of the Company means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is expressly subordinate in right of payment to the Securities pursuant to a written agreement. "Subordinated Obligation" of any Guarantor Subsidiary shall have a correlative meaning. "Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or members of any other governing body thereof is at the time owned or controlled, directly or indirectly, by (i) such Person or (ii) one or more Subsidiaries of such Person. "Subsidiary Guaranty" means any Guarantee of the Securities which may from time to time be executed and delivered pursuant to the terms of this Indenture. Each such Subsidiary Guaranty shall be in the form prescribed in this Indenture. The First Supplemental Indenture includes the Subsidiary Guaranties issued by the Initial Guarantors. "Temporary Cash Investments" means any of the following: (i) any investment in direct obligations (x) of the United States of America or any agency thereof or obligations Guaranteed by the United States of America or any agency thereof or (y) of any foreign country recognized by the United States of America rated at least "A" by S&P or "A-1" by Moody's; (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 365 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital and surplus in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above; (iv) investments in commercial paper, maturing not more than 365 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United 35 27 States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P; (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's; (vi) any money market deposit accounts issued or offered by a domestic commercial bank or a commercial bank organized and located in a country recognized by the United States of America, in each case, having capital and surplus in excess of $250,000,000 (or the foreign currency equivalent thereof), or investments in money market funds complying with the risk limiting conditions of Rule 2a-7 (or any successor rule) of the Commission under the Investment Company Act of 1940, as amended; and (vii) similar investments approved by the Board of Directors in the ordinary course of business. "Term Loans" means the Tranche A Term Loans and the Tranche B Term Loans made pursuant to the Senior Bank Facilities. "Total Assets" means, at any date of determination, the total consolidated assets of the Company and its Restricted Subsidiaries, as set forth on the Company's then most recent consolidated balance sheet. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled by, and published in, the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for redemption of the Securities following a Change of Control (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the then remaining Average Life to Stated Maturity of the 36 28 Securities; provided, however, that if the Average Life to Stated Maturity of the Securities is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the Average Life to Stated Maturity of the Securities is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total Consolidated assets of $1,000 or less or (B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under the Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of Section 4.03 and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of 37 29 Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders) is owned by the Company or another Wholly Owned Subsidiary (including shares held of record by a nominee for the benefit of the Company or another Wholly Owned Subsidiary). 38 30 SECTION 1.02. Other Definitions. Term Defined in ---- Section ---------- "Affiliate Transaction"............................................. 4.07 "Bankruptcy Law".................................................... 6.01 "covenant defeasance option"........................................ 8.01(b) "Custodian"......................................................... 6.01 "Event of Default".................................................. 6.01 "IAI"............................................................... 2.01(b) "IAI Global Note"................................................... 2.01(b) "legal defeasance option"........................................... 8.01(b) "Legal Holiday"..................................................... 13.08 "Obligations"....................................................... 10.01 "Offer"............................................................. 4.06(b) "Offer Amount"...................................................... 4.06(c) "Offer Period"...................................................... 4.06(c) "Offshore Securities Exchange Date"................................. 2.01(c) "Paying Agent"...................................................... 2.03 "Permanent Offshore Physical Securities"............................ 2.01(c) "Purchase Date"..................................................... 4.06(c) "QIB Global Note"................................................... 2.01(b) "QIBs".............................................................. 2.01(b) "Registrar"......................................................... 2.03 "Restricted Payment"................................................ 4.04 "Rule 144A"......................................................... 2.01(b) "Successor Company"................................................. 5.01 "Temporary Offshore Physical Securities"............................ 2.01(c) "U.S. Global Security".............................................. 2.01(b) "U.S. Physical Securities".......................................... 2.01(d) 39 31 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture Securityholder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness of the Company or a Guarantor Subsidiary, as the case may be, merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a 40 32 balance sheet of the issuer dated such date prepared in accordance with GAAP and accretion of principal on such security shall be deemed to be the Incurrence of Indebtedness; and (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater. ARTICLE II The Securities SECTION 2.01. Form and Dating. (a) The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture, and as otherwise provided in this Article II. Any Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B, which is incorporated in and expressly made a part of this Indenture, and as otherwise provided in this Article II. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Guarantor Subsidiary is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A and B are part of the terms of this Indenture. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. (b) The Initial Securities are being offered and sold by the Company pursuant to the Purchase Agreement. Initial Securities offered and sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") and institutional "Accredited Investors" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) ("IAIs"), in each case in accordance with Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be issued on the Issue Date initially in the form of two permanent global Securities (with separate CUSIP numbers) substantially in the form set forth in Exhibit A (each a "U.S. Global Security") deposited with the Trustee, as 41 33 custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. One U.S. Global Security (which may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate) will represent Initial Securities sold to QIBs (the "QIB Global Note"), and the other will represent Initial Securities sold to IAIs (the "IAI Global Note"). The aggregate principal amount of each U.S. Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Transfers of Initial Securities from QIBs to IAIs, and from IAIs to QIBs, will be represented by appropriate increases and decreases to the respective amounts of the appropriate U.S. Global Securities, as more fully provided in Section 2.13. (c) Initial Securities offered and sold in reliance on Regulation S, if any, shall be issued initially in the form of temporary certificated Securities in registered form substantially in the form set forth in Exhibit A (the "Temporary Offshore Physical Securities"). The Temporary Offshore Physical Securities will be registered in the name of, and held by, a temporary certificate holder designated by Chase Securities Inc. until the later of the completion of the distribution of the Initial Securities and the termination of the "restricted period" (as defined in Regulation S) with respect to the offer and sale of the Initial Securities (the "Offshore Securities Exchange Date"). The Company shall promptly notify the Trustee in writing of the occurrence of the Offshore Securities Exchange Date and, at any time following the Offshore Securities Exchange Date, upon receipt by the Trustee and the Company of a certificate substantially in the form set forth in Exhibit F, the Company shall execute, and the Trustee shall authenticate and deliver, one or more permanent certificated Securities in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Physical Securities") in exchange for the Temporary Offshore Physical Securities of like tenor and amount. (d) Initial Securities offered and sold other than as described in the preceding two paragraphs, if any, shall be issued in the form of permanent certificated Securities in registered form in substantially the form set forth in Exhibits A (the "U.S. Physical Securities"). 42 34 (e) The Temporary Offshore Physical Securities, Permanent Offshore Physical Securities and U.S. Physical Securities are sometimes collectively herein referred to as the "Physical Securities". SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and deliver (1) Initial Securities for original issue in an aggregate principal amount of $150,000,000 and (2) Exchange Securities for issue only in a Registered Exchange Offer, pursuant to the Exchange and Registration Rights Agreement, for Initial Securities for a like principal amount of Initial Securities exchanged pursuant thereto, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $150,000,000 except as provided in Section 2.07. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Any such appointment shall be evidenced by an instrument signed by an authorized officer of the Trustee, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. 43 35 Upon execution and delivery of the First Supplemental Indenture, the Initial Securities shall be endorsed by Neenah Corporation and each of the Initial Guarantors to evidence their assumption and Guaranties of the obligations thereunder. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. The Company initially appoints The Depository Trust Company to act as Depositary with respect to the Global Securities. The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided that no such removal shall become effective until (1) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (2) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (1) above. The Registrar or Paying Agent may resign at any time upon written notice; provided, however, that the Trustee may 44 36 resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 7.08. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. Any money deposited with any Paying Agent, or then held by the Company or a Subsidiary in trust for the payment of principal or interest on any Security and remaining unclaimed for two years after such principal and interest has become due and payable shall be paid to the Company at its request, or, if then held by the Company or a Subsidiary, shall be discharged from such trust; and the Securityholders shall thereafter, as unsecured general creditors, look only to the Company for payment thereof, and all liability of the Paying Agent with respect to such money, and all liability of the Company or such Subsidiary as trustee thereof, shall thereupon cease. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. 45 37 SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(l) of the Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Company shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed. Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. Any Holder of a U.S. Global Security shall, by acceptance of such Global Note, agree that transfers of beneficial interest in such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security (or its agent), and that ownership of a beneficial interest in such Global Security shall be required to be reflected in a book entry. All Securities issued upon any transfer or exchange pursuant to this Section 2.06 will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. 46 38 SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i) satisfies the Company or the Trustee within a reasonable time after he has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (ii) makes such request to the Company or the Trustee prior to the Security being acquired by a bona fide purchaser and (iii) satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. In the event any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof. Every replacement Security is an additional obligation of the Company. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Securities. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and 47 39 interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or any of its Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows or has reason to know are so owned shall be disregarded. SECTION 2.09. Temporary Securities. Until Definitive Securities and Global Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities and deliver them in exchange for temporary Securities upon surrender of such temporary Securities at the office or agency of the Company, without charge to the Holder. SECTION 2.10. Cancelation. The Company at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancelation unless the Company directs the Trustee to deliver canceled Securities to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall not authenticate Securities in place of canceled Securities other than pursuant to the terms of this Indenture. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful 48 40 manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. The Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements (if applicable) of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this paragraph, such manner of payment shall be deemed practicable by the Trustee. SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.13. Book-Entry Provisions for U.S. Global Security. (a) Each U.S. Global Security initially shall (i) be registered in the name of the Depositary for such U.S. Global Security or the nominee of such Depositary and (ii) be delivered to the Trustee as custodian for such Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any U.S. Global Security held on their behalf by the Depositary, or the Trustee as its custodian, or under such U.S. Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such U.S. Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, 49 41 proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of a U.S. Global Security shall be limited to transfers of such U.S. Global Security in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a U.S. Global Security may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.14. If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain U.S. Physical Securities in exchange for their beneficial interests in a U.S. Global Security upon written request in accordance with the Depositary's and the Registrar's procedures. In addition, U.S. Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in a U.S. Global Security if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such U.S. Global Security or the Depositary ceases to be a clearing agency registered under the Exchange Act, at a time when the Depositary is required to be so registered in order to act as Depositary, and in each case a successor depositary is not appointed by the Company within 90 days of such notice or, (ii) the Company executes and delivers to the Trustee and Security Registrar an Officers' Certificate stating that such U.S. Global Security shall be so exchangeable or (iii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary. (c) In connection with any transfer of a portion of the beneficial interest in a U.S. Global Security pursuant to subsection (b) of this Section to beneficial owners who are required to hold U.S. Physical Securities, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the beneficial interest in the U.S. Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (d) In connection with the transfer of an entire U.S. Global Security to beneficial owners pursuant to subsection (b) of this Section, such U.S. Global Security shall be deemed to be surrendered to the Trustee for cancelation, and the Company shall execute, and the Trustee 50 42 shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Security, an equal aggregate principal amount of U.S. Physical Securities of authorized denominations. (e) Any U.S. Physical Security delivered in exchange for an interest in a U.S. Global Security pursuant to subsection (c) or subsection (d) of this Section shall, except as otherwise provided by paragraph (f) of Section 2.14, bear the applicable legend regarding transfer restrictions applicable to the U.S. Physical Security set forth in Exhibit A. (f) The registered holder of a U.S. Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 2.14. Special Transfer Provisions. Unless and until an Initial Security is transferred or exchanged under an effective registration statement under the Securities Act, the following provisions shall apply: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Security to any IAI which is not a QIB (excluding Non-U.S. Persons) that is consistent with the Private Placement Legend: (i) The Registrar shall register the transfer of any Initial Security if (x) the requested transfer is at least two years after the original issue date of the Initial Security or (y) the proposed transferee has delivered to the Registrar a certificate substantially in the form set forth in Exhibit C. (ii) If the proposed transferee is an Agent Member, and the Initial Security to be transferred consists of U.S. Physical Securities or an interest in the QIB Global Security, upon receipt by the Registrar of (x) the document, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records 51 43 the date and an increase in the principal amount of the IAI Global Security in an amount equal to (x) the principal amount of the U.S. Physical Securities to be transferred, and the Trustee shall cancel the U.S. Physical Security so transferred or (y) the amount of the beneficial interest in the QIB Global Security to be so transferred (in which case the Registrar shall reflect on its books and records the date and an appropriate decrease in the principal amount of the QIB Global Security). (iii) If the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13 and the proposed transferor is an Agent Member holding a beneficial interest in a U.S. Global Security, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the beneficial interest in such U.S. Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (iv) If the Initial Security to be transferred consists of U.S. Physical Securities and the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13, upon receipt by the Registrar of the document, if any, required by paragraph (i), the Registrar shall register such transfer and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Security to a QIB (excluding Non-U.S. Persons): (i) If the Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities, Permanent Offshore Physical Securities or an interest in the IAI Global Security, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has provided the 52 44 Registrar with a certificate substantially in the form set forth in Exhibit G hereto. (ii) If the proposed transferee is an Agent Member, and the Initial Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities, Permanent Offshore Physical Securities or an interest in the IAI Global Security, upon receipt by the Registrar of (x) the document, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the QIB Global Security in an amount equal to (x) the principal amount of the U.S. Physical Securities, Temporary Offshore Physical Securities or Permanent Offshore Physical Securities, as the case may be, to be transferred, and the Trustee shall cancel the Physical Security so transferred or (y) the amount of the beneficial interest in the IAI Global Security to be so transferred (in which case the Registrar shall reflect on its books and records the date and an appropriate decrease in the principal amount of the IAI Global Security). (iii) If the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13 and the proposed transferor is an Agent Member holding a beneficial interest in a U.S. Global Security, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the beneficial interest in such U.S. Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (iv) If the Initial Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities or Permanent Offshore Physical Securities and the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13, upon receipt by the Registrar of the document, if any, required by paragraph (i), the 53 45 Registrar shall register such transfer and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (c) Transfers by Non-U.S. Persons Prior to June 8, 1997. The following provisions shall apply with respect to registration of any proposed transfer of an Initial Security by a Non-U.S. Person prior to June 8, 1997: (i) The Registrar shall register the transfer of any Initial Security (x) if the proposed transferee is a Non-U.S. Person and the proposed transferor has provided the Registrar with a certificate substantially in the form set forth in Exhibit H hereto or (y) if the proposed transferee is a QIB and the proposed transferor has provided the Registrar with a certificate substantially in the form set forth in Exhibit G hereto. Unless clause (ii) below is applicable, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Temporary Offshore Physical Securities of like tenor and amount. (ii) If the proposed transferee is an Agent Member in connection with a proposed transfer of an Initial Security to a QIB, upon receipt by the Registrar of (x) the document, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the QIB Global Security in an amount equal to the principal amount of the Temporary Offshore Physical Security to be transferred, and the Registrar shall cancel the Temporary Offshore Physical Securities so transferred. (d) Transfers by Non-U.S. Persons on or After June 8, 1997. The following provisions shall apply with respect to any transfer of an Initial Security by a Non-U.S. Person on or after June 8, 1997: (i) (x) If the Initial Security to be transferred is a Permanent Offshore Physical Note, the Registrar shall register such transfer, (y) if the Initial Security to be transferred is a Temporary Offshore Physical Note, upon receipt of a certificate substantially in the form set forth in Exhibit F from the proposed transferor, the Registrar shall register such transfer and (z) in the case of either clause (x) or (y), unless clause (ii) below is applicable, the 54 46 Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (ii) If the proposed transferee is an Agent Member in connection with a proposed transfer of an Initial Security to a QIB, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the QIB Global Security in an amount equal to the principal amount of the Temporary Offshore Physical Security or of the Permanent Offshore Physical Security to be transferred, and the Trustee shall cancel the Physical Security so transferred. (e) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any transfer of an Initial Security to a Non-U.S. Person: (i) Prior to June 8, 1997, the Registrar shall register any proposed transfer of an Initial Security to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth in Exhibit H from the proposed transferor and the Company shall execute, and the Trustee shall authenticate and make available for delivery, one or more Temporary Offshore Physical Securities. (ii) On and after June 8, 1997, the Registrar shall register any proposed transfer to any Non-U.S. Person (w) if the Initial Security to be transferred is a Permanent Offshore Physical Note, (x) if the Initial Security to be transferred is a Temporary Offshore Physical Note, upon receipt of a certificate substantially in the form set forth in Exhibit F from the proposed transferor, (y) if the Initial Security to be transferred is a U.S. Physical Security or an interest in a U.S. Global Security, upon receipt of a certificate substantially in the form set forth in Exhibit F from the proposed transferor and (z) in the case of either clause (w), (x) or (y), the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (iii) If the proposed transferor is an Agent Member holding a beneficial interest in a U.S. Global Security, upon receipt by the Registrar of (x) the 55 47 document, if any, required by paragraph (i), and (y) instructions in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the beneficial interest in the U.S. Global Security to be transferred and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (c) of Section 2.01 (relating to Permanent Offshore Physical Securities) or paragraph (a)(i)(x), (d)(i) or (e)(ii) of this Section 2.14 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (g) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.13 or this Section 2.14. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Interest payable on the Notes shall be computed on the basis of a 360-day year comprised of 30-day months. 56 48 ARTICLE III Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to Section 3.07, it shall notify the Trustee in writing of the redemption date and the principal amount of Securities to be redeemed. The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein; provided, however, that an Opinion of Counsel shall not be required in connection with a redemption pursuant to Section 3.07. If fewer than all the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not less than 15 days after the date of notice to the Trustee (unless a shorter period shall be acceptable to the Trustee). Any such notice may be canceled by notice in writing to the Trustee at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. Selection of Securities to be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of 57 49 redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (7) the CUSIP number, if any, printed on the Securities being redeemed; (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities; and (9) that if a Security is to be redeemed in part, only the portion of the principal amount (equal to $1,000 or an integral multiple thereof) of such Security to be redeemed and that a new Security in the aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the holder. At the Company's request (which may be revoked at any time in writing prior to the time at which the Trustee shall have given such notice to the Holders), the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. 58 50 SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest, if any, to the redemption date; provided that if the redemption date is after a regular record date and on or prior to the interest payment date, the accrued interest shall be payable to the Securityholder of the redeemed Securities registered on the relevant record date. If mailed in the manner provided herein, the notice shall be conclusively presumed to have been given whether or not the Holder receives such notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. At least one Business Day prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancelation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. SECTION 3.07. Optional Redemption. (a) Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole or in part, at any time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record 59 51 date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below: Redemption Period Price - ------ ---------- 2002 .......................................................... 105.5625% 2003 .......................................................... 103.7083% 2004 .......................................................... 101.8542% 2005 and thereafter ........................................... 100.0000% (b) Notwithstanding the foregoing, at any time on or prior to May 1, 2000, the Company may redeem in the aggregate up to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount thereof) of 111.125% plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption); provided, however, that at least 60% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. (c) At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at any time within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. ARTICLE IV Covenants SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the 60 52 Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be required to be or remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC (after the date that either the Exchange Offer, Registration Statement or the Shelf Registration Statement becomes effective), and provide (both prior to and after such effective date) the Trustee and Securityholders and prospective Securityholders (upon request) with the annual reports and the information, documents and other reports which are specified in Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA ss. 314(a). SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness (other than pursuant to the following paragraph (b)) unless on the date of such Incurrence the Consolidated Coverage Ratio exceeds 2.00 to 1. (b) Notwithstanding Section 4.03(a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness consisting of the Term Loans in an aggregate principal amount outstanding of up to $45,000,000 less (A) the amount of any scheduled principal payments thereon and (B) the aggregate amount of all repayments of principal actually made thereunder since the Issue Date with Net Available Cash from Asset Dispositions pursuant to Section 4.06(a)(iii)(A); (ii) Indebtedness consisting of revolving credit, working capital or letters of credit financing in an aggregate principal amount at any time outstanding not in excess of the greater of $35,000,000 and the Borrowing Base in effect from time to time (in each case less the aggregate amount of all repayments of 61 53 principal actually made thereunder since the Issue Date with Net Available Cash from Asset Dispositions pursuant to Section 4.06(a)(iii)(A)); (iii) Indebtedness of the Company owing to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Wholly Owned Subsidiary) will be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness of the Company represented by the Securities; (v) any Indebtedness of the Company and its Restricted Subsidiaries (other than the Indebtedness described in clauses (i), (ii) or (iii) above) outstanding on the Issue Date; (vi) Indebtedness of the Company and its Restricted Subsidiaries (A) in respect of judgment, appeal, surety, performance and other like bonds, bankers' acceptances and letters of credit provided by the Company and its Restricted Subsidiaries in the ordinary course of their business and which do not secure other Indebtedness and (B) under Commodity Agreements, Currency Agreements and Interest Rate Agreements that are designed to protect the Company and its Restricted Subsidiaries against fluctuations in commodity prices (for raw materials used by them), interest rates or currency exchange rates and not for the purposes of speculation; (vii) Indebtedness represented by Guarantees by the Company of Indebtedness of a Restricted Subsidiary, or in respect of letters of credit provided by the Company to support such Indebtedness, or Guarantees by a Restricted Subsidiary of Indebtedness of the Company or a Restricted Subsidiary, or in respect of letters of credit provided by a Restricted Subsidiary to support such Indebtedness; provided, however, that only Indebtedness that is incurred in compliance with this covenant may be guaranteed pursuant to this clause (vii); 62 54 (viii) Purchase Money Indebtedness, industrial revenue bonds or similar Indebtedness and Capitalized Lease Obligations of the Company and its Restricted Subsidiaries in an aggregate principal amount at any time outstanding not in excess of 10% of Total Assets; (ix) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments, in connection with the acquisition or disposition of any business, assets or Subsidiary of the Company permitted under the Indenture; (x) Indebtedness of the Company and its Restricted Subsidiaries, to the extent the proceeds thereof are immediately used after the Incurrence thereof to purchase Securities tendered in an offer to purchase made as a result of a Change of Control; (xi) Indebtedness of the Company or a Restricted Subsidiary owed to (including obligations in respect of letters of credit for the benefit of) any Person in connection with liability insurance provided by such Person to the Company or such Restricted Subsidiary, pursuant to reimbursement or indemnification obligations to such Person, in each case Incurred in the ordinary course of business; (xii) Indebtedness of the Company consisting of guarantees of up to an aggregate principal amount of $2,000,000 of borrowings by Management Investors in connection with purchases of Voting Stock of Holdings on or after the Issue Date and in accordance with Section 4.04; (xiii) Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount at any time outstanding not in excess of $15,000,000 million which Indebtedness may be incurred pursuant to clause (ii) above; and (xiv) any Refinancing Indebtedness Incurred in respect of any Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (i), (ii), (v), (viii), (x) or (xiv) of this paragraph (b). Notwithstanding the foregoing, the Company shall not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Company unless such Indebtedness 63 55 is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of the Company. In addition, the Company shall not Incur any Secured Indebtedness which is not Senior Indebtedness of the Company unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Securities) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A Guarantor Subsidiary shall not incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Subsidiary Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Subsidiary Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Subsidiary Guarantor. In addition, a Guarantor Subsidiary shall not incur any Secured Indebtedness which is not Senior Indebtedness of such Guarantor Subsidiary unless contemporaneously therewith effective provision is made to secure the Subsidiary Guaranty equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Subsidiary Guaranty) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (d) For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this section 4.03, (i) Indebtedness permitted by this section need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this provision permitting such Indebtedness and (ii) in the event that Indebtedness or any portion thereof meets the criteria of more than one of the types of Indebtedness described in this section, the Company, in its sole discretion, shall classify such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses. SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary 64 56 has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of equal or greater value); (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary; (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement, Investment or payment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company could not Incur at least $1.00 of additional Indebtedness under Section 4.03(a); or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the Issue Date to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) 100% of the aggregate net proceeds received by the Company (including the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of 65 57 Directors) of property received by the Company; provided, however, that such property is related, ancillary or complementary to any business of the Company and the Restricted Subsidiaries conducted on the Issue Date) as a capital contribution or from the issue or sale of its Capital Stock (other than Disqualified Stock) of the Company or Holdings subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries to the extent the purchase by such plan or trust is financed by Indebtedness of such plan or trust and for which the Company or a Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary) of any Indebtedness of the Company or its Restricted Subsidiaries issued subsequent to the Issue Date and convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or other property (other than such Capital Stock) distributed by the Company or any Restricted Subsidiary upon such conversion or exchange) (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares or scrip); (D) the aggregate Net Cash Proceeds received subsequent to the Issue Date by the Company or Holdings (other than from any Restricted Subsidiary) upon the exercise of any options or warrants to purchase Capital Stock (other than Disqualified Stock) of the Company or Holdings; and (E) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) payments of dividends, repayments of the principal of loans, return of capital or advances or other transfers of assets to the Company or any 66 58 Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") or the receipt of proceeds from the sale or other disposition of any portion of any Investment in an Unrestricted Subsidiary not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments. (b) The provisions of Section 4.04(a) shall not prohibit: (i) any purchase, redemption, retirement or other acquisition of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries to the extent the purchase by such plan or trust is financed by Indebtedness of such plan or trust and for which the Company or a Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); provided, however, that (A) such purchase, redemption, retirement or other acquisition shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale to the extent so used shall be excluded from Section 4.04(a)(iv)(B); (ii) any purchase, defeasance, retirement, redemption or other acquisition of (A) Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to Section 4.03(b) or (B) Subordinated Obligations of a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of any Restricted Subsidiary or the Company which is permitted to be Incurred pursuant to Section 4.03(b); provided, 67 59 however, that such purchase, defeasance, retirement, redemption or other acquisition shall be excluded in the calculation of the amount of Restricted Payments; (iii) any purchase, retirement, redemption or other acquisition of Disqualified Stock made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock; provided, however, that such purchase, retirement, redemption or other acquisition shall be excluded in the calculation of the amount of Restricted Payments; (iv) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.06; provided, however, that such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; (v) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the Securities pursuant to Section 4.08 (including the purchase of all Securities tendered), any purchase, defeasance, retirement, redemption or other acquisition of Subordinated Obligations required pursuant to the terms thereof as a result of such Change of Control; provided, however, that such purchase, defeasance, retirement, redemption or other acquisition shall be included in the calculation of the amount of Restricted Payments; (vi) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that such dividend shall be included in the calculation of the amount of Restricted Payments; (vii) the repurchase, for cash or notes, of shares of, or options or warrants to purchase shares of, or payments to Holdings to enable Holdings to repurchase shares of, or options or warrants to purchase shares of, Capital Stock of Holdings, the Company or any of the Subsidiaries of the Company from present or former Management Investors in an amount not in excess of $2,000,000 in any one year and $5,000,000 in the aggregate; provided, however, that the amount of such repurchase shall be included in the calculation of the amount of Restricted Payments; 68 60 (viii) payments in lieu of fractional shares in amount not in excess of $250,000 in the aggregate; (ix) payments by the Company to Holdings to pay Federal, state and local taxes to the extent such taxes are attributable to the Company and its Restricted Subsidiaries; provided, however, that such payments shall be excluded from the calculation of the amount of Restricted Payments; (x) loans, advances, dividends or distributions by the Company to Holdings to pay dividends on the common stock of Holdings following a Public Equity Offering of such stock; but only to the extent that such loans, advances, dividends or distributions do not exceed 6% per annum of the net proceeds received by the Company in such Public Equity Offering; provided, however, that the amount of such loans, advances, dividends or distributions shall be included in the amount of Restricted Payments; or (xi) in each case to the extent such payments by Holdings are attributable to the Company and its Restricted Subsidiaries, payments by the Company to Holdings not to exceed an amount necessary to permit Holdings to (A) make payments in respect to its indemnification obligations owing to directors, officers or other Persons under Holding's charter or by-laws or pursuant to written agreements with any such Person, (B) make payments in respect of its other operational expenses (other than taxes) incurred in the ordinary course of business, or (C) make payments in respect of indemnification obligations and costs and expenses incurred by Holdings in connection with any offering of common stock of Holdings; provided, however, that all such payments shall be included in the calculation of the amount of Restricted Payments. SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness owed to the Company, (ii) make any loans or 69 61 advances to the Company or (iii) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness entered into prior to the date on which such Restricted Subsidiary was acquired or designated as a Restricted Subsidiary by the Company (other than as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company); (3) any encumbrance or restriction pursuant to (x) an agreement constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this Section or contained in any amendment to an agreement referred to in clause (1) or (2) of this Section 4.05 or this clause (3) or (y) Indebtedness Incurred pursuant to clause (i) or (ii) of paragraph (b) of Section 4.03; provided, however, that the encumbrances and restrictions contained in (A) any such refinancing agreement or amendment referred to in clause (x) above are, collectively, no more restrictive in any material respect, than the encumbrances and restrictions contained in such agreements (as determined in good faith by the Company) and (B) any instrument relating to any Indebtedness referred to in clause (y) above, are, collectively, no more restrictive in any material respect than the encumbrances and restrictions contained in the Senior Bank Facilities as in effect on the Issue Date (as determined in good faith by the Company); (4) in the case of clause (iii) of this Section 4.05, any encumbrance or restriction contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary which are not prohibited by Section 4.12 to the extent such encumbrances or restrictions restrict the transfer of the property or assets subject to such security agreements or mortgages; 70 62 (5) any encumbrance or restriction existing under or by reason of applicable law; (6) customary non-assignment provisions of any licensing agreement or of any lease; (7) any encumbrance or restriction contained in contracts for sales of assets otherwise permitted by this Indenture; (8) with respect to a Restricted Subsidiary, any encumbrance or restriction imposed pursuant to an agreement that has been entered into for the sale of all or substantially all of the Capital Stock of such Restricted Subsidiary; and (9) Purchase Money Obligations for Property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (iii) of this Section 4.05. SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value, as may be determined (and shall be determined, to the extent an Asset Disposition (or a series of related Asset Dispositions) involves a fair market value greater than $1,000,000) in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors (including as to the value of all non-cash consideration), of the shares and assets subject to such Asset Disposition, (ii) in the case of an Asset Disposition (or a series of related Asset Dispositions) having a fair market value of $1,000,000 or more at least 80% (or 100% in the case of lease payments) of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness), to prepay, repay or purchase Senior Indebtedness of the Company or a Wholly Owned Subsidiary or, in the case of a sale by a Restricted Subsidiary which is 71 63 not a Wholly Owned Subsidiary, to prepay, repay or purchase Senior Indebtedness of such Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 365 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of Net Available Cash after application in accordance with clause (A), to the extent the Company or such Restricted Subsidiary elects, to reinvest (or enter into a binding contract to do so) in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary), within 365 days from the later of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an Offer (as defined below) to purchase Securities pursuant to and subject to the conditions of Section 4.06(b) and (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to fund (to the extent consistent with any other applicable provision of this Indenture) any corporate purpose; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this covenant, the Company and its Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions in any year which are not applied in accordance with this covenant exceed $5,000,000 in such year. For the purposes of Section 4.06(a)(ii), the following are deemed to be cash: (w) the assumption of Indebtedness of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition, (x) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash, (y) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Disposition, to the extent that the Company and each other Restricted Subsidiary is released from any Guarantee of such 72 64 Indebtedness in connection with such Asset Disposition, and (z) consideration consisting of Indebtedness of the Company or any Restricted Subsidiary. (b) In the event of an Asset Disposition that requires the purchase of Securities pursuant to Section 4.06(a)(iii)(C), the Company shall be required to purchase Securities tendered pursuant to an offer, commenced within 30 days following the expiration of the 365 day period referred to in Section 4.06(a)(iii)(B) (or, if the Company so elects, at any time within such 365 day period), by the Company for the Securities (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase in accordance with the procedures (including prorationing in the event of oversubscription) set forth in Section 4.06(c). If the aggregate purchase price of Securities tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Securities, the Company shall apply the remaining Net Available Cash in accordance with Section 4.06(a)(iii)(D) and upon completion of the purchase of the Notes tendered pursuant to the Offer, the remaining amount of Net Available Cash, if any, will be reset at zero. The Company shall not be required to make an Offer for Securities pursuant to this Section if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (A) and (B) of Section 4.06(a)(iii)) is less than $5,000,000 (which lesser amount shall be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c)(1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorationing as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any 73 65 Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports, and (iii) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (3). (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.06(a). On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancelation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee (or paying agent) shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee (or paying agent) shall deliver the excess to the Company (or if the Company is acting as paying agent, the Company may release such amount from trust) promptly after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than 5:00 PM Eastern Standard Time one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for 74 66 purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate and an Opinion of Counsel stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.07. Limitation on Transactions with Affiliates. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate and (ii) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $1,000,000, are not in writing and have not been approved by a majority of the members of the Board of Directors having no material direct or indirect financial interest in or with respect to such Affiliate Transaction. 75 67 In addition, if such Affiliate Transaction involves an amount in excess of $5,000,000, a fairness opinion must be obtained from a nationally recognized appraisal or investment banking firm. (b) The provisions of Section 4.07(a) shall not prohibit (i) any Restricted Payment or Permitted Investment permitted to be made pursuant to Section 4.04, (ii) fees, compensation or employee benefit arrangements paid to, and any indemnity provided for the benefit of directors, officers or employees of the Company, Holdings or any Subsidiary of the Company in the ordinary course of business or any Indebtedness permitted to be Incurred pursuant to Section 4.03(b)(xiii), or any payments in respect thereof, (iii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (iv) transactions pursuant to agreements entered into or in effect on the Issue Date, including amendments thereto entered into after the Issue Date, provided that the terms of any such amendment are not, in the aggregate, less favorable to the Company or such Restricted Subsidiary than the terms of such agreement prior to such amendment and provided further that such agreements are set forth on Schedule 4.07 hereto, (v) loans or advances to employees that are Affiliates of the Company in the ordinary course of business, but in any event not to exceed $2,000,000 in the aggregate outstanding at any one time, (vi) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries (so long as the other stockholders of any participating Restricted Subsidiaries which are not Wholly Owned Subsidiaries are not themselves Affiliates of the Company) or (vii) payments with respect to Indebtedness Incurred pursuant to Section 4.03(b)(ix). SECTION 4.08. Change of Control. (a) Upon a Change of Control, each Holder shall have the right to require that the Company repurchase all or any part of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, in accordance with the terms contemplated in Section 4.08(b); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to purchase the Securities pursuant to this Section 4.08 in the event that it has mailed notice of its election to redeem all the Securities under Section 3.07. 76 68 (b) Subject to the proviso to Section 4.08(a), within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating, among other things: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or any portion in integral multiples of $1,000 of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on a record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Securities or any portion thereof purchased. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than 5:00 PM Eastern Standard Time one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered to the Trustee for cancelation, and the Company shall pay the purchase price plus accrued and unpaid interest to the purchase date, if any, to the Holders entitled thereto. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations 77 69 in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.09. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year and within 60 days of the end of the first three fiscal quarters of the Company an Officers' Certificate complying with Section 314(a)(4) of the TIA and stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and, if such signer does know of such a Default or Event of Default, the certificate shall describe such Default or Event of Default with particularity and describe what actions, if any, the Company proposes to take with respect to such Default or Event of Default. SECTION 4.10. Further Instruments and Acts. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company shall not sell any shares of Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock, except (i) to the Company or a Wholly Owned Subsidiary, (ii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, (iii) directors' qualifying shares or (iv) in a Public Equity Offering as a result of or after which a Public Market exists. The proceeds of any sale of such Capital Stock permitted by clause (ii) shall be treated as Net Available Cash from an Asset Disposition and must be applied in accordance with the terms of Section 4.06. SECTION 4.12. Limitation on Liens. (a) The Company shall not, and shall not permit any Guarantor Subsidiary to, directly or indirectly, create or permit to exist any Lien (the "Initial Lien") on any of its property or assets (including Capital Stock), whether owned on the Issue Date or thereafter acquired, securing any Indebtedness 78 70 other than Senior Indebtedness of the Company in the case of the Company, or Senior Indebtedness of a Guarantor Subsidiary, in the case of a Guarantor Subsidiary, unless contemporaneously therewith effective provision is made to secure the Securities and, in respect of Liens on any Guarantor Subsidiary's property or assets, the Subsidiary Guaranty of such Guarantor Subsidiary equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Securities and such Subsidiary Guaranty) such obligation for so long as such obligation is so secured. The preceding sentence shall not require the Company or any Restricted Subsidiary to equally ratably secure the Securities if the Initial Lien consists of Permitted Liens. (b) Any Lien created for the benefit of the Holders of the Securities pursuant to the foregoing paragraph (a) shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien. SECTION 4.13. Limitation on Sale/Leaseback Transactions. The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless (i) the Company or such Restricted Subsidiary would be entitled to Incur Indebtedness in an amount equal to the Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to Section 4.03 and (ii) the net cash proceeds received by the Company or any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair market value (in the case of Sale/Leaseback Transactions involving amounts in excess of $1,000,000, as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) of such property and (iii) the transfer of such property is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.06. SECTION 4.14. Limitation on Lines of Business. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than (i) a Related Business and (ii) the making of Permitted Investments and the operations of any business that is part of a Permitted Investment. Holdings will not engage in any business other than managing its investment in the Company. 79 71 SECTION 4.15. Future Guarantor Subsidiaries. The Company shall cause (a) each Restricted Subsidiary that is a Domestic Subsidiary which Incurs Indebtedness and (b) each Restricted Subsidiary that is not a Domestic Subsidiary and that after the Issue Date enters into a Guarantee of any of the obligations of the Company, Holdings or any of the Company's Subsidiaries pursuant to the Senior Bank Facilities to execute and deliver to the Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to which such Subsidiary shall Guarantee payment of the Securities as provided in Section 10.06; provided, however, that such Subsidiary shall not be required to execute and deliver a supplemental indenture pursuant to this Section in the event that such Subsidiary is a party to this Indenture at the time of such Incurrence of Indebtedness. ARTICLE V Successor Company SECTION 5.01. When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to any Person unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction, the Successor Company would be able to 80 72 Incur an additional $1.00 of Indebtedness under Section 4.03(a); (iv) immediately after giving effect to such transaction, the Successor Company shall have Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction; and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture. Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets shall not be released from the obligation to pay the principal of and interest on the Securities. ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) a default occurs in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article X, and such default continues for a period of 30 days; (2) a default occurs in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article X; (3) the Company fails to comply with Section 5.01; 81 73 (4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14 or 4.15 (other than a failure to purchase Securities when required under Section 4.06 or 4.08) and such failure continues for 30 days after the notice specified in the penultimate paragraph of this Section 6.01; (5) the Company or any Guarantor Subsidiary fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified in the penultimate paragraph of this Section 6.01; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders of such Indebtedness because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $5,000,000 or its foreign currency equivalent at the time; (7) the Company or any Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Restricted Subsidiary in an involuntary case; 82 74 (B) appoints a Custodian of the Company or any Restricted Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Restricted Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) the rendering of any judgment or decree for the payment of money in excess of $5,000,000 or its foreign currency equivalent (net of amounts paid within 30 days of such judgment or decree under any insurance, indemnity, bond, surety or similar instrument) against the Company or any Restricted Subsidiary and is not discharged, waived or stayed and either (A) an enforcement proceeding is commenced with respect to such judgment or decree or (B) such judgment or decree remains outstanding the later of (i) the day which is the sixtieth day after the judgment is rendered and (ii) the day on which any right to appeal expires; or (10) any Subsidiary Guaranty ceases to be in full force and effect (except as contemplated by the terms thereof) or any Guarantor Subsidiary shall deny or disaffirm its obligations under this Indenture or any Subsidiary Guaranty and such Default continues for 10 days. The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4) or (5) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified in clauses (4) or (5) hereof after receipt of such notice. Such notice must 83 75 specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (3), (6), (7) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5), (8) or (9), its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the outstanding Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the Company occurs and is continuing, the principal of and interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquies- 84 76 cence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and 85 77 (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or 6.01(2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents and take such other actions, including participating as a member, voting or otherwise, of any committee of creditors appointed in the matter, as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, any Subsidiary, their respective creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Securityholder, any plan of reorganization, 86 78 arrangement, adjustment or composition affecting the Securities or the rights of any Securityholder, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money or property from the Company pursuant to this Article VI, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Company, a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it 87 79 may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 6.13. Restoration of Rights and Remedies. If the Trustee or any Securityholder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Securityholder, then, and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Securityholders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, Trustee and Securityholders shall continue as though no such proceeding had been instituted. ARTICLE VII Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. 88 80 (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section and Section 7.02(e); (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a written direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opin- 89 81 ion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers created in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, it will not be responsible 90 82 for the use or application of any monies received by a Paying Agent other than the Trustee, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to a Trust Officer of the Trustee, the Trustee shall mail to each Securityholder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in payment of principal of, premium (if any) or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with May 15, 1998, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report shall be transmitted). The Trustee will also comply with TIA ss. 313(b) and TIA ss. 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee, Paying Agent and Registrar from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and other professionals. Any costs and expenses associated with 91 83 the Exchange Securities shall be paid by the Company. The Company shall indemnify the Trustee, Paying Agent, Registrar, and each of their officers, directors and employees (each in their respective capacities), for and hold each of them harmless against any and all loss, liability or expense (including attorneys' fees) incurred by them without negligence or bad faith on their part in connection with the administration of this trust and the performance of their duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the acceptance, exercise or performance of any of its powers or duties hereunder. The Trustee, Paying Agent and Registrar shall notify the Company of any claim for which they may seek indemnity promptly upon obtaining actual knowledge thereof; provided that any failure so to notify the Company shall not relieve the Company of its indemnity obligations hereunder except to the extent the Company shall have been adversely affected thereby. The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company's expense in the defense. Such indemnified parties may have separate counsel and the Company shall pay the fees and expenses of such counsel; provided that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and such parties in connection with such defense. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee, Paying Agent or Registrar incurs expenses after the occurrence of a Default specified in Section 6.01(7) or 6.01(8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company 92 84 in writing. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee with the consent of the Company, which shall not be unreasonably withheld. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under 93 85 Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are out standing if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. 94 86 ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III hereof and the Company irrevocably deposits with the Trustee funds or U.S. Government Obligations on which payment of principal and interest when due will be sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company including, but not limited to fees and expenses of the Trustee and its counsel, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15, 5.01(iii) and 5.01(iv) and the operation of Sections 6.01(4), 6.01(6), 6.01(7) (with respect to Restricted Subsidiaries only), 6.01(8) (with respect to Restricted Subsidiaries only), 6.01(9) and 6.01(10) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7) (with respect to Restricted Subsidiaries only), 6.01(8) (with respect to Restricted Subsidiaries only), 6.01(9) and 6.01(10) or because of the failure of the Company to comply with Sections 5.01(iii) and 5.01(iv). 95 87 Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(7) or 6.01(8) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article X; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an 96 88 Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article VIII have been complied with. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to this Section 8.02 or the principal, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities. Anything in this Section 8.02 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request, in writing, by the Company any cash in dollars or U.S. Government Obligations held by it as provided in paragraph (d) above which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent legal defeasance or covenant defeasance. 97 89 Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations other than any tax, fee or other charge which by law is for the account of the Securityholders. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or 98 90 U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders. The Company, the Guarantor Subsidiaries and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Section 4.15 or Article V; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article X or Article XII that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representative therefor) under Article X or Article XII; (5) to add further Guarantees with respect to the Securities or to release Guarantor Subsidiaries when permitted by the terms hereof, or to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying this Indenture under the TIA; (8) to make any change that does not adversely affect the rights of any Securityholder; or (9) to provide for the issuance and authorization of the Exchange Securities. 99 91 Notwithstanding the foregoing and Section 9.02, on the date hereof (but after execution and delivery of this Indenture and the issuance of the Securities and after or concurrently with consummation of the Neenah Merger), the Neenah Corporation, the Initial Guarantors and the Trustee shall execute and deliver the First Supplemental Indenture. An amendment under this Section may not make any change that adversely affects the rights under Article X or Article XII of any holder of Senior Indebtedness of the Company or any Guarantor Subsidiary then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company, the Guarantor Subsidiaries and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities. The Holders of at least a majority in principal amount of the Securities may waive compliance by the Company or any Guarantor Subsidiary with any provision or covenant of this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment or waiver may not: (1) reduce the amount of Securities whose Holders must consent to an amendment or waiver; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article III; (5) make any Security payable in money other than that stated in the Security; 100 92 (6) make any change in Article X or Article XII that adversely affects the rights of any Securityholder under Article X or Article XII; (7) impair the right of any Holder to receive payment of principal of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities. (8) modify the Subsidiary Guarantees (except as contemplated by the terms thereof or of this Indenture) in any manner adverse to the Holders; or (9) make any change in Section 6.04, Section 6.07 or the third sentence of this Section. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article X or Article XII of any holder of Senior Indebtedness of the Company or a Guarantor Subsidiary then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee 101 93 receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective once the consents from the Holders of the requisite percentage in principal amount of outstanding Securities are received by the Company or the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and complies with the provisions hereof (including Section 9.03). SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, 102 94 whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE X Subordination of the Securities SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article X, to the prior payment in full of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness of the Company. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company, and only Indebtedness of the Company that is Senior Indebtedness of the Company shall rank senior to the Securities in accordance with the provisions set forth herein. For purposes of these subordination provisions, the Indebtedness evidenced by the Securities is deemed to include the liquidated damages payable pursuant to the provisions set forth in the Securities and the Exchange and Registration Rights Agreement. All provisions of this Article X shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company and its properties: (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of such Senior Indebtedness before Securityholders shall be entitled to receive any payment of principal of or interest on the Securities; and (2) until the Senior Indebtedness of the Company is paid in full, any payment or distribution to which Securityholders would be entitled but for this 103 95 Article X shall be made to holders of such Senior Indebtedness as their respective interests may appear. SECTION 10.03. Default on Senior Indebtedness of the Company. The Company may not pay the principal of, premium (if any) or interest on the Securities or make any deposit pursuant to Section 8.01 and may not otherwise purchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (i) any Senior Indebtedness of the Company is not paid when due or (ii) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the holders of such Senior Indebtedness with respect to which either of the events in clause (i) or (ii) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the holders of the Designated Senior Indebtedness of the Company specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee (with a copy to the Company) from the Person or Persons who gave such Blockage Notice, (ii) because such Designated Senior Indebtedness has been repaid in full or (iii) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day 104 96 period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of the Company during such period; provided, however, that if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness of the Company (other than the Bank Indebtedness), the Representative of the Bank Indebtedness may give another Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or the Representative of such holders) of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, the Company may not pay the Securities until five Business Days after such holders or the Representative of the holders of the Designated Senior Indebtedness of the Company receive notice of such acceleration and, thereafter, may pay the Securities only if this Article X otherwise permits payment at that time. SECTION 10.05. When Distribution Must Be Paid Over. If a payment or distribution is made to Securityholders that because of this Article X should not have been made to them, the Securityholders who receive the payment or distribution shall hold such payment or distribution in trust for holders of the Senior Indebtedness of the Company and pay it over to them as their respective interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness of the Company to receive distributions applicable to Senior Indebtedness of the Company. A distribution made under this Article X to holders of Senior Indebtedness of the Company which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on Senior Indebtedness of the Company. 105 97 SECTION 10.07. Relative Rights. This Article X defines the relative rights of Securityholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Securityholders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article X. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company may give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the Representative may give the notice. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness of the Company (or a Representative of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or Representative thereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all 106 98 the rights set forth in this Article X with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Company; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article X shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article X shall not be construed as preventing the occurrence of a Default. Nothing in this Article X shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article VIII by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article X, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article X, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of the Company and other Indebtedness of the Company, the amount thereof or payable thereon, the amount 107 99 or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article X, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Company held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article X, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article X. SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of the Company as provided in this Article X and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article X or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness of the Company shall be deemed conclusively to have relied on 108 100 such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in this Article shall apply to amounts due to the Trustee pursuant to other sections of this Indenture. ARTICLE XI Subsidiary Guarantees SECTION 11.01. Subsidiary Guarantees. Each Guarantor Subsidiary hereby jointly and severally unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture (including obligations to the Trustee) and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company whether for expenses, indemnification or otherwise under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Guarantor Subsidiary further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor Subsidiary, and that each such Guarantor Subsidiary shall remain bound under this Article XI notwithstanding any extension or renewal of any Obligation. Each Guarantor Subsidiary waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Guarantor Subsidiary waives notice of any default under the Securities or the Obligations. The obligations of each Guarantor Subsidiary hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of 109 101 them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such Guarantor Subsidiary, except as provided in Section 11.02(b). Each Guarantor Subsidiary further agrees that its Subsidiary Guaranty herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. The obligations of each Guarantor Subsidiary hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor Subsidiary herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor Subsidiary or would otherwise operate as a discharge of any Guarantor Subsidiary as a matter of law or equity. Each Guarantor Subsidiary further agrees that its Subsidiary Guaranty herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor Subsidiary by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or 110 102 comply with any other Obligation, each Guarantor Subsidiary hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Each Guarantor Subsidiary agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations. Each Guarantor Subsidiary further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of any Subsidiary Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article VI, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor Subsidiary for the purposes of this Section. Each Guarantor Subsidiary also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 11.02. Limitation on Liability. (a) Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the obligations guaranteed hereunder by any Guarantor Subsidiary shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to any Guarantor Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. (b) This Subsidiary Guaranty as to any Guarantor Subsidiary shall terminate and be of no further force or effect upon the sale or other transfer (i) by such Guarantor Subsidiary of all or substantially all of its assets or (ii) by the Company of all of its stock or other equity interests in such Guarantor Subsidiary, to a Person that is not an Affiliate of the Company; provided, however, that such sale or transfer shall be deemed to constitute an Asset 111 103 Disposition and the Company shall comply with its obligations under Section 4.06. SECTION 11.03. Successors and Assigns. This Article XI shall be binding upon each Guarantor Subsidiary and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article XI shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article XI at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of any provision of this Article XI, nor the consent to any departure by any Guarantor Subsidiary therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor Subsidiary in any case shall entitle such Guarantor Subsidiary to any other or further notice or demand in the same, similar or other circumstances. SECTION 11.06. Initial Guarantors; Execution of Supplemental Indenture for Future Guarantor Subsidiaries. (a) Upon consummation of the Neenah Merger and execution and delivery of the First Supplemental Indenture pursuant to Section 9.01 hereof, the Initial Guarantors will become Guarantor Subsidiaries. (b) Each Subsidiary which is required to become a Guarantor Subsidiary pursuant to Section 4.15 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to which such Subsidiary shall become a Guarantor Subsidiary under this 112 104 Article XI and shall guarantee the Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel and an Officers' Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Subsidiary Guaranty of such Guarantor Subsidiary is a legal, valid and binding obligation of such Guarantor Subsidiary, enforceable against such Guarantor Subsidiary in accordance with its terms. ARTICLE XII Subordination of the Subsidiary Guaranties SECTION 12.01. Agreement To Subordinate. Each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, that the Obligations of a Guarantor Subsidiary are subordinated in right of payment, to the extent and in the manner provided in this Article XII, to the prior payment in full of all Senior Indebtedness of such Guarantor Subsidiary and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness of such Guarantor Subsidiary. The Obligations with respect to a Guarantor Subsidiary shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such Guarantor Subsidiary, and only Indebtedness of such Guarantor Subsidiary that is Senior Indebtedness of such Guarantor Subsidiary shall rank senior to the Obligations of such Guarantor Subsidiary in accordance with the provisions set forth herein. SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of a Guarantor Subsidiary to creditors upon a total or partial liquidation or a total or partial dissolution of such Guarantor Subsidiary or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Guarantor Subsidiary and its properties: (1) holders of Senior Indebtedness of such Guarantor Subsidiary shall be entitled to receive payment in full of such Senior Indebtedness before Securityholders shall be entitled to receive any payment of any Obligations from such Guarantor Subsidiary; and 113 105 (2) until the Senior Indebtedness of such Guarantor Subsidiary is paid in full, any payment or distribution to which Securityholders would be entitled but for this Article XII shall be made to holders of such Senior Indebtedness as their respective interests may appear. SECTION 12.03. Default on Senior Indebtedness of a Guarantor Subsidiary. A Guarantor Subsidiary may not make any payment pursuant to any of the Obligations or repurchase, redeem or otherwise retire any Securities (collectively, "pay its Guaranty") if (i) any Senior Indebtedness of such Guarantor Subsidiary is not paid when due or (ii) any other default on Senior Indebtedness of such Guarantor Subsidiary occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full; provided, however, that such Guarantor Subsidiary may pay its Guaranty without regard to the foregoing if such Guarantor Subsidiary and the Trustee receive written notice approving such payment from the Representative of the holders of such Senior Indebtedness with respect to which either of the events in clause (i) or (ii) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness of a Guarantor Subsidiary pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, such Subsidiary Guarantor may not pay its Guaranty for a period (a "Guarantor Subsidiary Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to such Guarantor Subsidiary and the Company) of written notice (a "Guarantor Subsidiary Blockage Notice") of such default from the Representative of the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary specifying an election to effect a Guarantor Subsidiary Payment Blockage Period and ending 179 days thereafter (or earlier if such Guarantor Subsidiary Payment Blockage Period is terminated (i) by written notice to the Trustee (with a copy to such Guarantor Subsidiary and the Company) from the Person or Persons who gave such Guarantor Subsidiary Blockage Notice, (ii) because such Designated Senior Indebtedness has been repaid in full or (iii) because the default giving rise to such Guarantor Subsidiary Blockage Notice is no longer continuing). Notwithstanding the provisions described in 114 106 the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, such Guarantor Subsidiary may resume to pay its Guaranty after such Guarantor Subsidiary Payment Blockage Period, including any missed payments. Not more than one Guarantor Subsidiary Blockage Notice may be given with respect to a Guarantor Subsidiary in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of such Guarantor Subsidiary during such period; provided, however, that if any Guarantor Subsidiary Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness of such Guarantor Subsidiary (other than the Bank Indebtedness), the Representative of the Bank Indebtedness may give another Guarantor Subsidiary Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Guarantor Subsidiary Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. SECTION 12.04. Demand for Payment. If payment of the Securities is accelerated because of an Event of Default and a demand for payment is made on a Guarantor Subsidiary pursuant to Article XI the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary (or the Representative of such holders) of such demand. If any Designated Senior Indebtedness of such Guarantor Subsidiary is outstanding, such Guarantor Subsidiary may not pay its Guaranty until five Business Days after such holders or the Representative of the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary receive notice of such demand and, thereafter, may pay its Guaranty only if this Article XII otherwise permits payment at that time. SECTION 12.05. When Distribution Must Be Paid Over. If a payment or distribution is made to Securityholders that because of this Article XII should not have been made to them, the Securityholders who receive the payment or distribution shall hold such payment or distribution in trust for holders of the Senior Indebtedness of the relevant Guarantor Subsidiary and pay it over to them as their respective interests may appear. SECTION 12.06. Subrogation. After all Senior Indebtedness of a Guarantor Subsidiary is paid in full and 115 107 until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness of such Guarantor Subsidiary to receive distributions applicable to Senior Indebtedness of such Guarantor Subsidiary. A distribution made under this Article XII to holders of Senior Indebtedness of such Guarantor Subsidiary which otherwise would have been made to Securityholders is not, as between such Guarantor Subsidiary and Securityholders, a payment by such Guarantor Subsidiary on Senior Indebtedness of such Guarantor Subsidiary. SECTION 12.07. Relative Rights. This Article XII defines the relative rights of Securityholders and holders of Senior Indebtedness of a Guarantor Subsidiary. Nothing in this Indenture shall: (1) impair, as between a Guarantor Subsidiary and Securityholders, the obligation of a Guarantor Subsidiary which is absolute and unconditional, to pay its Obligations to the extent set forth in Article XI; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a default by a Guarantor Subsidiary under its Obligations, subject to the rights of holders of Senior Indebtedness of such Guarantor Subsidiary to receive distributions otherwise payable to Securityholders. SECTION 12.08. Subordination May Not Be Impaired by a Guarantor Subsidiary. No right of any holder of Senior Indebtedness of a Guarantor Subsidiary to enforce the subordination of the Obligations of such Guarantor Subsidiary shall be impaired by any act or failure to act by such Guarantor Subsidiary or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section 12.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article XII. A Guarantor Subsidiary, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of a Guarantor Subsidiary may give the notice; provided, however, that, if an issue of Senior Indebtedness of a Guarantor Subsidiary has a Representative, 116 108 only the Representative may give the notice. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness of a Guarantor Subsidiary (or a Representative of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or Representative thereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness of a Guarantor Subsidiary with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article XII with respect to any Senior Indebtedness of a Guarantor Subsidiary which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of such Guarantor Subsidiary; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 12.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of a Guarantor Subsidiary, the distribution may be made and the notice given to their Representative (if any). SECTION 12.11. Article XII Not To Prevent Events of Default or Limit Right To Accelerate. The failure of a Guarantor Subsidiary to make a payment on any of its Obligations by reason of any provision in this Article XII shall not be construed as preventing the occurrence of a default by such Guarantor Subsidiary under its Obligations. Nothing in this Article XII shall have any effect on the right of the Securityholders or the Trustee to make a demand for payment on a Guarantor Subsidiary pursuant to Article XI. SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article XII, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of a Guarantor Subsidiary for the purpose of ascertaining the Persons entitled to participate 117 109 in such payment or distribution, the holders of the Senior Indebtedness of a Guarantor Subsidiary and other Indebtedness of a Guarantor Subsidiary, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of a Guarantor Subsidiary to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Guarantor Subsidiary held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article XII, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article XII. SECTION 12.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of each of the Guarantor Subsidiaries as provided in this Article XII and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of a Guarantor Subsidiary. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of a Guarantor Subsidiary and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the relevant Guarantor Subsidiary or any other Person, money or assets to which any holders of Senior Indebtedness of such Guarantor Subsidiary shall be entitled by virtue of this Article XII or otherwise. SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Guarantor Subsidiary on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of a 118 110 Guarantor Subsidiary, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE XIII Miscellaneous SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail or by national overnight courier service addressed as follows: if to the Company or any Guarantor Subsidiary: 2121 Brooks Avenue Neenah, WI 54957 Attention of: Chief Financial Officer if to the Trustee: United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Attention: Corporate Trust Division The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed by first class mail within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its 119 111 sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it, except that any such notice to the Trustee must be received by a Trust Officer to be duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. SECTION 13.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee and complying with Section 11.05 stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee and complying with Section 11.05 stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the 120 112 statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which commercial banking institutions (including, without limitation, the Federal Reserve System) are authorized or required by law to close in New York City. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 121 113 SECTION 13.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company of any Guarantor Subsidiary shall not have any liability for any obligations of the Company or any Guarantor Subsidiary under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 122 114 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. NC MERGER COMPANY, by ------------------------- Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK by ------------------------- Name: Title: 123 [FACE OF INITIAL SECURITY] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY 124 2 FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PURCHASE PRICE OF $250,000 FOR SUCH SECURITIES FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. NC MERGER COMPANY 11-1/8% SENIOR SUBORDINATED NOTE DUE 2007 No. C-1 CUSIP No. 640071AA4 $150,000,000 NC MERGER COMPANY, a Wisconsin corporation, promises to pay to Cede & Co., or registered assigns, the principal sum of $150,000,000 on May 1, 2007. Interest Payment Dates: May 1 and November 1 125 3 Record Dates: April 15 and October 15 Additional provisions of this Security are set forth on the other side of this Security. Dated: April 30, 1997 NC MERGER COMPANY, by ----------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, certifies that this is one of the Securities referred to in the Indenture, by --------------------------- Authorized Signatory 126 4 Assumed and Guaranteed pursuant to the First Supplemental Indenture NEENAH CORPORATION, by ----------------------- Name: Title: NEENAH FOUNDRY COMPANY, by ----------------------- Name: Title: NEENAH TRANSPORT, INC., by ----------------------- Name: Title: HARTLEY CONTROLS CORPORATION, by ----------------------- Name: Title: 127 5 [REVERSE SIDE OF INITIAL SECURITY] 11-1/8% Senior Subordinated Note due 2007 1. Interest NC Merger Company, a Wisconsin corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company and the Guarantor Subsidiaries will use their best efforts to have the Exchange Offer Registration Statement or, if applicable, the Shelf Registration Statement (each a "Registration Statement") declared effective by the Commission as promptly as practicable after the filing thereof. If (i) the Shelf Registration Statement or Exchange Offer Registration Statement, as applicable under the Exchange and Registration Rights Agreement is not filed with the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 105 days after the Issue Date, (iii) the Exchange Offer is not consummated on or prior to 135 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company will pay liquidated damages to each holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such holder until the applicable Registration Statement is filed or declared effective, the Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. The Trustee shall have no responsibility with respect to the determination of the 128 6 amount of any such liquidated damages. For purposes of the foregoing, "Transfer Restricted Securities" means each Initial Security until (i) the date on which such Initial Security has been exchanged for a freely transferable Exchange Security in the Exchange Offer, (ii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Initial Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. The Company will pay interest and liquidated damages, if any, semiannually on May 1 and November 1 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 30, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment The Company will pay interest (except defaulted interest) on and liquidated damages, if any, in respect of the Securities to the Persons who are registered holders of Securities at the close of business on the April 15 or October 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money or by wire transfer of federal funds. 129 7 3. Paying Agent and Registrar Initially, UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to the Holders. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture and First Supplemental Indenture The Company issued the Securities under an Indenture dated as of April 30, 1997 ("Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. Pursuant to the First Supplemental Indenture dated as of April 30, 1997, among Neenah Corporation, the Initial Guarantors and the Trustee, Neenah Corporation assumed the Company's obligations under the Indenture and the Securities and each of the Initial Guarantors agreed to guarantee those obligations under the Indenture and the Securities. The Securities are unsecured senior subordinated obligations of the Company limited to $150,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and 130 8 Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; Sale/Leaseback Transactions and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture (as supplemented by the First Supplemental Indenture), the Initial Guarantors have guaranteed the Company's obligations under the Indenture on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below: Redemption Period Price - ------ ---------- 2002........................................................ 105.5625% 2003........................................................ 103.7083% 2004........................................................ 101.8542% 2005 and thereafter......................................... 100.0000% Notwithstanding the foregoing, at any time prior to May 1, 2000, the Company may redeem in the aggregate up 131 9 to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company at a redemption price (expressed as a percentage of principal amount) of 111.125% plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 60% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at the option of the Company within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus 132 10 accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Guarantor Subsidiary, as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 133 11 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount then outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to release Guarantor Subsidiaries when permitted by the Indenture, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any other change that does not adversely affect the rights of any Securityholder, or to provide for the issuance and authorization of the Exchange Securities. 134 12 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by Article X), Securities when required; (iii) failure by the Company or any Guarantor Subsidiary to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or a Significant Subsidiary if the amount accelerated (or so unpaid) exceeds $5,000,000 or its foreign currency equivalent; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and its Restricted Subsidiaries; (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $5,000,000 or its foreign currency equivalent against the Company or a Restricted Subsidiary; and (vii) a Subsidiary Guaranty ceasing to be in full force and effect (other than in accordance with its terms) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Subsidiary Guaranty and such Default continues for 10 days. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interest of the Holders. 135 13 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Guarantor Subsidiary shall not have any liability for any obligations of the Company or a Guarantor Subsidiary under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN 136 14 (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: NC MERGER COMPANY 2121 Brooks Avenue Neenah, Wisconsin 54957 Attention of James K. Hildebrand 137 15 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint _________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: _____________________________ Your Signature: ____________________________ Signature Guarantee:____________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 138 16 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_________ principal amount of Securities held in (check applicable space) ____ book-entry or _____ definitive form by the undersigned. The undersigned (check one box below): |_| has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depository a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); |_| has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such 139 17 Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW: (1) |_| to the Company; or (2) |_| pursuant to an effective registration statement under the Securities Act of 1933; or (3) |_| inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) |_| o outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) |_| pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. 140 18 Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ------------------------ Signature Signature Guarantee: - ----------------------------------- -------------------------- Signature must be guaranteed Signature ________________________________________________________________________________ TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer 141 19 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized officer Amount of this Amount of this Security following of Trustee or Global Security Global Security such decrease or Securities increase) Custodian
142 20 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: |_| If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $_______________ Date: __________________ Your Signature: ___________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) 143 EXHIBIT B [FORM OF FACE OF EXCHANGE SECURITY] [Global Securities Legend] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. (2) NEENAH CORPORATION 11-1/8% SERIES B SENIOR SUBORDINATED NOTE DUE 2007 No. Cusip No. [ ] $[ ] NEENAH CORPORATION, a Wisconsin corporation, promises to pay to [ ], or registered assigns, the principal sum of $__________ on May 1, 2007. Interest Payment Dates: May 1 and November Record Dates: April 15 and October 15 - ---------- (2) This paragraph should only be added if the Security is issued in global form. 144 2 Additional provisions of this Security are set forth on the other side of this Security. Dated: NEENAH CORPORATION, by ----------------------- Name: Title: ----------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by ------------------------- Authorized Signatory 145 3 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 11-1/8% Series B Senior Subordinated Note due 2007 1. Interest NEENAH CORPORATION, a Wisconsin corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest and liquidated damages, if any, semiannually on May 1 and November 1 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 30, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 15 or October 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money or by wire transfer of federal funds. 3. Paying Agent and Registrar Initially, UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to the Holders. The Company or any of its domestically incorporated 146 4 Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture; First Supplemental Indenture NC Merger Company, a Wisconsin corporation ("NC Merger"), issued the Securities under an Indenture dated as of April 30, 1997 ("Indenture"), among NC Merger and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. Pursuant to the First Supplemental Indenture dated as of April 30, 1997, among the Company, the Initial Guarantors and the Trustee, the Company assumed NC Merger's obligations under the Indenture and the Securities and each of the Initial Guarantors agreed to guarantee those obligations under the Indenture and the Securities. The Securities are unsecured senior subordinated obligations of the Company limited to $150,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; Sale/Leaseback Transactions and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain 147 5 restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Guarantor Subsidiaries have guaranteed the Company's obligations under the Indenture on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below: Redemption Period Price - ------ ---------- 2002............................................................ 105.5625% 2003............................................................ 103.7083% 2004............................................................ 101.8542% 2005 and thereafter............................................. 100.0000% Notwithstanding the foregoing, at any time on or prior to May 1, 2000, the Company may redeem in the aggregate up to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings at a redemption price (expressed as a percentage of principal amount thereof) of 111.125% plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption); provided, however, that at least 60% of the original 148 6 aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at the option of the Company within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to purchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 149 7 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Guarantor Subsidiary, as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Regis trar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 150 8 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount then outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to release Guarantor Subsidiaries when permitted by the Indenture or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by Article X), Securities when required; (iii) failure by the Company or any Guarantor Subsidiary to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations 151 9 (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000 or its foreign currency equivalent; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and its Restricted Subsidiaries; and (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $5,000,000 or its foreign currency equivalent against the Company or a Restricted Subsidiary; and (vii) a Subsidiary Guaranty ceasing to be in full force and effect (other than in accordance with its terms) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Subsidiary Guaranty and such Default continues for 10 days. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 152 10 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Guarantor Subsidiary shall not have any liability for any obligations of the Company or a Guarantor Subsidiary under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either 153 11 as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: NEENAH CORPORATION 2121 Brooks Avenue Neenah, WI 54957 Attention of Chief Financial Officer 154 12 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint __________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ____________________________ Your Signature: _____________________________ Signature Guarantee:____________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 155 13 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized officer Amount of this Amount of this Security following of Trustee or Global Security Global Security such decrease or Securities increase) Custodian
156 14 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: |_| If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $______________ Date: _____________________________ Your Signature: ____________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) 157 EXHIBIT C [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS] Transferee Letter of Representation Neenah Corporation c/o United States Trust Company of New York 114 West 47th Street New York, NY 10036 Dear Ladies and Gentlemen: This certificate is delivered to request a transfer of $ principal amount of the 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") of Neenah Corporation (the "Company"). Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: Name: ___________________________________ Address: ________________________________ Taxpayer ID Number: _____________________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Securities and invest in or purchase securities similar to the Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. 158 2 We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor", in each case in a transaction involving a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities 159 3 pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE:___________________ BY____________________________ 160 EXHIBIT D FIRST SUPPLEMENTAL INDENTURE FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April 30, 1997, among NEENAH CORPORATION, a Wisconsin corporation ("Neenah"), NEENAH FOUNDRY COMPANY, NEENAH TRANSPORT, INC. and HARTLEY CONTROLS CORPORATION, each a Wisconsin corporation and a wholly owned subsidiary of Neenah (collectively, the "Initial Guarantors"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS NC Merger Company, a Wisconsin corporation (the "Company"), as issuer, has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 30, 1997, providing for the issuance of an aggregate principal amount of $150,000,000 of 11-1/8% Senior Subordinated Notes due 2007 of the Company (the "Securities"); WHEREAS, immediately after the execution of the Indenture and the issuance of the Securities, the Company was merged with and into Neenah in the Neenah Merger, with Neenah as the surviving corporation; WHEREAS, (i) pursuant to the terms of the Neenah Merger, Neenah succeeded to the obligations of the Company under the Indenture and (ii) the Guarantors have agreed to become Guarantor Subsidiaries under the Indenture; and WHEREAS, pursuant to Section 9.01 of the Indenture, the parties hereto are required to execute and deliver this Supplemental Indenture; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, Neenah, each of the Guarantors and the Trustee mutually covenant and agree for 161 2 the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein", "hereof" and "hereby" and other words of similar import used in this Supplement refer to this Supplement as a whole and not to any particular section hereof. 2. Express Assumption of Obligations under the Indenture. Neenah acknowledges and agrees that as a result of its being the surviving corporation in the Merger with NC Merger it has succeeded to all of the obligations and duties of NC Merger under the Securities and the Indenture on the terms and subject to the conditions set forth in the Securities and the Indenture. Neenah agrees to be bound by all provisions of the Securities and the Indenture. 3. Agreement To Guarantee. Each of the Guarantors hereby agrees to, jointly and severally guarantee Neenah's obligations under the Securities on the terms and subject to the conditions set forth in Article XI of the Indenture and to be bound by all other applicable provisions of the Indenture. 4. Ratification of Indenture; Supplemental Indenture, Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed by the parties hereto and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 5. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT 162 3 THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 6. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 7. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 8. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. NEENAH CORPORATION, by ----------------------- Name: Title: NEENAH FOUNDRY COMPANY, by ----------------------- Name: Title: NEENAH TRANSPORT, INC., by ----------------------- Name: Title: 163 4 HARTLEY CONTROLS CORPORATION, by ----------------------- Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, by ----------------------- Name: Title: 164 EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of [ ], among [NEW GUARANTOR SUBSIDIARY] (the "New Guarantor Subsidiary"), a subsidiary of NEENAH CORPORATION (or its successor), a Wisconsin corporation (the "Company"), THE COMPANY, on behalf of itself and the Guarantor Subsidiaries (the "Existing Guarantor Subsidiaries") under the Indenture referred to below, and UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking association, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H : WHEREAS NC Merger Company, a Wisconsin corporation ("NC Merger"), has heretofore executed and delivered to the Trustee an Indenture (the "Indenture"), dated as of April 30, 1997, providing for the issuance of an aggregate principal amount of $150,000,000 of 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") and the Company and the Initial Guarantors have executed and delivered the First Supplemental Indenture pursuant to which the Company assumed NC Merger's obligations under the Indenture and the Securities and the Initial Guarantors agreed to guarantee those obligations; WHEREAS Section 4.15 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor Subsidiary to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor Subsidiary shall unconditionally guarantee all of the Company's obligations under the Securities pursuant to a Subsidiary Guaranty on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and Existing Guarantor Subsidiaries are authorized to execute and deliver this Supplemental Indenture; 165 2 NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor Subsidiary, the Company, the Existing Guarantor Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplement refer to this Supplement as a whole and not to any particular section hereof. 2. Agreement to Guarantee. The New Guarantor Subsidiary hereby agrees, jointly and severally with all other Guarantor Subsidiaries, to Guarantee the Company's obligations under the Securities on the term and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. 3. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 166 3 5. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 6. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 7. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW GUARANTOR SUBSIDIARY], by ----------------------------- Name: Title: NEENAH CORPORATION, on behalf of itself and the Existing Guarantor Subsidiaries, by ----------------------------- Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, by ----------------------------- Name: Title: 167 4 168 EXHIBIT F [FORM OF CERTIFICATE TO BE DELIVERED UPON TERMINATION OF RESTRICTED PERIOD] On or after June 8, 1997 Neenah Corporation c/o United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] Re: Neenah Corporation (the "Company") 11-1/8% Senior Subordinated Notes due 2007 (the "Initial Securities") and 11-1/8% Series B Senior Subordinated Notes due 2007 (the "Exchange Securities" and, together with the Initial Securities, the "Securities") Ladies and Gentlemen: This letter relates to Securities represented by a temporary global note certificate (the "Temporary Certificate"). Pursuant to Section 2.01 of the Indenture dated as of April 30, 1997 relating to the Securities (the "Indenture"), we hereby certify that (1) we are the beneficial owner of $[ ] principal amount of Initial Securities represented by the Temporary Certificate and (2) we are a person outside the United States to whom the Initial Securities could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as amended. Accordingly, you are hereby requested to issue a Certificated Note representing the undersigned's interest in the principal amount of Initial Securities represented by the Temporary Certificate, all in the manner provided by the Indenture. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any 169 2 administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By:___________________________ Authorized Signature 170 EXHIBIT G [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO RULE 144A] United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] [date] Re: Neenah Corporation (the "Company") 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $_______ aggregate principal amount at maturity of the Securities, we hereby certify that such transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we hereby further certify that the Securities are being transferred to a person that we reasonably believe is purchasing the Securities for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Securities are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter 171 2 or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, ------------------------------ [Name of Transferor] By:_________________________ Authorized Signature 172 EXHIBIT H [Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S] [date] United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] Re: Neenah Corporation (the "Company") 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. 173 2 In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:_______________________ Authorized Signature EX-4.2 7 PURCHASE AGREEMENT AS OF APRIL 23, 1997 1 EXHIBIT 4.2 EXECUTION COPY NC MERGER COMPANY $150,000,000 11-1/8 % Senior Subordinated Notes due 2007 PURCHASE AGREEMENT April 23, 1997 CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: NC Merger Company, a Wisconsin corporation (the "Company"), proposes to issue and sell $150,000,000 aggregate principal amount of its 11-1/8% Senior Subordinated Notes due 2007 (the "Notes"). The Notes will be issued pursuant to an Indenture to be dated as of April 30, 1997 (the "Indenture") between the Company and United States Trust Company of New York, as trustee (the "Trustee"). Immediately following the consummation of the sale of the Notes hereunder and pursuant to the Agreement and Plan of Reorganization dated November 20, 1996, as amended (the "Merger Agreement"), among NFC Castings, Inc., a Delaware corporation ("Holdings"), the Company and Neenah Corporation, a Wisconsin corporation ("Neenah"), the Company will merge (the "Merger") with and into Neenah, with Neenah being the surviving corporation. Upon consummation of the Merger, Neenah will assume, by supplemental indenture (the "Supplemental Indenture"), all of the obligations of the Company under the Indenture and the Notes, Neenah will become the primary obligor on the Notes and the Notes will be guaranteed on an unsecured senior subordinated basis (the "Guarantees", and together with the Notes, the "Securities") by the principal operating subsidiaries of Neenah, Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. (collectively, the "Guarantors"). The Company confirms its agreement with Chase Securities Inc. ("CSI") and Morgan Stanley & Co. Incorporated (together with CSI, the "Initial Purchasers") concerning the purchase of the Securities from the Company by the several Initial Purchasers. 2 2 The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption therefrom. The Company has prepared a preliminary offering memorandum dated April 4, 1997 (the "Preliminary Offering Memorandum") and will prepare an offering memorandum dated the date hereof (the "Offering Memorandum") setting forth information concerning the Company, Neenah, the Guarantors and the Securities. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the Company to the Initial Purchasers pursuant to the terms of this Agreement. Any references herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to include all amendments and supplements thereto, unless otherwise noted. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in accordance with Section 2. Holders of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights Agreement, substantially in the form attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to which Neenah and the Guarantors will agree to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of senior subordinated notes of the Company (the "Exchange Securities") which are identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum. 1. Representations, Warranties and Agreements of the Company. The Company represents and warrants to, and agrees with, the several Initial Purchasers on and as of the date hereof and the Closing Date (as defined in Section 3) that: (a) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, did not, and on the Closing Date the Offering Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company by or on behalf of any Initial Purchaser specifically for use therein (the "Initial Purchasers' Information"). 3 3 (b) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains all of the information that, if requested by a prospective purchaser of the Securities, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act. (c) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 2 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) Holdings has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and the Company, Neenah and each of Neenah's subsidiaries have been duly incorporated and are validly existing as corporations under the laws of the State of Wisconsin; and each of the Company, Holdings, Neenah and each of Neenah's subsidiaries are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged and to take the actions necessary to consummate each of the transactions contemplated by this Agreement and the Offering Memorandum (the "Transactions"), except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a material adverse effect on the condition (financial or otherwise), results of operations, business or prospects of Neenah and its subsidiaries taken as a whole (a "Material Adverse Effect"). (e) Neenah has a capitalization as set forth in the Offering Memorandum under the heading "Capitalization"; all of the outstanding shares of capital stock of Holdings, the Company, Neenah and each of Neenah's Subsidiaries have been, and upon the consummation of the Transactions will be, duly and validly authorized and issued and are, and upon the consummation of the Transactions will be, fully paid and non-assessable, except as set forth in Section 180.0622(2)(b) of the Wisconsin statutes, as judicially interpreted; and upon the consummation of the Transactions will conform in all material respects to the description thereof contained in the Offering Memorandum. Upon consummation of the Transactions, all of the outstanding shares of capital stock of Neenah and its subsidiaries will be owned directly or indirectly by Holdings, free and clear of any lien, charge, encumbrance, security interest, restriction 4 4 upon voting or transfer or any other claim of any third party, other than liens arising under the Senior Bank Facilities. (f) Each of the Company, Neenah and the Guarantors have full right, power and authority to execute and deliver any of this Agreement, the Neenah Letter Agreement (as defined in Section 5(q) hereof), the Indenture, the Supplemental Indenture, the Registration Rights Agreement, the Securities and the Merger Agreement (collectively, the "Transaction Documents") to which it is or will be a party and to perform its respective obligations hereunder and thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly and validly taken. (g) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company (and has been or will be duly authorized by Neenah and the Guarantors and will be the valid and legally binding agreement of Neenah and each of the Guarantors upon the execution and delivery of the Neenah Letter Agreement by each party thereto). (h) The Registration Rights Agreement has been or will be duly authorized by Neenah and each of the Guarantors and, when duly executed and delivered in accordance with its terms by Neenah, the Guarantors and the Initial Purchasers, will constitute a valid and legally binding agreement of Neenah and each of the Guarantors, enforceable against Neenah and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (i) The Indenture has been duly authorized by the Company and, when duly executed and delivered in accordance with its terms by the Company and the Trustee, will constitute a valid and legally binding agreement of the Company (and upon the execution and delivery of the Supplemental Indenture by each party thereto, of Neenah, as primary obligor, and of the Guarantors, as note guarantors) enforceable against the Company (and Neenah and each of the Guarantors, as aforesaid) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust 5 5 Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (j) The Supplemental Indenture has been or will be duly authorized by Neenah and each of the Guarantors and, when duly executed and delivered in accordance with the terms thereof by each party thereto, will constitute the valid and legally binding agreement of Neenah and the Guarantors, enforceable against each of them in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (k) The Neenah Letter Agreement has been or will be duly authorized by Neenah and each of the Guarantors and when duly executed and delivered in accordance with the terms thereof by each party thereto, will constitute the valid and legally binding agreement of Neenah and each of the Guarantors, enforceable against Neenah and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (l) The Securities have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company (and upon execution and delivery of the Supplemental Indenture by each party thereto, of Neenah, as primary obligor, and of each of the Guarantors, as note guarantors) entitled to the benefits of the Indenture and enforceable against the Company (and Neenah and each of the Guarantors, as aforesaid) in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (m) The Merger Agreement has been duly authorized, executed and delivered by the Company, Holdings and Neenah and constitutes a valid and legally binding agreement of the Company, Holdings and Neenah enforceable against each of them in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). 6 6 (n) Each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum. (o) The execution, delivery and performance by the Company, Neenah and each of the Guarantors of each of the Transaction Documents to which it is or will be a party, the issuance, authentication, sale and delivery of the Securities and compliance by the Company, Neenah and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents (i) will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, Neenah or any of Neenah's subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which any of them is a party or by which any of them is bound or to which any of their respective properties or assets are subject, except where such conflict, breach, violation or default would not (A) result in a Material Adverse Effect on the Company, Neenah or any of Neenah's subsidiaries, or (B) have a material adverse effect on the Company's ability to perform its obligations under any of the Transaction Documents to which it is a party, and (ii) such actions will not result in any violation of (A) the provisions of the charter or by-laws of the Company, Neenah or any of Neenah's subsidiaries or (B) to the Company's best knowledge, any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company, Neenah or any of Neenah's subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by each of the Company, Neenah and each of the Guarantors of each of the Transaction Documents to which it is or will be a party, the issuance, authentication, sale and delivery of the Securities and compliance by the Company, Neenah and the Guarantors (as applicable) with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which shall have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement. (p) Ernst & Young LLP are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The historical financial statements (including the related notes) contained in the Offering Memorandum comply in all material respects with the requirements 7 7 applicable to a registration statement on Form S-1 under the Securities Act (except that certain consolidated financial statement schedules and net income per common share data are omitted); such financial statements have been prepared in accordance with generally accepted accounting principles consis tently applied throughout the periods covered thereby and fairly present the financial position of the entities purported to be covered thereby at the re spective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained in the Offering Memorandum under the headings "Summary--Summary Consolidated Financial and Other Data", "Capitalization", "Selected Consolidated Financial and Other Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Management--Compensation of Executive Officers" are derived from the accounting records of the Company and its subsidiaries and fairly present the information purported to be shown thereby. The pro forma financial information contained in the Offering Memorandum has been prepared on a basis consistent with the histori cal financial statements contained in the Offering Memorandum (except for the pro forma adjustments specified therein), includes all material adjustments to the historical financial information required by Rule 11-02 of Regulation S-X under the Securities Act and the Exchange Act to reflect the transactions described in the Offering Memorandum, gives effect to assumptions made on a reasonable basis and fairly presents the historical and proposed transactions contemplated by the Offering Memorandum and the Transaction Documents. The other historical financial and statistical information and data included in the Offering Memorandum are, in all material respects, fairly presented. (q) There are no legal or governmental proceedings pending to which the Company, Neenah or any of Neenah's subsidiaries is a party or of which any of their respective property or assets is the subject which, singularly or in the aggregate, if determined adversely to the Company, Neenah or any of Neenah's subsidiaries, could reasonably be expected to have a Material Adverse Effect; and to the best knowledge of the Company, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (r) To the best knowledge of the Company, no action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the issuance of the Securities or suspends the sale of the Securities in any jurisdiction; to the best knowledge of the Company, no injunction, restraining order or order of any nature by any federal or state court of competent jurisdiction has been issued with respect to the Company, Neenah or any of 8 8 Neenah's subsidiaries which would prevent or suspend the issuance or sale of the Securities or the use of the Preliminary Offering Memorandum or the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company, threatened against or affecting the Company, Neenah or any of Neenah's subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Securities or in any manner draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and the Company has complied with any and all requests by any securities authority in any jurisdiction for additional information to be included in the Preliminary Offering Memorandum and the Offering Memorandum. (s) None of the Company, Holdings, Neenah or any of Neenah's subsidiaries is (i) in violation of its charter or by-laws, (ii) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets are subject or (iii) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its properties or assets may be subject, except for any violation or default under clauses (ii) or (iii) that would not have a Material Adverse Effect. (t) Neenah and each of Neenah's subsidiaries possess all material licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate federal, state or foreign regulatory agencies or bodies which are necessary or desirable for the ownership of their respective properties or the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to possess or make the same would not, singularly or in the aggregate, have a Material Adverse Effect, and none of the Company, Neenah or any of Neenah's subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course. (u) Neenah and each of Neenah's subsidiaries have filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due thereon, and no tax deficiency has been determined adversely to Neenah or any of Neenah's subsidiaries which has had (nor does the Company have any knowledge of any tax deficiency which, if determined adversely to Neenah or any of Neenah's subsidiaries, could reasonably be expected to have) a Material Adverse Effect. (v) None of the Company, Neenah or any of Neenah's subsidiaries is (i) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission 9 9 thereunder or (ii) a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended. (w) Neenah and each of Neenah's subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (x) Neenah and each of its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks as are adequate to protect Neenah and its subsidiaries and their respective businesses. Neither Neenah nor any of its subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance. (y) Neenah and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses; and the Company has no reason to believe that the conduct of their respective businesses will conflict in any material respect with, and Neenah and its subsidiaries have not received any notice of any claim of conflict with, any such rights of others. (z) Neenah and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property which are material to the business of Neenah and its subsidiaries, in each case free and clear of all liens (other than liens arising under the Senior Bank Facilities), encumbrances, claims and defects and imperfections of title except such as (i) do not materially interfere with the use made and proposed to be made of such property by Neenah and its subsidiaries or (ii) could not reasonably be expected to have a Material Adverse Effect. (aa) No material labor disturbance by or dispute with the employees of Neenah or any of its subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened. 10 10 (bb) No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of Neenah or any of its subsidiaries which could reasonably be expected to have a Material Adverse Effect; each such employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; Neenah and each of its subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which Neenah or any of its subsidiaries would have any liability; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification. (cc) There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to or caused by Neenah or any of its subsidiaries (or, to the best knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company, Neenah or any of Neenah's subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by Neenah or any of its subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability could not reasonably be expected to have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. (dd) Neither Neenah nor, to the best knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of Neenah or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any 11 11 foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (ee) On and immediately after the Closing Date, Neenah (on a consolidated basis, after giving effect to the issuance of the Securities and to the other Transactions as described in the Offering Memorandum) will be Solvent. As used in this paragraph, the term "Solvent" means, with respect to a particular date, that on such date (i) the present fair market value (or present fair saleable value) of the assets of Neenah is not less than the total amount required to pay the probable liabilities of Neenah on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (ii) Neenah is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (iii) assuming the sale of the Securities as contemplated by this Agreement, the Neenah Letter Agreement and the Offering Memorandum, Neenah is not incurring debts or liabilities beyond its ability to pay as such debts and liabilities mature and (iv) Neenah is not engaged in any business or transaction, and is not about to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which Neenah is engaged. In computing the amount of such contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (ff) Except as described in the Offering Memorandum, there are no outstanding subscriptions, rights, warrants, calls or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity or other ownership interest in Holdings, the Company, Neenah or any of Neenah's subsidiaries. (gg) Neither Neenah nor any of its subsidiaries owns any "margin securities" as that term is defined in Regulations G and U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Securities to be considered a "purpose credit" within the meanings of Regulation G, T, U or X of the Federal Reserve Board. 12 12 (hh) None of the Company, Neenah or any of Neenah's subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company, Neenah or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Securities. (ii) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (jj) None of the Company, Neenah, any of their respective affiliates or any person acting on behalf of any of them has engaged or will engage in any directed selling efforts (as such term is defined in Regulation S under the Securities Act ("Regulation S")), and all such persons have complied and will comply with the offering restrictions requirement of Regulation S to the extent applicable. (kk) None of the Company, Neenah or any of their respective affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as such term is defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act. (ll) None of the Company, Neenah or any of their respective affiliates or any other person acting on behalf of any of them has engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (mm) There are no securities of the Company or Neenah registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed on a national securities exchange or quoted in a U.S. automated inter-dealer quotation system. (nn) Neither the Company nor Neenah has taken or will take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (oo) No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Preliminary Offering Memorandum or the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. 13 13 (pp) None of Neenah or any of its subsidiaries does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Florida Statutes Section 517.075. (qq) Since the date as of which information is given in the Offering Memorandum, except as contemplated by the Transactions, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of Neenah or any of its subsidiaries, whether or not arising in the ordinary course of business, (ii) neither Neenah nor any of the subsidiaries have incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) neither Neenah nor any of its subsidiaries have entered into any material transaction other than in the ordinary course of business and (iv) there has not been any change in the capital stock or long-term debt of Neenah or any of its subsidiaries, or any dividend or distribution of any kind declared, paid or made by Neenah on any class of its capital stock. (rr) The Company and Holdings have not conducted business prior to the date hereof other than the transactions contemplated by this Agreement. 2. Purchase and Resale of the Securities. (a) On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to each of the Initial Purchasers, severally and not jointly, and each of the Initial Purchasers, severally and not jointly, agrees to purchase from the Company, the principal amount of Securities set forth opposite the name of such Initial Purchaser on Schedule 1 hereto at a purchase price equal to 97.00% of the principal amount thereof. The Company shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be purchased as provided herein. (b) The Initial Purchasers have advised the Company that they propose to offer the Securities for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents and warrants to, and agrees with, the Company that (i) it is purchasing the Securities pursuant to a private sale exempt from registration under the Securities Act, (ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act ("Regulation D") or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and (iii) it has solicited and will solicit offers for the Securities only from, and has offered or sold and will offer, sell or deliver the Securities, as part of its initial offering, only to persons whom it reasonably believes to be qualified institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the Securities Act, or if any such person is buying for one or more 14 14 institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and in each case, in transactions in accordance with Rule 144A. In addition to the foregoing, each Initial Purchaser acknowledges and agrees that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 5(d) and (e), counsel for the Company and for the Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers and their compliance with their agreements contained in this Section 2, and each Initial Purchaser hereby consents to such reliance. (c) The Company acknowledges and agrees that the Initial Purchasers may sell Securities to any affiliate of an Initial Purchaser and that any such affiliate may sell Securities purchased by it to an Initial Purchaser. 3. Delivery of and Payment for the Securities. (a) Delivery of and payment for the Securities shall be made at the offices of Cravath, Swaine & Moore ("CSM"), New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on April 30, 1997, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchasers and the Company (such date and time of payment and delivery being referred to herein as the "Closing Date"). (b) On the Closing Date, payment of the purchase price for the Securities shall be made to the Company by wire or book-entry transfer of same-day funds to such account or accounts as the Company shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against delivery to the Initial Purchasers of the certificates evidencing the Notes. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchasers hereunder. Upon delivery, the Notes shall be in global form, registered in such names and in such denominations as CSI on behalf of the Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Company agrees to make one or more global certificates evidencing the Notes available for inspection by CSI on behalf of the Initial Purchasers in New York, New York at least 24 hours prior to the Closing Date. 4. Further Agreements of the Company. The Company agrees with each of the several Initial Purchasers: (a) to advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the statements 15 15 therein, in the light of the circumstances under which they were made, not misleading; to advise the Initial Purchasers promptly of any order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum, of any suspension of the qualification of the Securities for offering or sale in any jurisdiction and of the initiation or threatening of any proceeding for any such purpose; and to use its best efforts to prevent the issuance of any such order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to obtain the lifting thereof at the earliest possible time; (b) to furnish promptly to each of the Initial Purchasers and counsel for the Initial Purchasers, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum (and any amendments or supplements thereto) as may be reasonably requested; (c) prior to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to each of the Initial Purchasers and counsel for the Initial Purchasers and not to effect any such amendment or supplement to which the Initial Purchasers shall reasonably object by notice to the Company after a reasonable period to review; (d) if, at any time prior to completion of the resale of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchasers or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; (e) for so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act and are not saleable pursuant to Rule 144(k) under the Securities Act, to furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being for the benefit of the holders from time to time of the Securities and prospective purchasers of the Securities designated by such holders); 16 16 (f) for so long as the Securities are outstanding, to furnish to the Initial Purchasers copies of any annual reports, quarterly reports and current reports filed by the Company with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to the Trustee or to the holders of the Securities pursuant to the Indenture or the Exchange Act or any rule or regulation of the Commission thereunder; (g) to promptly take from time to time such actions as the Initial Purchasers may reasonably request to qualify the Securities for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate and to continue such qualifications in effect for so long as required for the resale of the Securities; and to arrange for the determination of the eligibility for investment of the Securities under the laws of such jurisdictions as the Initial Purchasers may reasonably request; provided that the Company, Neenah and Neenah's subsidiaries shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction; (h) to assist the Initial Purchasers in arranging for the Securities to be designated Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for the Securities to be eligible for clearance and settlement through the Depository Trust Company ("DTC"); (i) not to, and to cause their affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as such term is defined in the Securities Act) which could be integrated with the sale of the Securities in a manner which would require registration of the Securities under the Securities Act; (j) except following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and to cause their affiliates not to, and not to authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; 17 17 (k) for a period of 180 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities or the Exchange Securities) without the prior written consent of the Initial Purchasers; (l) during the period from the Closing Date until two years after the Closing Date, without the prior written consent of the Initial Purchasers, not to, and not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act; (m) not to, for so long as the Securities are outstanding, be or become, or be or become owned by, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act, and to not be or become, or be or become owned by, a closed-end investment company required to be registered, but not registered thereunder; (n) in connection with the offering of the Securities, until CSI on behalf of the Initial Purchasers shall have notified the Company of the completion of the resale of the Securities, not to, and to use its reasonable best efforts to cause its affiliated purchasers (as defined in Rule 100 of Regulation M under the Exchange Act) not to, directly or indirectly, either alone or with one or more other persons, bid for, purchase, or attempt to induce any person to bid for or purchase, a covered security during the applicable restricted period; (o) in connection with the offering of the Securities, to make the officers, employees, independent accountants and legal counsel of the Company, Holdings, Neenah and Neenah's subsidiaries reasonably available upon request by the Initial Purchasers; (p) to furnish to each of the Initial Purchasers on the date hereof a copy of the independent accountants' report included in the Offering Memorandum signed by the accountants rendering such report; (q) to do and perform all things required to be done and performed by it under this Agreement that are within its control prior to or after the Closing Date, and to use its best efforts to satisfy all conditions precedent to the delivery of the Securities; 18 18 (r) to not take, and to use best efforts to cause Holdings, Neenah and each of Neenah's subsidiaries to not take, any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the covenants contained in the Indenture; (s) to not take, and to use best efforts to cause Holdings, Neenah and each of Neenah's subsidiaries to not take, any action prior to the Closing Date which would require the Offering Memorandum to be amended or supplemented pursuant to Section 4(d); (t) prior to the Closing Date, not to issue, and to use best efforts to cause Holdings, Neenah and each of Neenah's subsidiaries not to issue, any press release or other communication directly or indirectly or hold any press conference with respect to the Company, Neenah or Neenah's subsidiaries, their respective conditions, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of Neenah and of which the Initial Purchasers are notified), without the prior written consent of the Initial Purchasers, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; and (u) to apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds". 5. Conditions of Initial Purchasers' Obligations. The respective obligations of the several Initial Purchasers hereunder are subject to (i) the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of the Company contained herein, (ii) the accuracy of the representations and warranties of Neenah and the Guarantors contained in the Neenah Letter Agreement, (iii) the accuracy of the statements of the Company, Neenah and the Guarantors and their respective officers made in any certificates delivered pursuant hereto, (iv) the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchasers as promptly as practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers and the Company may agree; and no stop order suspending the sale of the Securities in any jurisdiction shall have been issued and no proceeding for that purpose shall have been commenced or shall be pending or threatened. (b) Neither of the Initial Purchasers shall have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum 19 19 or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Initial Purchasers, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Initial Purchasers, and the Company, Holdings, Neenah and the Guarantors shall have furnished to the Initial Purchasers all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (d) Kirkland & Ellis ("K&E"), as counsel to the Company, Foley & Lardner, as counsel for the Company and Neenah, and Quarles and Brady ("Q&B"), as counsel to Neenah and the Guarantors, shall have furnished to the Initial Purchasers their written opinions, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth in Annex B-1, Annex B-2 and Annex B-3 hereto, respectively. (e) The Initial Purchasers shall have received from CSM, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and the Company, Holdings, Neenah and the Guarantors shall have furnished to such counsel such documents and information as CSM requests for the purpose of enabling them to pass upon such matters. (f) Neenah shall have furnished to the Initial Purchasers a letter (the "Initial Letter") of Ernst & Young LLP, addressed to the Initial Purchasers and dated April 24, 1997, in form and substance satisfactory to the Initial Purchasers, substantially to the effect set forth in Annex C hereto. (g) Neenah shall have furnished to the Initial Purchasers a letter (the "Bring-Down Letter") of Ernst & Young LLP, addressed to the Initial Purchasers and dated the Closing Date (i) confirming that they are independent public accountants with respect to Neenah and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings thereunder, (ii) stating, as of the date of the Bring-Down Letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than three business days prior to the date of the Bring-Down Letter), that the conclusions and findings of such 20 20 accountants with respect to the financial information and other matters covered by the Initial Letter are accurate and (iii) confirming in all material respects the conclusions and findings set forth in the Initial Letter. In addition, Neenah shall have received letters from such accountants consenting to the use, in connection with the offering of the Securities, of the audited consolidated financial statements of Neenah prepared by such accountants and included in the Offering Memorandum. (h) Each of the Company, Neenah and the Guarantors shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, of its chief executive officer or president and its chief financial officer stating that (A) such officers have carefully examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (C) as of the Closing Date, the representations and warranties of the Company in this Agreement and of Neenah and the Guarantors in the Neenah Letter Agreement are true and correct in all material respects, the Company, Neenah and each of the Guarantors have complied with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder or under the Neenah Letter Agreement on or prior to the Closing Date, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum, there has been no material adverse change in the financial position or results of operation of Neenah or any of its subsidiaries, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of Neenah and its subsidiaries taken as a whole. (i) The Indenture shall have been duly executed and delivered by the Company and the Trustee and the Notes shall have been duly executed and delivered by the Company and duly authenticated by the Trustee. (j) The Securities shall have been approved by the NASD for trading in the PORTAL Market. (k) If any event shall have occurred that requires the Company under Section 4(d) to prepare an amendment or supplement to the Offering 21 21 Memorandum, such amendment or supplement shall have been prepared, the Initial Purchasers shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchasers reasonably in advance of the Closing Date. (l) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which in the judgment of the Initial Purchasers would materially impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Securities as contemplated hereby. (m) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change in the capital stock or long-term debt or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of Neenah and its subsidiaries taken as a whole, the effect of which, in any such case described above, is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). (n) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities. (o) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Securities by any "nationally recognized statistical rating organization", as such term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of the Commission under the Securities Act and (ii) no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Securities. (p) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange, the 22 22 NASDAQ market or the over-the-counter market shall have been suspended or limited, or minimum prices shall have been established on any such exchange or market by the Commission, by any such exchange or by any other regulatory body or governmental authority having jurisdiction, or (ii) any moratorium on commercial banking activities shall have been declared by federal or New York state authorities or (iii) an outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war or (iv) a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) the effect of which, in the case of this clause (iv), is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery of the Securities on the terms and in the manner contemplated by this Agreement and in the Offering Memorandum (exclusive of any amendment or supplement thereto). (q) Substantially simultaneously with the sale of the Securities hereunder (i) the Merger shall have been consummated, (ii) the Initial Purchasers shall have received a counterpart of an agreement in the form of Exhibit D hereto (the "Neenah Letter Agreement") which shall have been executed and delivered by a duly authorized officer of Neenah and each of the Guarantors, whereby, among other things, Neenah (as the surviving entity after the Merger) and the Guarantors will become parties to this Agreement and be subject to the obligations of the Company under this Agreement, including, but not limited to, the obligations under Sections 8, 9, 10 and 12 hereof, (iii) the Initial Purchasers shall have received a counterpart of the Supplemental Indenture which shall have been executed and delivered by the parties thereto and pursuant to the terms thereof Neenah shall have become the primary obligor under the Indenture and the Guarantors shall have become note guarantors under the Indenture and (iv) the Initial Purchasers shall have received a counterpart of the Registration Rights Agreement which shall have been executed and delivered by a duly authorized officer of Neenah and each of the Guarantors. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers. 6. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers, in their absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in Section 5(l), (m), (n), (o) or (p) shall have occurred and be continuing. 7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the non- 23 23 defaulting Initial Purchaser may make arrangements for the purchase of the Securities which such defaulting Purchaser agreed but failed to purchase by other persons satisfactory to the Company and the non-defaulting Initial Purchaser, but if no such arrangements are made within 36 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement, the term "Initial Purchasers" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule 1 hereto that, pursuant to this Section 7, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase. (b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company or any non-defaulting Initial Purchaser for damages caused by its default. If other persons are obligated or agree to purchase the Securities of a defaulting Initial Purchaser, either the non-defaulting Initial Purchaser or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Offering Memorandum that effects any such changes. 8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement shall have been terminated pursuant to Section 6 or Section 7, (b) the Company shall fail to tender the Securities for delivery to the Initial Purchasers for any reason permitted under this Agreement or (c) the Initial Purchasers shall decline to purchase the Securities for any reason permitted under this Agreement, the Company shall reimburse the Initial Purchasers for such out-of-pocket expenses (including reasonable fees and disbursements of counsel) as shall have been reasonably incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase and resale of the Securities. If this Agreement is terminated pursuant to Section 7 by reason of the default of one or more of the Initial Purchasers, the Company shall not be obligated to reimburse any defaulting Initial Purchaser on account of such expenses. 9. Indemnification. (a) The Company shall indemnify and hold harmless each Initial Purchaser, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Securities), to which that Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or 24 24 otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or in any information provided by the Company pursuant to Section 4(e) or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Initial Purchasers' Information; and provided, further, that with respect to any such untrue statement in or omission from the Preliminary Offering Memorandum, the indemnity agreement contained in this Section 9(a) shall not inure to the benefit of any such Initial Purchaser to the extent that the sale to the person asserting any such loss, claim, damage, liability or action was an initial resale by such Initial Purchaser and any such loss, claim, damage, liability or action of or with respect to such Initial Purchaser results from the fact that both (A) to the extent required by applicable law, a copy of the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such person and (B) the untrue statement in or omission from the Preliminary Offering Memorandum was corrected in the Offering Memorandum unless, in either case, such failure to deliver the Offering Memorandum was a result of non-compliance by the Company with Section 4(b). (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(b) and Section 10 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Initial 25 25 Purchasers' Information, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in 26 26 Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. The obligations of the Company and the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Company or the Initial Purchasers, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 10. Contribution. If the indemnification provided for in Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Securities purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the Securities under this Agreement, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company or information supplied by the Company on the one hand or to any Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. 27 27 The Company and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 10 were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discounts and commissions received by such Initial Purchaser with respect to the Securities purchased by it under this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this Section 10 are several in proportion to their respective purchase obligations and not joint. 11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided in Sections 9 and 10 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Company and the Initial Purchasers and in Section 4(e) with respect to holders and prospective purchasers of the Securities. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. Expenses. The Company agrees with the Initial Purchasers to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Securities, including stamp duties and transfer taxes, if any, payable upon issuance of the Securities; (e) the fees and expenses of the Company's counsel and independent accountants; (f) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in Section 4(h) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of counsel for the Initial Purchasers); (g) any fees charged by rating agencies for rating the 28 28 Securities; (h) the fees and expenses of the Trustee and any paying agent (including related fees and expenses of any counsel to such parties); (i) all expenses and application fees incurred in connection with the application for the inclusion of the Securities on the PORTAL Market and the approval of the Securities for book-entry transfer by DTC; and (j) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement which are not otherwise specifically provided for in this Section 12; provided, however, that except as provided in this Section 12 and Section 8, the Initial Purchasers shall pay their own costs and expenses. 13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company and the Initial Purchasers contained in this Agreement or made by or on behalf of the Company or the Initial Purchasers pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers, directors, employees, representatives, agents or controlling persons. 14. Notices, etc.. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Gerard J. Murray (telecopier no.: (212) 270-0994); or (b) if to the Company, shall be delivered or sent by mail or telecopy transmission to the address of the Company set forth in the Offering Memorandum, Attention: James K. Hildebrand (telecopier no.: 614-889-8308); provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall also be delivered or sent by mail to such Initial Purchaser at its address set forth on the signature page hereof. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by CSI. 15. Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 16. Initial Purchasers' Information. The parties hereto acknowledge and agree that the Initial Purchasers' Information consists solely of the following 29 29 information in the Preliminary Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the front cover page concerning the terms of the offering by the Initial Purchasers; (ii) the first paragraph on the inside front cover page concerning over-allotment and trading activities by the Initial Purchasers; and (iii) the statements concerning the Initial Purchasers contained in the third, fourth, sixth and seventh paragraphs under the heading "Plan of Distribution". 17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 18. Counterparts. This Agreement may be executed in one or more counterparts (which may include counterparts delivered by telecopier) and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 19. Amendments. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 20. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 30 30 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Company and the several Initial Purchasers in accordance with its terms. Very truly yours, NC MERGER COMPANY By ------------------------------ Name: Title: Accepted: CHASE SECURITIES INC. By ---------------------------- Authorized Signatory Address for notices pursuant to Section 9(c): 1 Chase Plaza, 25th floor New York, New York 10081 Attention: Legal Department MORGAN STANLEY & CO. INCORPORATED By ---------------------------- Authorized Signatory Address for notices pursuant to Section 9(c): 1585 Broadway (33rd Floor) New York, NY 10036 Attention: Legal Department 31 31 SCHEDULE 1 Principal Amount Initial Purchasers of Securities ------------------ ------------- Chase Securities Inc. $ 112,500,000 Morgan Stanley & Co. Incorporated 37,500,000 ----------- Total $ 150,000,000 32 32 ANNEX A [Form of Exchange and Registration Rights Agreement] 33 33 ANNEX B-1 [Form of Opinion of Counsel for the Company] Kirkland & Ellis shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) Holdings has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged (except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a Material Adverse Effect); (ii) all of the outstanding shares of capital stock of Holdings have been, and upon the consummation of the Merger all of the outstanding shares of capital stock of Holdings will be, duly and validly authorized and issued and fully paid and non-assessable; (iii) the statements in the Offering Memorandum under the heading "Certain United States Federal Income Tax Considerations", to the extent that they constitute summaries of matters of law or regulation or legal conclusions, have been reviewed by such counsel and fairly summarize the matters described therein in all material respects; and such counsel does not have actual knowledge of any current or pending legal or governmental actions, suits or proceedings which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required; (iv) the Indenture conforms in all material respects with the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; (v) Holdings has full right, power and authority to execute and deliver each of the Transaction Documents to which is a party and to perform its obligations thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction 34 34 Documents to which Holdings is a party and the consummation of the transactions contemplated thereby have been duly and validly taken; (vi) assuming the due authorization, execution and delivery of the Purchase Agreement by the Company, the Purchase Agreement constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution, and delivery of the Neenah Letter Agreement by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah and each of the Guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification provisions thereof may be limited by applicable law; (vii) upon the due authorization, execution and delivery of the Registration Rights Agreement by Neenah and the Guarantors, the Registration Rights Agreement will constitute a valid and legally binding agreement of the Neenah and each of the Guarantors, enforceable against each of them in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification provisions thereof may be limited by applicable law; (viii) assuming the due authorization, execution and delivery of the Indenture by the Company and the Trustee, the Indenture constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution and delivery of the Supplemental Indenture by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah as primary obligor and each of the Guarantors as note guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (ix) assuming the due authorization and execution of the Securities by the Company and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with the Purchase Agreement, the Securities constitute valid and legally binding obligations of the Company (and, upon the due authorization, execution and delivery of the Supplemental Indenture by the parties thereto, of Neenah and the Guarantors) entitled to the benefits of the Indenture and enforceable against the Company (and Neenah as primary obligor 35 35 and each of the Guarantors as note guarantors) in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (x) the Merger Agreement has been duly authorized, executed and delivered by Holdings; (xi) each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum; (xii) the execution, delivery and performance by Holdings of each of the Transaction Documents to which it is a party, the compliance by Holdings with the terms of each of the Transaction Documents to which it is a party and the consummation of the Transactions will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Holdings pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Holdings is a party or by which it is bound or to which its property or assets is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of Holdings or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over Holdings or any of its properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by Holdings of each of the Transaction Documents to which it is a party, the compliance by Holdings with the terms of each of the Transaction Documents to which it is a party and the consummation of the Transactions, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement; (xiii) to the best knowledge of such counsel, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which Holdings is a party or of which any property or assets of Holdings is the subject which (A) singularly or in the aggregate, if determined adversely to Holdings, could reasonably be expected to have a Material Adverse Effect or (B) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best 36 36 knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (xiv) Holdings is not (A) in violation of its charter or by-laws, (B) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (C) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject; (xv) neither the consummation of the transactions contemplated by the Purchase Agreement nor the sale, issuance, execution or delivery of the Securities will violate Regulation G, T, U or X of the Federal Reserve Board; and (xvi) assuming the accuracy of the representations, warranties and agreements of the Company (and, upon the due authorization, execution and delivery of the Neenah Letter Agreement, of Neenah and the Guarantors) and of the Initial Purchasers contained in the Purchase Agreement, the issuance and sale of the Securities and the offer, resale and delivery of the Securities in the manner contemplated by the Purchase Agreement and the Offering Memorandum, are exempt from the registration requirements of the Securities Act, and it is not necessary to qualify the Indenture under the Trust Indenture Act. Such counsel shall also state that they have participated in conferences with representatives of the Company and Neenah and with representatives of Neenah's independent accountants and counsel at which conferences the contents of the Offering Memorandum and any amendment and supplement thereto and related matters were discussed and, although such counsel assume no responsibility for the accuracy, completeness or fairness of the Offering Memorandum, any amendment or supplement thereto (except as expressly provided above), nothing has come to the attention of such counsel to cause such counsel to believe that the Offering Memorandum or any amendment or supplement thereto (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of Neenah and public officials which are furnished to the Initial Purchasers. 37 37 ANNEX B-2 [Form of Opinion of Counsel for the Company and Neenah] Foley & Lardner shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company and to Neenah, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) The Company has been, and upon consummation of the Merger each of Neenah and each of the Guarantors will be, duly incorporated and validly existing as corporations under the laws of the State of Wisconsin; (ii) all of the outstanding shares of capital stock of the Company have been, and upon the consummation of the Merger all of the outstanding shares of capital stock of Neenah will be, duly and validly authorized and issued and fully paid and non-assessable, except as set forth in Section 180.0622(2)(b) of the Wisconsin Statutes, as judicially interpreted; and upon the consummation of the Merger and the other Transactions the capital stock of Neenah will conform in all material respects to the description thereof contained in the Offering Memorandum; (iii) each of the Company, Neenah and each of the Guarantors has full right, power and authority to execute and deliver each of the Transaction Documents to which is a party and to perform its obligations thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents to which any of the Company, Neenah or any of the Guarantors is a party and the consummation of the transactions contemplated thereby have been duly and validly taken; (iv) the Purchase Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution, and delivery of the Neenah Letter Agreement by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah and each of the Guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification provisions thereof may be limited by applicable law; 38 38 (v) the Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution and delivery of the Supplemental Indenture by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah as primary obligor and each of the Guarantors as note guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insol vency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (vi) the Securities have been duly authorized and issued by the Compa ny and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with the Purchase Agreement, will constitute valid and legally binding obligations of the Company (and, upon the due authorization, execution and delivery of the Supplemental Indenture by the parties thereto, of Neenah and the Guarantors) entitled to the benefits of the Indenture and enforceable against the Company (and Neenah as primary obligor and each of the Guarantors as note guarantors) in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (vii) the Merger Agreement has been duly authorized, executed and delivered by the Company, and assuming due authorization, execution and delivery by Neenah and Holdings, will constitute a valid and legally binding agreement of Neenah, the Company and Holdings enforceable against Neenah, the Company and Holdings in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (viii) the execution, delivery and performance by each of the Company, Neenah and each of the Guarantors of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities by the Company, the compliance by each of the Company, Neenah and each of the Guarantors with the terms of each of the Transaction Documents to which each is a party and the consummation of the Transactions will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, Neenah or any of the Guarantors pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or 39 39 instrument to which the Company, Neenah or any of the Guarantors is a party or by which any of them are bound or to which the property or assets of any of them is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of any of the Company, Neenah or any of the Guarantors or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over any of the Company, Neenah or any of the Guarantors or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by each of the Company, Neenah and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance, authentication, sale and delivery of the Securities by the Company, the compliance by each of the Company, Neenah and each of the Guarantors with the terms of each of the Transaction Documents to which each is a party and the consummation of the Transactions, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement; (ix) to the best knowledge of such counsel, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which the Company is a party or of which any property or assets of the Company is the subject which (A) singularly or in the aggregate, if determined adversely to the Company, could reasonably be expected to have a Material Adverse Effect or (B) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (x) the Company is not (A) in violation of its charter or by-laws, (B) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (C) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject; (xi) neither the Company, Neenah nor any of Neenah's subsidiaries is (A) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act and the rules and regulations of the Commission thereunder, without taking account of any 40 40 exemption under the Investment Company Act arising out of the number of holders of securities of the Company, Neenah or Neenah's subsidiaries or (B) a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended; (xii) each of the Letter Agreement, the Supplemental Indenture and the Registration Rights Agreement has been duly authorized, executed and delivered by Neenah and each of the Guarantors, and each of the Letter Agreement, the Supplemental Indenture and the Registration Rights Agreement is enforceable against Neenah and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (xii) neither the consummation of the transactions contemplated by the Purchase Agreement nor the assumption of the Notes by Neenah or the guarantee of the Notes by the Guarantors will violate Regulation G, T, U or X of the Federal Reserve Board. In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company, Neenah and public officials which are furnished to the Initial Purchasers. 41 41 ANNEX B-3 [Form of Opinion of Counsel for Neenah] Quarles & Brady shall have furnished to the Initial Purchasers their written opinion, as counsel to Neenah and the Guarantors, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) Neenah and each of the Guarantors has been duly incorporated and is validly existing as a corporation under the laws of Wisconsin, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged (except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a Material Adverse Effect), (ii) all of the outstanding shares of capital stock of Neenah and each of the Guarantors have been duly and validly authorized and issued and are fully paid and non-assessable, except as set forth in Section 180.0622(2)(b) of the Wisconsin Statutes, as judicially interpretated. Upon consummation of and by virtue of the Merger, each outstanding share of the Company's common stock, without par value, will be converted into one share of the Class A Common Stock of Neenah, and each outstanding share of the Common Stock of Neenah will be converted into cash as provided in the Merger Agreement; (iii) to the best knowledge of such counsel, there are not any current or pending legal or governmental actions, suits or proceedings which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required; (iv) the Merger Agreement has been duly authorized, executed and delivered by Neenah, and assuming due authorization, execution and delivery by the Company and Holdings, will constitute a valid and legally binding agreement of Neenah enforceable against Neenah in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); 42 42 (v) the execution, delivery and performance by Neenah of the Merger Agreement and compliance by Neenah with the terms thereof will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Neenah or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which Neenah or any of its subsidiaries is a party or by which Neenah or any of its subsidiaries is bound or to which any of the property or assets of Neenah or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of Neenah or any of its subsidiaries or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over Neenah or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by Neenah of the Merger Agreement, and compliance by Neenah with the terms thereof and the consummation of the Merger, except for such consents, approvals, authorizations, filings, registrations or qualifications which have been obtained or made prior to the Closing Date; (vi) to the best knowledge of such counsel, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which Neenah or any of its subsidiaries is a party or of which any property or assets of Neenah or any of its subsidiaries is the subject which (A) singularly or in the aggregate, if determined adversely to Neenah or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect or (B) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (vii) neither Neenah nor any of its subsidiaries is (A) in violation of its charter or by-laws, (B) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (C) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject; [Such counsel shall also state that they have participated in conferences with representatives of Neenah and with representatives of Neenah's independent 43 43 accountants and counsel at which conferences the contents of the Offering Memorandum and any amendment and supplement thereto and related matters were discussed and, although such counsel assume no responsibility for the accuracy, completeness or fairness of the Offering Memorandum, any amendment or supplement thereto (except as expressly provided above), nothing has come to the attention of such counsel to cause such counsel to believe that the Offering Memorandum or any amendment or supplement thereto (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.] In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of Neenah and public officials which are furnished to the Initial Purchasers. 44 44 ANNEX C [Form of Initial Comfort Letter] Neenah shall have furnished to the Initial Purchasers a letter of Ernst & Young LLP, addressed to the Initial Purchasers and dated the date of the Purchase Agreement, in form and substance satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) they are independent certified public accountants with respect to the Company within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings; (ii) in their opinion, the audited financial statements and pro forma financial information included in the Offering Memorandum and reported on by them comply in form in all material respects with the accounting requirements of the Exchange Act and the related published rules and regulations of the Commission thereunder that would apply to the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); (iii) based upon a reading of the latest unaudited financial statements made available by Neenah, the procedures of the AICPA for a review of interim financial information as described in Statement of Auditing Standards No. 71, reading of minutes and inquiries of certain officials of Neenah who have responsibility for financial and accounting matters and certain other limited procedures requested by the Initial Purchasers and described in detail in such letter, nothing has come to their attention that causes them to believe that (A) any unaudited consolidated financial statements included in the Offering Memorandum do not comply as to form in all material respects with applicable accounting requirements, (B) any material modifications should be made to the unaudited consolidated financial statements included in the Offering Memorandum for them to be in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited consolidated financial statements included in the Offering Memorandum or (C) the information included under the headings ["Summary--Summary Consolidated Financial and Other Data", "Capitalization", "Selected Consolidated Financial and Other Data", "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Management--Compensation of Executive Officers"] is not in conformity with the disclosure requirements of Regulation S-K that would apply to the Offering Memorandum 45 45 if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act; (iv) based upon the procedures detailed in such letter with respect to the period subsequent to the date of the last available balance sheet, including reading of minutes and inquiries of certain officials of Neenah who have responsibility for financial and accounting matters, nothing has come to their attention that causes them to believe that (A) at a specified date not more than three business days prior to the date of such letter, there was any change in capital stock, increase in long-term debt or decrease in net current assets as compared with the amounts shown in the December 31, 1996 unaudited balance sheet included in the Offering Memorandum or (B) for the period from December 31, 1996 to a specified date not more than three business days prior to the date of such letter, there were any decreases, as compared with the corresponding period in the preceding year, in net sales, income from operations, EBITDA or net income, except in all instances for changes, increases or decreases that the Offering Memorandum discloses have occurred or which are set forth in such letter, in which case the letter shall be accompanied by an explanation by Neenah as to the significance thereof unless said explanation is not deemed necessary by the Initial Purchasers; (v) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company) set forth in the Offering Memorandum agrees with the accounting records of Neenah, excluding any questions of legal interpretation; and (vi) on the basis of a reading of the unaudited pro forma financial information included in the Offering Memorandum, carrying out certain specified procedures, reading of minutes and inquiries of certain officials of Neenah who have responsibility for financial and accounting matters and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial information, nothing came to their attention which caused them to believe that the pro forma financial information does not comply in form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such information. 46 46 EXHIBIT D April__, 1997 CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED c/o CHASE SECURITIES INC. 270 Park Avenue New York, NY 10017 Dear Sirs: Reference is hereby made to the Purchase Agreement dated April__, 1997 (the "Purchase Agreement"), between NC Merger Company, a Wisconsin corporation (the "Company"), and you pursuant to which the Company has agreed to issue and sell and you have agreed to purchase the Securities described therein on the terms set forth therein. Capitalized terms used herein but not otherwise defined herein have meanings assigned thereto in the Purchase Agreement (including by reference therein to the Offering Memorandum). This is the letter agreement referred to in Section 5(q) of the Purchase Agreement. The parties hereto agree that this Letter Agreement is being executed and delivered in connection with the issue and sale of the Securities pursuant to the Purchase Agreement and to induce the Initial Purchasers to purchase the Securities thereunder. Neenah (as the Company's successor after the Merger) and each of the Guarantors hereby confirm their agreement with you as follows: SECTION 1. In accordance with Section 5(q) of the Purchase Agreement, Neenah and each of the Guarantors by their respective signatures below each becomes a party to the Purchase Agreement on the same terms and with the same ongoing obligations and rights as the Company thereunder with the same force and effect as if originally named therein as a party and Neenah and each of the Guarantors jointly and severally agrees to all the terms and provisions of the Purchase Agreement applicable to the Company thereunder including, but not limited to, under Sections 8, 9, 10 and 12 thereof. SECTION 2. Neenah and each of the Guarantors hereby represents and warrants to, and agrees with, each of you as of the date hereof that: 47 47 (a) each of them has full right, power and authority to execute and deliver this Letter Agreement and perform its obligations hereunder and all corporate action required to be taken by each of them for the due and proper authorization, execution, delivery and performance of this Letter Agreement and the consummation of the transactions contemplated hereby has been duly and validly taken and this Letter Agreement has been duly authorized and validly executed and delivered by each of them and is the valid and legally binding agreement of each of them enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and except as rights to indemnity and contribution may be limited under applicable law; (b) each of them has full right, power and authority to execute and deliver the Supplemental Indenture and perform its obligations thereunder and all corporate action required to be taken by each of them for the due and proper authorization, execution, delivery and performance of the Supplemental Indenture and the consummation of the transactions contemplated thereby have been duly and validly taken; the Supplemental Indenture has been duly authorized by each of them, and, when duly executed and delivered in accordance with its terms by each party thereto, the Supplemental Indenture will constitute the valid and legally binding agreement of Neenah, as primary obligor, and of each of the Guarantors, as note guarantors, and will be enforceable against Neenah and each of the Guarantors in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); and (c) the representations, warranties and agreements set forth in Section 1 of the Purchase Agreement are true and accurate on the date hereof as if made on such date by Neenah and each of the Guarantors, and each reference therein to the knowledge of the Company shall be deemed to be a reference to the knowledge of Neenah and each of the Guarantors. SECTION 3. THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 4. This Letter Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 48 48 SECTION 5. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Letter Agreement. If the foregoing is in accordance with your understanding of the agreement among the parties hereto, kindly indicate your acceptance in the space provided for that purpose below. Very truly yours, NEENAH CORPORATION, By ---------------------- Name: Title: NEENAH FOUNDRY COMPANY, By ---------------------- Name: Title: HARTLEY CONTROLS CORPORATION, By ---------------------- Name: Title: NEENAH TRANSPORT, INC., By ---------------------- Name: Title: 49 49 CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED By CHASE SECURITIES INC., By _________________ Name: Title: EX-4.3 8 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.3 EXECUTION COPY NEENAH CORPORATION $150,000,000 11-1/8 % Senior Subordinated Notes due 2007 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT April 30, 1997 CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: NC Merger Company, a Wisconsin corporation (" NC Merger"), proposes to issue and sell to you (the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated April 23, 1997 (the "Purchase Agreement"), $150,000,000 aggregate principal amount of its 11-1/8 % Senior Subordinated Notes due 2007 (the "Notes"). The Notes will be issued pursuant to an Indenture to be dated as of April 30, 1997 (the "Indenture") between NC Merger and United States Trust Company of New York, as Trustee (the "Trustee"). Immediately following the consummation of the sale of the Notes under the Purchase Agreement and pursuant to the Agreement and Plan of Reorganization dated November 20, 1996, as amended, among NFC Castings, Inc., a Delaware corporation, NC Merger and Neenah Corporation, a Wisconsin corporation (the "Company"), NC Merger will merge (the "Merger") with and into the Company, with the Company being the surviving corporation. Upon consummation of the Merger, the Company will assume, by supplemental indenture, all of the obligations of NC Merger under the Indenture and the Notes. The Company will become the primary obligor on the Notes and the Notes will be fully guaranteed (the "Guarantees", and collectively with the Notes, the "Securities") on an unsecured senior subordinated basis as to payment, premium, if any, and interest by the Company's principal operating subsidiaries, Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. (the "Guarantors"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. 2 2 Pursuant to the Purchase Agreement, substantially simultaneously with (i) the sale of the Notes to the Initial Purchasers and (ii) the Merger, the Company and the Guarantors are required to enter into an exchange and registration rights agreement in the form hereof. Accordingly, the Company and the Guarantors hereby agree with you, for the benefit of the holders of the Securities (including the Initial Purchasers) (the "Holders"), as follows: 1. Registered Exchange Offer. The Company and the Guarantors shall (i) prepare and, not later than 45 days following the date of original issuance of the Securities (the "Issue Date"), file with the Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders (the "Registered Exchange Offer") to issue and deliver to such Holders, in exchange for the Securities, a like aggregate principal amount of debt securities of the Company (the "Exchange Securities") identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use their reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 105 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 135 days after the Issue Date, and (iii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date that notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture or an indenture (the "Exchange Securities Indenture") between the Company, the Guarantors and the Trustee or such other bank or trust company reasonably satisfactory to you, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture except for the transfer restrictions relating to the Securities (as described above). Upon the effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder to elect to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company, a Guarantor or an Exchanging Dealer (as defined below) not complying with the requirements of the next sentence, (b) acquires the Exchange Securities in the ordinary course of such Holder's business and (c) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, 3 3 (i) each Holder which is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if either Initial Purchaser elects to sell Exchange Securities acquired in exchange for Securities constituting any unsold portion of the original offering, it is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act and the Exchange Act ("Regulation S-K"), as applicable, in connection with such a sale. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 20 business days after the date that notice of the Registered Exchange Offer is mailed to the Holders (or longer if required by applicable law); (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; and (d) otherwise comply in all respects with all laws applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (a) accept for exchange all Securities validly tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (b) deliver to the Trustee for cancellation all Securities so accepted for exchange; and (c) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder of Securities, 4 4 Exchange Securities equal in principal amount to the Securities of such Holder so accepted for exchange. The Company shall make available, for a period of 180 days after the consummation of the Registered Exchange Offer, a copy of the prospectus forming part of the Exchange Offer Registration Statement to any broker-dealer for use in connection with any resale of any Exchange Securities. Interest on each Exchange Security issued pursuant to the Registered Exchange Offer will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or any of the Guarantors, or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Company and the Guarantors will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include, as of the consummation of the Registered Exchange Offer, an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations of the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason the Registered Exchange Offer is not consummated within 135 days after the Issue Date, or (iii) either of the Initial Purchasers so request with respect to Securities not 5 5 eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by such Initial Purchaser following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: (a) The Company and the Guarantors shall use their reasonable best efforts to file as promptly as practicable with the Commission, and thereafter shall use their reasonable best efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company and the Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders for a period of two years from the Issue Date or such shorter period that will terminate when all the Securities and Exchange Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company and the Guarantors shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if any one of them voluntarily takes any action that would result in Holders of Securities or Exchange Securities covered thereby not being able to offer and sell such Securities or Exchange Securities during that period, unless such action is required by applicable law (c) Notwithstanding any other provisions hereof, the Company and the Guarantors will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement 6 6 to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. Liquidated Damages. (a) The parties hereto agree that the Holders of Securities will suffer damages if the Company and the Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the applicable Registration Statement is not filed with the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective within 105 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation), (iii) the Registered Exchange Offer is not consummated on or prior to 135 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation) but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors will be obligated to pay liquidated damages to each holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. As used herein, the term "Transfer Restricted Securities" means each Security or Exchange Security until (i) the date on which such Security or Exchange Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) the date on which such Security or Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Security or Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company and the Guarantors shall not be required to pay liquidated damages to the holder of Transfer 7 7 Restricted Securities if such holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company and the Guarantors shall pay the liquidated damages due on the Transfer Restricted Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the liquidated damages then due. The liquidated damages due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay liquidated damages shall be deemed to accrue from and including the date of the applicable Registration Default. (c) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to you, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that either Initial Purchaser (with respect to any portion unsold from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration, shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably (as determined by the Company) may propose; (ii) if applicable, include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by either Initial Purchaser, include 8 8 the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise you and the Holders (if applicable) and, if requested by you or any such Holder, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities or the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Guarantors will make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. (d) The Company will furnish to each holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). 9 9 (e) The Company will, during the Shelf Registration Period, promptly deliver to each holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Exchanging Dealer and to each Initial Purchaser, as applicable, which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if the Exchanging Dealer or the Initial Purchaser, as applicable, so requests in writing, all exhibits (including those incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Exchanging Dealer and to each Initial Purchaser, as applicable, without charge, as many copies of the prospectus included within the coverage of the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Exchanging Dealer or such Initial Purchaser, as applicable, may reasonably request for delivery by (i) such Exchanging Dealer in connection with a sale of Exchange Securities received by it pursuant to the Registered Exchange Offer or (ii) such Initial Purchaser in connection with a sale of Exchange Securities received by it in exchange for Securities constituting any unsold portion of the original offering; and the Company consents to the use of such prospectus or any amendment or supplement thereto by any such Exchanging Dealer or by such Initial Purchaser, as applicable, as aforesaid. (h) Prior to any public offering of Securities or Exchange Securities pursuant to any Registration Statement, the Company and the Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities or Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities or Exchange Securities covered by such Registration Statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any 10 10 action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company and the Guarantors will cooperate with the Holders of Securities or Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities or Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing prior to sales of Securities or Exchange Securities pursuant to such Registration Statement. (j) If any event contemplated by paragraphs (b)(ii) through (v) above occurs during the period for which the Company is required to maintain an effective Registration Statement, the Company and the Guarantors will promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities or purchasers of Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities or Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Securities or Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company and the Guarantors will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earnings statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company and the Guarantors will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. 11 11 (n) The Company may require each holder of Transfer Restricted Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice of the Company pursuant to Section 4(b)(ii) through (v) hereof, such holder will discontinue disposition of such Transfer Restricted Securities until such holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) hereof or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Company and the Guarantors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities pursuant to such Shelf Registration Statement. (q) In the case of a Shelf Registration Statement, each of the Company and the Guarantors shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined in Section 5 below) acting for, Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold and any underwriter participating in any disposition of Securities or Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and and the Guarantors and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, 12 12 Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company and the Guarantors shall, if requested by Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use their reasonable best efforts to cause (i) their counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities or Exchange Securities, as applicable, in customary form, (ii) their officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) and (iii) their independent public accountants to provide a comfort letter in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Company and the Guarantors will bear all expenses incurred in connection with the performance of their obligations under Sections 1, 2, 3 and 4 and the Company and the Guarantors will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities and the Exchange Securities to be sold pursuant to each Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. 6. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Exchanging Dealer or an Initial Purchaser, as applicable, the Company and the Guarantors shall jointly and severally indemnify and hold harmless each Holder, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities or Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state 13 13 therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities or Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) to the extent required by applicable law, a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities or Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g). (b) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, the Guarantors, their affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company or the Guarantors within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or 14 14 defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Securities or Exchange Securities pursuant to such Shelf Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more 15 15 than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party(which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 7. Contribution. If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, in such proportion as shall be appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other with respect to the actions, statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, has been taken or made by, or relates to information supplied by, such indemnifying party or indemnified party, and the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a holder of Transfer Restricted Securities or Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the 16 16 Transfer Restricted Securities or Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Rules 144 and 144A. The Company and the Guarantors shall use their reasonable best efforts to file the reports required to be filed by them under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company or the Guarantors are not required to file such reports, they will, upon the written request of any holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company and the Guarantors covenant that they will take such further action as any holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 9. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, lock-up letters, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the 17 17 Securities and the Exchange Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of the Holders of Securities or Exchange Securities whose Securities or Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold by such Holders pursuant to such Registration Statement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to each Initial Purchaser; (2) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; and (3) if to the Company or a Guarantor, initially at the address of the Company set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) 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. (e) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the 18 18 Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (h) Remedies. In the event of a breach by the Company or the Guarantors, or by any holder of Transfer Restricted Securities, of any of their obligations under this Agreement, each holder of Transfer Restricted Securities or the Company and each Guarantor, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or any of the Guarantors of any of their obligations under Sections 1 or 2 hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, the Guarantors and each holder of Transfer Restricted Securities agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. The Company and each of the Guarantors represents, warrants and agrees that (i) it has not entered into and shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities. 19 19 (k) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. Please confirm that the foregoing correctly sets forth the agreement among the Company and you. Very truly yours, NEENAH CORPORATION By ------------------------------ Name: Title: NEENAH FOUNDRY COMPANY By ------------------------------ Name: Title: 20 20 HARTLEY CONTROLS CORPORATION By ------------------------------ Name: Title: NEENAH TRANSPORT, INC. By ------------------------------ Name: Title: Accepted: CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED By Chase Securities Inc. By ---------------------------- Authorized Signatory 21 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company and the Guarantors have agreed that, for a period of 180 days after the Expiration Date (as defined herein) they will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 22 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution." 23 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company and the Guarantors have agreed that, for a period of 180 days after the Expiration Date, they will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until _______________, 1997, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.(1) Neither the Company nor the Guarantors will receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company and the Guarantors will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company and the Guarantors have agreed to pay all expenses - ---------- (1) In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Registered Exchange Offer prospectus. 24 incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 25 ANNEX D |_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: __________________________________________________ Address: __________________________________________________ __________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-4.4 9 FIRST SUPPLEMENTAL INDENTURE 1 EXHIBIT 4.4 EXECUTION COPY FIRST SUPPLEMENTAL INDENTURE FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April 30, 1997, among NEENAH CORPORATION, a Wisconsin corporation ("Neenah"), NEENAH FOUNDRY COMPANY, NEENAH TRANSPORT, INC. and HARTLEY CONTROLS CORPORATION, each a Wisconsin corporation and a wholly owned subsidiary of Neenah (collectively, the "Initial Guarantors"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS NC Merger, a Delaware corporation (the "Company"), as issuer, has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 30, 1997, providing for the issuance of an aggregate principal amount of $150,000,000 of 11-1/8% Senior Subordinated Notes due 2007 of the Company (the "Securities"); WHEREAS, immediately after the execution of the Indenture and the issuance of the Securities, the Company was merged with and into Neenah in the Neenah Merger, with Neenah as the surviving corporation; WHEREAS, (i) pursuant to the terms of the Neenah Merger, Neenah succeeded to the obligations of the Company under the Indenture and (ii) the Guarantors have agreed to become Guarantor Subsidiaries under the Indenture, and WHEREAS, pursuant to Section 9.01 of the Indenture, the parties hereto are requested to execute and deliver this Supplemental Indenture; 2 2 NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, Neenah, each of the Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplement, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein", "hereof" and "hereby" and other words of similar import used in this Supplement refer to this Supplement as a whole and not to any particular section hereof. 2. Express Assumption of Obligations under the Indenture. Neenah acknowledges and agrees that as a result of its being the surviving corporation in the Merger with NC Merger it has succeeded to all of the obligations and duties of NC Merger under the Securities and the Indenture on the terms and subject to the conditions set forth in the Securities and the Indenture. Neenah agrees to be bound by all provisions of the Securities and the Indenture. 3. Agreement To Guarantee. Each of the Guarantors hereby agrees to, jointly and severally guarantee Neenah's obligations under the Securities on the terms and subject to the conditions set forth in Article XI of the Indenture and to be bound by all other applicable provisions of the Indenture. 4. Ratification of Indenture; Supplemental Indenture, Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and 3 3 confirmed by the parties hereto and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 5. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 6. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 7. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 8. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. 4 4 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. NEENAH CORPORATION, by __________________________________ Name: Title: NEENAH FOUNDRY COMPANY, by __________________________________ Name: Title: NEENAH TRANSPORT, INC., by __________________________________ Name: Title: HARTLEY CONTROLS CORPORATION, by __________________________________ Name: Title: 5 5 UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, by __________________________________ Name: Title: EX-4.5 10 LETTER AGREEMENT DATED APRIL 30, 1997 1 Exhibit 4.5 April 30, 1997 CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED c/o CHASE SECURITIES INC. 270 Park Avenue New York, NY 10017 Dear Sirs: Reference is hereby made to the Purchase Agreement dated April 23, 1997 (the "Purchase Agreement"), between NC Merger Company, a Wisconsin corporation (the "Company"), and you pursuant to which the Company has agreed to issue and sell and you have agreed to purchase the Securities described therein on the terms set forth therein. Capitalized terms used herein but not otherwise defined herein have meanings assigned thereto in the Purchase Agreement (including by reference therein to the Offering Memorandum). This is the letter agreement referred to in Section 5(q) of the Purchase Agreement. The parties hereto agree that this Letter Agreement is being executed and delivered in connection with the issue and sale of the Securities pursuant to the Purchase Agreement and to induce the Initial Purchasers to purchase the Securities thereunder. Neenah (as the Company's successor after the Merger) and each of the Guarantors hereby confirm their agreement with you as follows: SECTION 1. In accordance with Section 5(q) of the Purchase Agreement, Neenah and each of the Guarantors by their respective signatures below each becomes a party to the Purchase Agreement on the same terms and with the same ongoing obligations and rights as the Company thereunder with the same force and effect as if originally named therein as a party and Neenah and each of the Guarantors jointly and severally agrees to all the terms and provisions of the Purchase Agreement applicable to 2 2 the Company thereunder including, but not limited to, under Sections 8, 9, 10 and 12 thereof. SECTION 2. Neenah and each of the Guarantors hereby represents and warrants to, and agrees with, each of you as of the date hereof that: (a) each of them has full right, power and authority to execute and deliver this Letter Agreement and perform its obligations hereunder and all corporate action required to be taken by each of them for the due and proper authorization, execution, delivery and performance of this Letter Agreement and the consummation of the transactions contemplated hereby has been duly and validly taken and this Letter Agreement has been duly authorized and validly executed and delivered by each of them and is the valid and legally binding agreement of each of them enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and except as rights to indemnity and contribution may be limited under applicable law; (b) each of them has full right, power and authority to execute and deliver the Supplemental Indenture and perform its obligations thereunder and all corporate action required to be taken by each of them for the due and proper authorization, execution, delivery and performance of the Supplemental Indenture and the consummation of the transactions contemplated thereby have been duly and validly taken; the Supplemental Indenture has been duly authorized by each of them, and, when duly executed and delivered in accordance with its terms by each party thereto, the Supplemental Indenture will constitute the valid and legally binding agreement of Neenah, as primary obligor, and of each of the Guarantors, as note guarantors, and will be enforceable against Neenah and each of the Guarantors in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); and (c) the representations, warranties and agreements set forth in Section 1 of the Purchase Agreement are true and accurate on the date hereof as if made on such date by Neenah and each of the Guarantors, and each reference therein to the knowledge of the Company shall be deemed to be a reference to the knowledge of Neenah and each of the Guarantors. 3 3 SECTION 3. THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 4. This Letter Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. SECTION 5. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Letter Agreement. If the foregoing is in accordance with your understanding of the agreement among the parties hereto, kindly indicate your acceptance in the space provided for that purpose below. Very truly yours, NEENAH CORPORATION, By ______________________ Name: Title: NEENAH FOUNDRY COMPANY, By ______________________ Name: Title: HARTLEY CONTROLS CORPORATION, By ______________________ Name: Title: NEENAH TRANSPORT, INC., 4 4 By ______________________ Name: Title: CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED By CHASE SECURITIES INC., By ___________________________ Name: Title: EX-4.6 11 FORM OF GLOBAL NOTE 1 EXHIBIT 4.6 [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. [Restricted Securities Legend] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE 2 2 COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATIONS UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PURCHASE PRICE OF $250,000 FOR SUCH SECURITIES FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. NC MERGER COMPANY 3 3 11-1/8% SENIOR SUBORDINATED NOTE DUE 2007 No. # CUSIP No. [ ] $[ ] NC MERGER COMPANY, a Wisconsin corporation, promises to pay to [ ], or registered assigns, the principal sum of $[ ] on May 1, 2007. Interest Payment Dates: May 1 and November 1 Record Dates: April 15 and October 15 Additional provisions of this Security are set forth on the other side of this Security. Dated: April 30, 1997 NC MERGER COMPANY, by ________________________ Name: Title: ________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION 4 4 UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by ________________________________ Authorized Signatory Assumed and Guaranteed pursuant to the First Supplemental Indenture NEENAH CORPORATION, by ______________________________ Name: Title: NEENAH FOUNDRY COMPANY, by ______________________________ Name: Title: NEENAH TRANSPORT, INC., 5 5 by ______________________________ Name: Title: HARTLEY CONTROLS CORPORATION, by ______________________________ Name: Title: 6 6 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11-1/8% Senior Subordinated Note due 2007 1. Interest NC Merger Company, a Wisconsin corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company and the Guarantor Subsidiaries will use their best efforts to have the Exchange Offer Registration Statement or, if applicable, the Shelf Registration Statement (each a "Registration Statement") declared effective by the Commission as promptly as practicable after the filing thereof. If (i) the Shelf Registration Statement or Exchange Offer Registration Statement, as applicable under the Exchange and Registration Rights Agreement is not filed with the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 105 days after the Issue Date, (iii) the Exchange Offer is not consummated on or prior to 135 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company will pay liquidated damages to each holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such holder until the applicable Registration Statement is filed 7 7 or declared effective, the Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such liquidated damages. For purposes of the foregoing, "Transfer Restricted Securities" means each Initial Security until (i) the date on which such Initial Security has been exchanged for a freely transferable Exchange Security in the Exchange Offer, (ii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Initial Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. The Company will pay interest and liquidated damages, if any, semiannually on May 1 and November 1 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 30, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment The Company will pay interest (except defaulted interest) on and liquidated damages, if any, in respect of the Securities to the Persons who are registered holders of Securities at the close of business on the April 15 or 8 8 October 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money or by wire transfer of federal funds. 9 9 3. Paying Agent and Registrar Initially, UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to the Holders. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture and First Supplemental Indenture The Company issued the Securities under an Indenture dated as of April 30, 1997 ("Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. Pursuant to the First Supplemental Indenture dated as of April 30, 1997, among Neenah Corporation, the Initial Guarantors and the Trustee, Neenah Corporation assumed the Company's obligations under the Indenture and the Securities and each of the Initial Guarantors agreed to guarantee those obligations under the Indenture and the Securities. The Securities are unsecured senior subordinated obligations of the Company limited to $150,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities 10 10 pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; Sale/Leaseback Transactions and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture (as supplemented by the First Supplemental Indenture), the Initial Guarantors have guaranteed the Company's obligations under the Indenture on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, 11 11 to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below:
Redemption Period Price - ------ ---------- 2002.................................... 105.5625% 2003.................................... 103.7083% 2004.................................... 101.8542% 2005 and thereafter..................... 100.0000%
Notwithstanding the foregoing, at any time prior to May 1, 2000, the Company may redeem in the aggregate up to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company at a redemption price (expressed as a percentage of principal amount) of 111.125% plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 60% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at the option of the Company within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. 12 12 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be 13 13 paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Guarantor Subsidiary, as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written 14 14 request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount then outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to release Guarantor Subsidiaries when permitted by the Indenture, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any other change that does not adversely affect the rights of any 15 15 Securityholder, or to provide for the issuance and authorization of the Exchange Securities. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by Article X), Securities when required; (iii) failure by the Company or any Guarantor Subsidiary to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000 or its foreign currency equivalent; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and its Restricted Subsidiaries; (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $5,000,000 or its foreign currency equivalent against the Company or a Restricted Subsidiary; and (vii) a Subsidiary Guaranty ceasing to be in full force and effect (other than in accordance with its terms) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Subsidiary Guaranty and such Default continues for 10 days. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. 16 16 Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may with hold from Securityholders notice of any continuing Default (except a Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may other wise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Guarantor Subsidiary shall not have any liability for any obligations of the Company or a Guarantor Subsidiary under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law 17 17 THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TENENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 18 18 THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: NC MERGER COMPANY 2121 BROOKS AVENUE NEENAH, WI 54957 ATTENTION OF CHIEF FINANCIAL OFFICER 19 19 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: _____________________ Your Signature: ____________________________________ Signature Guarantee:____________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 20 20 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_________ principal amount of Securities held in (check applicable space) ____ book-entry or _____ definitive form by the undersigned. The undersigned (check one box below): [ ] has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depository a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); [ ] has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such 21 21 Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW: (1) [ ] to the Company; or (2) [ ] pursuant to an effective registration statement under the Securities Act of 1933; or (3) [ ] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) [ ] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) [ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. 22 22 Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ____________________________ Signature Signature Guarantee: ______________________________________ ____________________________ Signature must be guaranteed Signature ________________________________________________________________________________ TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has 23 23 determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer 24 24 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made: Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized officer Amount of this Amount of this Security following of Trustee or Global Security Global Security such decrease or Securities increase) Custodian
25 25 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: ________________________ Your Signature: _________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:____________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) 26 EXHIBIT B [FORM OF FACE OF EXCHANGE SECURITY] [Global Securities Legend] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 2/ NEENAH CORPORATION 11-1/8% SERIES B SENIOR SUBORDINATED NOTE DUE 2007 No. Cusip No. [ ] $[ ] NEENAH CORPORATION, a Wisconsin corporation, promises to pay to [ ], or registered assigns, the principal sum of $ on May 1, 2007. Interest Payment Dates: May 1 and November Record Dates: April 15 and October 15 - ---------- 2 This paragraph should only be added if the Security is issued in global form. 27 2 Additional provisions of this Security are set forth on the other side of this Security. Dated: NEENAH CORPORATION, by __________________________ Name: Title: __________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by _____________________________ Authorized Signatory 28 3 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 11-1/8% Series B Senior Subordinated Note due 2007 1. Interest NEENAH CORPORATION, a Wisconsin corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest and liquidated damages, if any, semiannually on May 1 and November 1 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 30, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 15 or October 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money or by wire transfer of federal funds. 29 4 3. Paying Agent and Registrar Initially, UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to the Holders. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture; First Supplemental Indenture NC Merger Company, a Wisconsin corporation ("NC Merger"), issued the Securities under an Indenture dated as of April 30, 1997 ("Indenture"), among NC Merger and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. Pursuant to the First Supplemental Indenture dated as of April 30, 1997, among the Company, the Initial Guarantors and the Trustee, the Company assumed NC Merger's obligations under the Indenture and the Securities and each of the Initial Guarantors agreed to guarantee those obligations under the Indenture and the Securities. The Securities are unsecured senior subordinated obligations of the Company limited to $150,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. 30 5 The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; Sale/Leaseback Transactions and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Guarantor Subsidiaries have guaranteed the Company's obligations under the Indenture on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date 31 6 (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below:
Redemption Period Price - ------ ---------- 2002........................................ 105.5625% 2003........................................ 103.7083% 2004........................................ 101.8542% 2005 and thereafter......................... 100.0000%
Notwithstanding the foregoing, at any time on or prior to May 1, 2000, the Company may redeem in the aggregate up to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings at a redemption price (expressed as a percentage of principal amount thereof) of 111.125% plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption); provided, however, that at least 60% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at the option of the Company within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. 32 7 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to purchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness 33 8 of the relevant Guarantor Subsidiary, as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 34 9 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount then outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to release Guarantor Subsidiaries when permitted by the Indenture or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 35 10 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by Article X), Securities when required; (iii) failure by the Company or any Guarantor Subsidiary to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000 or its foreign currency equivalent; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and its Restricted Subsidiaries; and (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $5,000,000 or its foreign currency equivalent against the Company or a Restricted Subsidiary; and (vii) a Subsidiary Guaranty ceasing to be in full force and effect (other than in accordance with its terms) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Subsidiary Guaranty and such Default continues for 10 days. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of 36 11 any continuing Default (except a Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Guarantor Subsidiary shall not have any liability for any obligations of the Company or a Guarantor Subsidiary under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law 37 12 THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TENENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 38 13 The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: NEENAH CORPORATION 2121 Brooks Avenue Neenah, WI 54957 Attention of Chief Financial Officer 39 14 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: _______________________ Your Signature: __________________________________ Signature Guarantee:____________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 40 15 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made: Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized officer Amount of this Amount of this Security following of Trustee or Global Security Global Security such decrease or Securities increase) Custodian
41 16 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: ______________________ Your Signature: ___________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:____________________________________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) 42 EXHIBIT C [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS] Transferee Letter of Representation Neenah Corporation c/o United States Trust Company of New York 114 West 47th Street New York, NY 10036 Dear Ladies and Gentlemen: This certificate is delivered to request a transfer of $ principal amount of the 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") of Neenah Corporation (the "Company"). Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: Name: ___________________________________ Address: ________________________________ Taxpayer ID Number: _____________________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of 43 2 evaluating the merits and risk of our investment in the Securities and invest in or purchase securities similar to the Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor", in each case in a transaction involving a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to 44 3 clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE:___________________ BY____________________________ 45 EXHIBIT D FIRST SUPPLEMENTAL INDENTURE FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April 30, 1997, among NEENAH CORPORATION, a Wisconsin corporation ("Neenah"), NEENAH FOUNDRY COMPANY, NEENAH TRANSPORT, INC. and HARTLEY CONTROLS CORPORATION, each a Wisconsin corporation and a wholly owned subsidiary of Neenah (collectively, the "Initial Guarantors"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS NC Merger Company, a Wisconsin corporation (the "Company"), as issuer, has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 30, 1997, providing for the issuance of an aggregate principal amount of $150,000,000 of 11-1/8% Senior Subordinated Notes due 2007 of the Company (the "Securities"); WHEREAS, immediately after the execution of the Indenture and the issuance of the Securities, the Company was merged with and into Neenah in the Neenah Merger, with Neenah as the surviving corporation; WHEREAS, (i) pursuant to the terms of the Neenah Merger, Neenah succeeded to the obligations of the Company under the Indenture and (ii) the Guarantors have agreed to become Guarantor Subsidiaries under the Indenture; and WHEREAS, pursuant to Section 9.01 of the Indenture, the parties hereto are required to execute and deliver this Supplemental Indenture; 46 2 NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, Neenah, each of the Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein", "hereof" and "hereby" and other words of similar import used in this Supplement refer to this Supplement as a whole and not to any particular section hereof. 2. Express Assumption of Obligations under the Indenture. Neenah acknowledges and agrees that as a result of its being the surviving corporation in the Merger with NC Merger it has succeeded to all of the obligations and duties of NC Merger under the Securities and the Indenture on the terms and subject to the conditions set forth in the Securities and the Indenture. Neenah agrees to be bound by all provisions of the Securities and the Indenture. 3. Agreement To Guarantee. Each of the Guarantors hereby agrees to, jointly and severally guarantee Neenah's obligations under the Securities on the terms and subject to the conditions set forth in Article XI of the Indenture and to be bound by all other applicable provisions of the Indenture. 4. Ratification of Indenture; Supplemental Indenture, Part of Indenture. Except as expressly amended 47 3 hereby, the Indenture is in all respects ratified and confirmed by the parties hereto and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 5. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 6. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 7. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 48 4 8. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. NEENAH CORPORATION, by _________________________________ Name: Title: NEENAH FOUNDRY COMPANY, by _________________________________ Name: Title: NEENAH TRANSPORT, INC., by _________________________________ Name: Title: 49 5 HARTLEY CONTROLS CORPORATION, by _________________________________ Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, by _________________________________ Name: Title: 50 EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of [ ], among [NEW GUARANTOR SUBSIDIARY] (the "New Guarantor Subsidiary"), a subsidiary of NEENAH CORPORATION (or its successor), a Wisconsin corporation (the "Company"), THE COMPANY, on behalf of itself and the Guarantor Subsidiaries (the "Existing Guarantor Subsidiaries") under the Indenture referred to below, and UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking association, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H : WHEREAS NC Merger Company, a Wisconsin corporation ("NC Merger"), has heretofore executed and delivered to the Trustee an Indenture (the "Indenture"), dated as of April 30, 1997, providing for the issuance of an aggregate principal amount of $150,000,000 of 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") and the Company and the Initial Guarantors have executed and delivered the First Supplemental Indenture pursuant to which the Company assumed NC Merger's obligations under the Indenture and the Securities and the Initial Guarantors agreed to guarantee those obligations; WHEREAS Section 4.15 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor Subsidiary to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor Subsidiary shall unconditionally guarantee all 51 2 of the Company's obligations under the Securities pursuant to a Subsidiary Guaranty on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and Existing Guarantor Subsidiaries are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor Subsidiary, the Company, the Existing Guarantor Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplement refer to this Supplement as a whole and not to any particular section hereof. 2. Agreement to Guarantee. The New Guarantor Subsidiary hereby agrees, jointly and severally with all other Guarantor Subsidiaries, to Guarantee the Company's obligations under the Securities on the term and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. 52 3 3. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 5. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 6. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 53 4 7. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW GUARANTOR SUBSIDIARY], by __________________________________ Name: Title: NEENAH CORPORATION, on behalf of itself and the Existing Guarantor Subsidiaries, by __________________________________ Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, by __________________________________ Name: Title: 54 EXHIBIT F [FORM OF CERTIFICATE TO BE DELIVERED UPON TERMINATION OF RESTRICTED PERIOD] On or after June 8, 1997 Neenah Corporation c/o United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] Re: Neenah Corporation (the "Company") 11-1/8% Senior Subordinated Notes due 2007 (the "Initial Securities") and 11-1/8% Series B Senior Subordinated Notes due 2007 (the "Exchange Securities" and, together with the Initial Securities, the "Securities") Ladies and Gentlemen: This letter relates to Securities represented by a temporary global note certificate (the "Temporary Certificate"). Pursuant to Section 2.01 of the Indenture dated as of April 30, 1997 relating to the Securities (the "Indenture"), we hereby certify that (1) we are the beneficial owner of $[ ] principal amount of Initial Securities represented by the Temporary Certificate and (2) we are a person outside the United States to whom the Initial Securities could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as amended. Accordingly, you are hereby requested to issue a Certificated Note representing the undersigned's interest in the principal amount of Initial Securities represented by the Temporary Certificate, all in the manner provided by the Indenture. 55 2 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By:___________________________ Authorized Signature 56 EXHIBIT G [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO RULE 144A] United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] [date] Re: Neenah Corporation (the "Company") 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $_______ aggregate principal amount at maturity of the Securities, we hereby certify that such transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we hereby further certify that the Securities are being transferred to a person that we reasonably believe is purchasing the Securities for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Securities are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter 57 2 or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, ____________________________ [Name of Transferor] By:_________________________ Authorized Signature 58 EXHIBIT H [Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S] [date] United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] Re: Neenah Corporation (the "Company") 11-1/8% Senior Subordinated Notes due 2007 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; 59 2 (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:_______________________ Authorized Signature EX-4.7 12 INDENTURE DATED AS OF JULY 1, 1997 1 EXHIBIT 4.7 EXECUTION COPY NEENAH CORPORATION 11-1/8% Series C Senior Subordinated Notes due 2007 Obligations to be guaranteed by Neenah Transport, Inc. and Hartley Controls Corporation INDENTURE Dated as of July 1, 1997 Trustee, United States Trust Company of New York 2 1 TABLE OF CONTENTS Page ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions ................................................ 1 SECTION 1.02. Other Definitions .......................................... 29 SECTION 1.03. Incorporation by Reference of Trust Indenture Act ............................................ 30 SECTION 1.04. Rules of Construction ...................................... 30 ARTICLE II The Securities SECTION 2.01. Form and Dating ............................................ 31 SECTION 2.02. Execution and Authentication ............................... 32 SECTION 2.03. Registrar and Paying Agent ................................. 33 SECTION 2.04. Paying Agent To Hold Money in Trust ........................ 34 SECTION 2.05. Securityholder Lists ....................................... 35 SECTION 2.06. Transfer and Exchange ...................................... 35 SECTION 2.07. Replacement Securities ..................................... 36 SECTION 2.08. Outstanding Securities ..................................... 37 SECTION 2.09. Temporary Securities ....................................... 37 SECTION 2.10. Cancellation ............................................... 38 SECTION 2.11. Defaulted Interest ......................................... 38 SECTION 2.12. CUSIP Numbers .............................................. 38 SECTION 2.13. Book-Entry Provisions for U.S. Global Security ................................................. 39 SECTION 2.14. Special Transfer Provisions ................................ 40 ARTICLE III Redemption SECTION 3.01. Notices to Trustee ......................................... 46 SECTION 3.02. Selection of Securities to be Redeemed ........................................... 46 SECTION 3.03. Notice of Redemption ....................................... 47 3 2 SECTION 3.04. Effect of Notice of Redemption ............................. 48 SECTION 3.05. Deposit of Redemption Price ................................ 48 SECTION 3.06. Securities Redeemed in Part ................................ 48 SECTION 3.07. Optional Redemption ........................................ 48 ARTICLE IV Covenants SECTION 4.01. Payment of Securities ...................................... 50 SECTION 4.02. SEC Reports ................................................ 50 SECTION 4.03. Limitation on Indebtedness ................................. 50 SECTION 4.04. Limitation on Restricted Payments .......................... 54 SECTION 4.05. Limitation on Restrictions on Distributions from Subsidiaries .......................... 57 SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock ......................................... 60 SECTION 4.07. Limitation on Transactions with Affiliates ............................................... 64 SECTION 4.08. Change of Control .......................................... 65 SECTION 4.09. Compliance Certificate ..................................... 67 SECTION 4.10. Further Instruments and Acts ............................... 67 SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries ............................................. 67 SECTION 4.12. Limitation on Liens ........................................ 67 SECTION 4.13. Limitation on Sale/Leaseback Transactions ............................................. 68 SECTION 4.14. Limitation on Lines of Business ............................ 68 SECTION 4.15. Future Guarantor Subsidiaries .............................. 68 ARTICLE V Successor Company SECTION 5.01. When Company May Merge or Transfer Assets ................................................... 69 ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default .......................................... 70 SECTION 6.02. Acceleration ............................................... 72 SECTION 6.03. Other Remedies ............................................. 73 4 3 SECTION 6.04. Waiver of Past Defaults .................................... 73 SECTION 6.05. Control by Majority ........................................ 73 SECTION 6.06. Limitation on Suits ........................................ 74 SECTION 6.07. Rights of Holders to Receive Payment .......................................... 74 SECTION 6.08. Collection Suit by Trustee ................................. 74 SECTION 6.09. Trustee May File Proofs of Claim ........................... 75 SECTION 6.10. Priorities ................................................. 75 SECTION 6.11. Undertaking for Costs ...................................... 76 SECTION 6.12. Waiver of Stay or Extension Laws ........................... 76 SECTION 6.13. Restoration of Rights and Remedies ......................... 76 ARTICLE VII Trustee SECTION 7.01. Duties of Trustee .......................................... 76 SECTION 7.02. Rights of Trustee .......................................... 78 SECTION 7.03. Individual Rights of Trustee ............................... 79 SECTION 7.04. Trustee's Disclaimer ....................................... 79 SECTION 7.05. Notice of Defaults ......................................... 79 SECTION 7.06. Reports by Trustee to Holders .............................. 79 SECTION 7.07. Compensation and Indemnity ................................. 80 SECTION 7.08. Replacement of Trustee ..................................... 81 SECTION 7.09. Successor Trustee by Merger ................................ 82 SECTION 7.10. Eligibility; Disqualification .............................. 82 SECTION 7.11. Preferential Collection of Claims Against Company .......................................... 82 ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance ............................................... 83 SECTION 8.02. Conditions to Defeasance ................................... 84 SECTION 8.03. Application of Trust Money ................................. 85 SECTION 8.04. Repayment to Company ....................................... 86 SECTION 8.05. Indemnity for Government Obligations .............................................. 86 SECTION 8.06. Reinstatement .............................................. 86 SECTION 8.07. Concurrent Defeasance of Securities and Original Securities .................................. 86 5 4 ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders ................................. 87 SECTION 9.02. With Consent of Holders .................................... 87 SECTION 9.03. Compliance with Trust Indenture Act ........................ 89 SECTION 9.04. Revocation and Effect of Consents and Waivers .................................................. 89 SECTION 9.05. Notation on or Exchange of Securities ............................................ 90 SECTION 9.06. Trustee to Sign Amendments ................................. 90 SECTION 9.07. Payment for Consent ........................................ 90 ARTICLE X Subordination of the Securities SECTION 10.01. Agreement to Subordinate .................................. 90 SECTION 10.02. Liquidation, Dissolution, Bankruptcy ...................... 91 SECTION 10.03. Default on Senior Indebtedness of the Company ............................................. 91 SECTION 10.04. Acceleration of Payment of Securities ..................... 92 SECTION 10.05. When Distribution Must Be Paid Over ....................... 93 SECTION 10.06. Subrogation ............................................... 93 SECTION 10.07. Relative Rights ........................................... 93 SECTION 10.08. Subordination May Not Be Impaired by Company ................................................. 93 SECTION 10.09. Rights of Trustee and Paying Agent ........................ 94 SECTION 10.10. Distribution or Notice to Representative .................. 94 SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To Accelerate ..................................... 94 SECTION 10.12. Trust Moneys Not Subordinated ............................. 94 SECTION 10.13. Trustee Entitled to Rely .................................. 95 SECTION 10.14. Trustee to Effectuate Subordination ....................... 95 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company ...................... 96 SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination Provisions ................................ 96 SECTION 10.17. Trustee's Compensation Not Prejudiced ..................... 96 6 5 ARTICLE XI Subsidiary Guaranties SECTION 11.01. Subsidiary Guaranties .................................... 96 SECTION 11.02. Limitation on Liability .................................. 98 SECTION 11.03. Successors and Assigns ................................... 99 SECTION 11.04. No Waiver ................................................ 99 SECTION 11.05. Modification ............................................. 99 SECTION 11.06. Execution of Supplemental Indenture for Future Guarantor Subsidiaries ...................... 100 ARTICLE XII Subordination of the Subsidiary Guaranties SECTION 12.01. Agreement to Subordinate ................................. 100 SECTION 12.02. Liquidation, Dissolution, Bankruptcy ..................... 100 SECTION 12.03. Default on Senior Indebtedness of a Guarantor Subsidiary ................................... 101 SECTION 12.04. Demand for Payment ....................................... 102 SECTION 12.05. When Distribution Must Be Paid Over ...................... 102 SECTION 12.06. Subrogation .............................................. 103 SECTION 12.07. Relative Rights .......................................... 103 SECTION 12.08. Subordination May Not Be Impaired by a Guarantor Subsidiary ................................... 103 SECTION 12.09. Rights of Trustee and Paying Agent ....................... 103 SECTION 12.10. Distribution or Notice to Representative ................. 104 SECTION 12.11. Article XII Not To Prevent Events of Default or Limit Right To Accelerate .................................... 104 SECTION 12.12. Trustee Entitled to Rely ................................. 104 SECTION 12.13. Trustee to Effectuate Subordination ...................... 105 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of a Guarantor Subsidiary ............................................. 105 SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Guarantor Subsidiary on Subordination Provisions ............................ 105 7 6 ARTICLE XIII Miscellaneous SECTION 13.01. Trust Indenture Act Controls ............................. 106 SECTION 13.02. Notices .................................................. 106 SECTION 13.03. Communication by Holders with Other Holders ................................................ 107 SECTION 13.04. Certificate of Opinion as to Conditions Precedent .............................................. 107 SECTION 13.05. Statements Required in Certificate or Opinion ................................................ 107 SECTION 13.06. When Securities Disregarded .............................. 108 SECTION 13.07. Rules by Trustee, Paying Agent and Registrar .............................................. 108 SECTION 13.08. Legal Holidays ........................................... 108 SECTION 13.09. Governing Law ............................................ 108 SECTION 13.10. No Recourse Against Others ............................... 108 SECTION 13.11. Successors ............................................... 109 SECTION 13.12. Multiple Originals ....................................... 109 SECTION 13.13. Table of Contents; Headings .............................. 109 Exhibit A - Form of Face of Initial Security Exhibit B - Form of Face of Exchange Security Exhibit C - Form of Transferee Letter of Representation Exhibit D - Form of Supplemental Indenture Exhibit E - Form of Certificate to be Delivered upon Termination of Restricted Period Exhibit F - Form of Certificate to be Delivered in Connection with Transfers to Non-QIB Institutional Accredited Investors Exhibit G - Form of Certificate to be Delivered in Connection with Transfers pursuant to Regulation S 8 7 CROSS-REFERENCE ABLE TIA Indenture Section Section - ------- ------- 310(a)(1) ..................................................... 7.10 (a)(2) ..................................................... 7.10 (a)(3) ..................................................... N.A. (a)(4) ..................................................... N.A. (b) ........................................................ 7.08; 7.10 (c) ........................................................ N.A. 311(a) ........................................................ 7.11 (b) ........................................................ 7.11 (c) ........................................................ N.A. 312(a) ........................................................ 2.05 (b) ........................................................ 11.03 (c) ........................................................ 11.03 313(a) ........................................................ 7.06 (b)(1) ..................................................... N.A. (b)(2) ..................................................... 7.06 (c) ........................................................ 11.02 (d) ........................................................ 7.06 314(a) ........................................................ 4.02; 4.09; 11.02 (b) ........................................................ N.A. (c)(1) ..................................................... 11.04 (c)(2) ..................................................... 11.04 (c)(3) ..................................................... N.A. (d) ........................................................ N.A. (e) ........................................................ 13.05 (f) ........................................................ 4.12 315(a) ........................................................ 7.01 (b) ........................................................ 7.05; 11.02 (c) ........................................................ 7.01 (d) ........................................................ 7.01 (e) ........................................................ 6.11 316(a)(last sentence) ..................................................... 13.06 (a)(1)(A) .................................................. 6.05 (a)(1)(B) .................................................. 6.04 (a)(2) ..................................................... N.A. (b) ........................................................ 6.07 317(a)(1) ..................................................... 6.08 (a)(2) ..................................................... 6.09 (b) ........................................................ 2.04 318(a) ........................................................ 11.01 N.A. means Not Applicable. - --------------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture. CONFORMED COPY 9 INDENTURE dated as of July 1, 1997, among NEENAH CORPORATION, a Wisconsin corporation (the "Company") Neenah Transport, Inc. and Hartley Controls Corporation each a Wisconsin Corporation (the "Initial Guarantors"), and United States Trust Company of New York, a New York banking corporation (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 11-1/8% Series C Senior Subordinated Notes due 2007 (the "Initial Securities") and, when and if issued pursuant to a registered exchange for Initial Securities, the Company's 11-1/8% Series D Senior Subordinated Notes due 2007 (the "Exchange Securities"). ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions. "ACP Holdings" means ACP Holding Company, a Delaware corporation. "ACP Products, L.L.C." means ACP Products, L.L.C., a Delaware limited liability company. "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock), including improvements to existing assets, to be used by the Company or a Restricted Subsidiary in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that, in the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this 10 2 definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Section 4.07 only, "Affiliate" shall also mean any beneficial owner of shares representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Applicable Premium" means, with respect to a Security, the greater of (i) 1.0% of the then outstanding principal amount of such Security and (ii) the excess of (A) the present value of all remaining required interest and principal payments due on such Security, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (B) the then outstanding principal amount of such Security. "Asset Disposition" means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Restricted Subsidiaries (including any disposition by means of a merger, consolidation or similar transaction) other than: (i) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; (ii) a disposition of inventory, in the ordinary course of business consistent with past practices of the Company and its Subsidiaries and (iii) dispositions with a fair market value of less than $500,000 in the aggregate in any fiscal year; (iv) a disposition of properties and assets that is governed by the provisions of Section 5.01(i)-(v); and (v) for purposes of Section 4.06 only, a disposition subject to Section 4.04. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate assumed in making calculations in accordance with FAS 13) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). 11 3 "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Senior Bank Facilities or any refinancing or replacements thereof including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Borrowing Base" means, as of the date of determination, an amount equal to the sum, without duplication, of (i) 80% of the net book value of the Company's accounts receivable at such date and (ii) 50% of the net book value of the Company's inventories at such date. Net book value shall be determined in accordance with GAAP and shall be that reflected on the most recent available balance sheet (it being understood that the accounts receivable and inventories of an acquired business may be included if such acquisition has been completed on or prior to the date of determination). "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted 12 4 for as a capitalized lease for financial reporting purposes in accordance with GAAP. The amount of Indebtedness represented by a Capitalized Lease Obligation shall be the capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last scheduled payment of rent or any other amount due under the relevant lease. "Change of Control" means the occurrence of any of the following events: (a) prior to the earlier to occur of the first public offering of Voting Stock of ACP Holdings, the Company or Holdings, the Permitted Holders cease to be entitled (by "beneficial ownership" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of Voting Stock, contract or otherwise) to elect or cause the election of directors of the Company having a majority of the total voting power of the Board of Directors of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (a), the Permitted Holders shall be deemed to beneficially own any Voting Stock of a corporation (the "specified corporation") held by any other corporation (the "parent corporation") so long as one or more of the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent corporation); (b) after the first public offering of Voting Stock of ACP Holdings, the Company or Holdings, any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Permitted Holders, is or becomes the beneficial owner (as defined in clause (a) above), directly or indirectly, of Voting Stock that represents more than 40% of the aggregate ordinary voting power of all classes of the Voting Stock of ACP Holdings, the Company or Holdings, voting together as a single class, and either (x) the Permitted Holders beneficially own (as defined in clause (a) above), directly or indirectly, in the aggregate Voting Stock that represents a lesser percentage of the aggregate ordinary voting power of all classes of the Voting Stock of ACP Holdings, the Company or Holdings, as the case may be, voting together as a single class, than 13 5 such other person or group and are not entitled (by voting power, contract or otherwise) to elect directors of ACP Holdings, the Company or Holdings having a majority of the total voting power of the board of directors of ACP Holdings, Holdings or the Company, as the case may be, or (y) such other person or group is entitled to elect directors of ACP Holdings, the Company or Holdings having a majority of the total voting power of the board of directors of ACP Holding, Holdings or the Company; (c) after the first public offering of Voting Stock of ACP Holdings, Holdings or the Company, during any period of not greater than two consecutive years beginning after the Issue Date, individuals who at the beginning of such period constituted the board of directors of ACP Holdings, Holdings or the Company, as the case may be (together with any new directors whose election by such board of directors or whose nomination for election by shareholders was approved by the Permitted Holders or by such board of directors, in each case by a vote of a majority of the directors of ACP Holdings, the Company or Holdings, as the case may be, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to have a majority of the total voting power of the board of directors of ACP Holdings, Holdings or the Company, as the case may be; or (d) any sale, lease, or other transfer (in one transaction or in a series of related transactions) is made by the Company or its Restricted Subsidiaries of all or substantially all of the consolidated assets of the Company and its Restricted Subsidiaries to any Person. "Citicorp" means Citicorp, a Delaware corporation. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Agreement" means one or more of the following agreements entered into by a Person and one or more financial institutions: commodity future contracts, forward contracts, options or other similar arrangements or agreements designed to protect against fluctuations in the price of, or the shortage of supply of, commodities from time to time. 14 6 "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination (determined, for the four fiscal quarters ending prior to the Original Issue Date, or any thereof, on a pro forma basis to give effect to the Neenah Merger as if it had occurred at the beginning of such period) to (ii) Consolidated Interest Expense for such four fiscal quarters (determined, for the four fiscal quarters ending prior to the Original Issue Date, or any thereof, on a pro forma basis to give effect to the Neenah Merger as if it had occurred at the beginning of such period); provided, however, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness and the application of the proceeds thereof as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that in the case of Indebtedness to finance seasonal fluctuations in working capital needs Incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four quarter period); (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have disposed of any assets constituting all or substantially all of the assets of an operating unit of a business (a "Disposal"), (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the 15 7 assets which are the subject of such Disposal for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and (y) Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Disposal for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of the assets of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness in connection therewith) as if such Investment or acquisition occurred on the first day of such period; and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Disposal or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Disposal, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the 16 8 amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). If any Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest and is being given pro forma effect, then (i) if any interest had accrued on such Indebtedness prior to the date of determination, the interest expense on such Indebtedness shall be computed by applying a fixed or floating rate of interest as selected by the Company or such Restricted Subsidiary for the interest period immediately preceding such determination or (ii) if no interest accrued on such Indebtedness prior to the date of determination, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company or such Restricted Subsidiary, either a fixed or floating rate. If any Indebtedness which is being given pro forma effect was Incurred under a revolving credit facility that was in effect throughout the applicable period, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period. "Consolidated Interest Expense" means, for any period, the total consolidated interest expense of the Company and its Restricted Subsidiaries for such period, plus, to the extent Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense: (i) interest expense attributable to Capitalized Lease Obligations and Attributable Debt; (ii) amortization of debt discount; (iii) capitalized interest; (iv) noncash interest expense; (v) commissions, discounts and other fees and charges with respect to letters of credit and bankers' acceptance financing; (vi) net costs associated with Interest Rate Agreements; (vii) the interest portion of any deferred payment obligation for goods or services; (viii) interest actually paid by the Company or any Restricted Subsidiary on any Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary; (ix) the cash contributions to any employee 17 9 stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or a Wholly Owned Subsidiary) in connection with Indebtedness Incurred by such plan or trust; and (x) the earned discount or yield with respect to the sale of receivables (without duplication of amounts included in Consolidated Net Income); but in no event shall include (i) amortization of debt issuance costs; (ii) Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries of the Company and Disqualified Stock of the Company held by Persons other than the Company or a Wholly Owned Subsidiary; or (iii) interest Incurred in connection with Investments in discontinued operations. "Consolidated Net Income" means, for any period, the consolidated net income (loss) of the Company and its Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income; (ii) for purposes of Section 4.04(a)(3)(A) only, any net income (loss) of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net 18 10 Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) any extraordinary gain or loss; and (vi) the cumulative effect of a change in accounting principles after the Original Issue Date. Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.04(a)(3)(D). Notwithstanding anything to the contrary in Section 4.04, all amounts paid to Holdings pursuant to Section 4.04(b)(xi)(B) shall be deducted in computing Consolidated Net Income. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and the Restricted Subsidiaries, determined on a Consolidated basis, as of the end of the most recent fiscal quarter of the Company ending at least 45 days prior to the taking of any action for the purpose of which the determination is being made, as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. 19 11 "Consolidated Non-Cash Charges" of any Person means, for any period, the aggregate depreciation, amortization and other non-cash charges of such Person and its Consolidated Subsidiaries for such period, on a Consolidated basis, as determined in accordance with GAAP (excluding any such other non-cash charge which requires an accrual or reserve for cash charges for any future period). "Consolidation" means the consolidation of the accounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" shall not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreement or other similar agreement or arrangement as to which such Person is a party or a beneficiary. "CVC" means Citicorp Venture Capital, Ltd., a New York corporation. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Definitive Securities" means Securities that are in the form of Exhibit A or Exhibit B attached hereto that do not include the information called for by footnote 1 thereof. "Depositary" means, with respect to the Securities issuable or issued in whole or in part in global form, the Person specified in Section 2.03 as the Depositary with respect to the Securities, until a successor shall have been appointed and becomes such pursuant to the applicable provisions of this Indenture, and thereafter, "Depositary" shall mean or include such successor. "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend at least $25,000,000 and is specifically designated by the Company in the instrument evidencing or 20 12 governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock; or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to ninety-one days after the Stated Maturity of the Securities. Disqualified Stock shall not include any Capital Stock that is not otherwise Disqualified Stock if by its terms the holders have the right to require the issuer to repurchase such stock upon a Change of Control (or upon events substantially similar to a Change of Control). "Domestic Subsidiary" means a Subsidiary that is incorporated or organized under the laws of the United States of America, any state thereof or the District of Columbia. "EBITDA" for any period means the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) income tax expense; (ii) Consolidated Interest Expense; and (iii) Consolidated Non-Cash Charges, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income (loss) of such Subsidiary was included in calculating Consolidated Net Income. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement dated as of the Issue Date by and among the Initial Purchaser, the Company and the Initial Guarantors, as such agreement may be amended, modified, or supplemented from time to time in accordance with the terms thereof. "Exchange Offer" shall have the meaning set forth in the Exchange and Registration Rights Agreement. 21 13 "Exchange Offer Registration Statement" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, in statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "Global Security" means a Security that is in the form of Exhibit A or Exhibit B hereto that includes the information called for by footnote 1 thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person through an agreement enforceable by or for the benefit of the holder of such Indebtedness and any such 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 Indebtedness or other obligation of such other Person (whether arising to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, 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. "Guarantor Subsidiary" means any Person that has issued a Subsidiary Guaranty. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Commodity Agreement, Interest Rate Agreement or Currency Agreement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. 22 14 "Holdings" means NFC Castings, Inc., a Delaware corporation, any Person acceding to its ownership, and successors thereto. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary; provided further, however, that in the case of a discount security, the accretion of original issue discount on such security shall not be considered an Incurrence of Indebtedness if (but only if) the Company elects to treat the whole face amount of such security as Incurred at such time (and such Incurrence is then permitted in accordance with the terms of this Indenture). "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (i) the principal of indebtedness of such Person for borrowed money; (ii) the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto) other than letters of credit or similar instruments supporting Trade Payables entered into in the ordinary course of business of such Person to the extent that such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed not later than the third business day following such drawing; (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than twelve months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (v) all Capitalized Lease Obligations and all Attributable Debt of such Person; 23 15 (vi) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by such Person; and (ix) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Indenture as amended or supplemented from time to time. "Initial Purchaser" means Chase Securities Inc. "Interest Rate Agreement" means, with respect to any Person, any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance loan (other than advances or loans to customers or suppliers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the Person making such loan or advance) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, 24 16 Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04 only, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Initial Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Management Investors" means the officers and employees of ACP Products, L.L.C., ACP Holdings, Holdings, the Company or a Subsidiary of the Company who acquire Voting Stock of ACP Products, L.L.C., ACP Holdings, Holdings or the Company on or after the Issue Date. "Moody's" means Moody's Investors Service, Inc., and its successors. "Neenah Merger" means the merger, consummated on April 30, 1997, of NC Merger Company, a Delaware corporation, with and into the Company under the terms of the Agreement and Plan of Reorganization (as amended) by and among Holdings, the Company and NC Merger Company and dated November 20, 1996. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable, or from an escrow account or otherwise, in each case only as and when received, but 25 17 excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of: (i) all legal, title and recording expenses, commissions and other expenses (including fees and expenses of counsel and investment bankers) incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition; (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition; (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition; and (iv) appropriate amounts to be provided by the party or parties making such Asset Disposition as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Disposition. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the proceeds of such issuance or sale in the form of cash, including payments in respect of deferred payment obligations when received in form of, or stock or other assets when disposed for, cash, net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, filing and registration fees, trustee's fees, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers, one of whom shall be the principal executive, financial or accounting officer of the Company. 26 18 "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Original Indenture" means the Indenture, dated as of April 30, 1997, as amended, between the Company and United States Trust Company of New York as trustee, as in effect on the date of this Indenture. "Original Issue Date" means the date of issuance of the Original Securities, April 30, 1997. "Original Securities" means the Company's 11-1/8% Senior Subordinated Notes due 2007 issued under the Original Indenture and any of the Company's Series B 11-1/8% Senior Subordinated Notes exchanged therefor. "Permitted Holders" means (i) CVC and its Affiliates and Permitted Transferees and (ii) the Management Investors and their Permitted Transferees. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (i) the Company; (ii) a Restricted Subsidiary or a Person which shall, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (iii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (iv) Temporary Cash Investments; (v) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms, provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (vi) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vii) loans or advances to employees made in the ordinary course of business and not exceeding $1,000,000 in the aggregate outstanding at any one time; (viii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of 27 19 judgments; (ix) securities received as consideration in sales of assets made in compliance with Section 4.06; (x) other Investments, of any type, provided that the amount of such Investments made after the Original Issue Date in reliance on this clause (x) and outstanding at any time does not exceed 7.5% of Total Assets; or (xi) Guarantees relating to Indebtedness which is permitted to be Incurred under Section 4.03. "Permitted Liens" means with respect to any Person, (a) Liens to secure Indebtedness permitted under the provisions described under clause (b)(i) or (ii) under Section 4.03; (b) pledges or deposits made or other Liens granted by (1) such Person under workmen's compensation laws, unemployment insurance laws or similar legislation, (2) in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or (3) to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business, (c) Liens imposed by law, such as carriers', warehousemen's, mechanics', employees' and other like Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments, awards, decrees or orders of any court or other governmental authority against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review; (d) Liens for property taxes not yet due or payable or subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings; (e) Liens in favor of issuers of surety, performance, judgment, appeal and other like bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; (f) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning provisions, carveouts, conditional waivers or other restrictions as to the use of real properties or minor irregularities of title (and with respect to leasehold interests, mortgages, obligations, Liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property, with or without consent of the lessee) or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which 28 20 were not Incurred in connection with Indebtedness and which do not in the aggregate materially impair the use of such properties in the operation of the business of such Person; (g) Liens existing or provided for under written arrangements existing on the Original Issue Date; (h) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of such Person; (i) Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligations; (j) Liens to secure any refinancing, refunding, replacement, renewal, repayment or extension (or successive refinancings, refundings, replacements, renewals, repayments or extensions) as a whole, or in part, of any Indebtedness secured by any Lien referred to in clause (g), (i), (l), (m) or (n); provided, however, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (g), (i), (l), (m) or (n) at the time the original Lien became a Permitted Lien and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, replacement, renewal, repayment or extension; (k)(i) mortgages, liens, security interests, restrictions or encumbrances that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary or the Company has easement rights or on any real property leased by the Company and subordination or similar agreements relating thereto and (ii) any condemnation or eminent domain proceedings affecting any real property; (l) Liens on property, assets or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created, Incurred or assumed by such Person in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; (m) Liens on property or assets at the time the Company or a Restricted Subsidiary acquired the property or assets, including any acquisition by means of a merger or consolidation with or into the Company or a Restricted Subsidiary; provided, however, that such Liens are not created in connection with, or in contemplation of, such acquisition; provided further, however, that the Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; and 29 21 (n) any Lien on stock or other securities of an Unrestricted Subsidiary that secures Indebtedness of such Unrestricted Subsidiary. "Permitted Transferee" means (a) with respect to CVC (i) Citicorp, any direct or indirect wholly owned subsidiary of Citicorp, and any officer, director or employee of CVC, Citicorp or any wholly owned subsidiary of Citicorp; (ii) any spouse or lineal descendant (including by adoption and stepchildren) of the officers, directors and employees in clause (a)(i) above or (iii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of one or more of the persons described in clause (a)(i) or (ii) above and (b) with respect to any officer or employee of ACP Products, L.L.C., ACP Holdings, Holdings, the Company or a Subsidiary of the Company (i) any spouse or lineal descendant (including by adoption and stepchildren) of such officer or employee and (ii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of such officer or employee, any of the persons described in clause (b)(i) above or any combination thereof. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock," as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security that is due or overdue or is to become due at the relevant time. "Private Placement Legend" means the legend set forth under such caption in the form of Initial Security in Exhibit A hereto. "Public Equity Offering" means an underwritten primary public offering of common stock of ACP Holdings, Company or Holdings (or, for purposes of Section 4.11(d), 30 22 any Restricted Subsidiary) pursuant to an effective registration statement (other than a registration statement on Form S-4, S-8 or any successor or similar forms) under the Securities Act (whether alone or in conjunction with any secondary public offering); provided, however, that if any such offering is an offering of the common stock of ACP Holdings, only the net proceeds thereof that are contributed to the Company shall be taken into consideration for purposes of this definition. "Public Market" means any time after (x) a Public Equity Offering has been consummated and (y) at least 15% of the total issued and outstanding common stock of ACP Holdings, the Company or Holdings (or, for purposes of Section 4.11, any Restricted Subsidiary) has been distributed by means of an effective registration statement under the Securities Act. "Purchase Agreement" means the Purchase Agreement dated June 26, 1997 among the Company and the Initial Purchaser. "Purchase Money Indebtedness" means Indebtedness (i) consisting of the deferred purchase price of an asset or assets (including Capital Stock and the assets of an ongoing business) including additions and improvements, any conditional sale obligation, any obligation under any title retention agreement or any other purchase money obligation or (ii) incurred to finance the acquisition by the Company or a Restricted Subsidiary of an asset or assets (including Capital Stock and the assets of a Related Business), including additions and improvements; provided that in the case of clause (i) the Average Life of such Indebtedness is less than the anticipated useful life of assets having an aggregate fair market value representing more than 50% of the aggregate fair market value of all assets so acquired and that in the case of clauses (i) and (ii) such Indebtedness is incurred within 180 days after the acquisition by the Company or Restricted Subsidiary of such asset or assets, or is in existence with respect to any asset or other property at the time such asset or property is acquired. "Redemption Date" means the date on which the Securities are optionally redeemed pursuant to Section 3.07. "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances" and "refinanced" 31 23 shall have a correlative meaning) any Indebtedness existing on the Original Issue Date or Incurred in compliance with this Indenture and the Original Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in this Indenture and the Original Indenture) and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of that or another Restricted Subsidiary of the Company), including Indebtedness that refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced; (ii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced; (iii) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or, if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or, if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus the amount of any premium reasonably determined by the Company or such Restricted Subsidiary, as applicable, as necessary at the time of such refinancing to accomplish such refinancing or required pursuant to the terms thereof, plus the amount of expenses of the Company or such Restricted Subsidiary, as applicable, Incurred in connection with such refinancing; and (iv) if the Indebtedness being refinanced is subordinated in right of payment to the Securities, such Refinancing Indebtedness is subordinated in right of payment to the Securities to the extent of the Indebtedness being refinanced; provided further, however, that Refinancing Indebtedness shall not include Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "Registered Exchange Offer" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Related Business" means any business of the Company and the Restricted Subsidiaries as conducted on the Original Issue Date and any business related, ancillary or complementary thereto. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc., and its successors. 32 24 "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or such Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" of the Company means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Securities" means, collectively, the Initial Securities and, when and if issued as provided in the Exchange and Registration Rights Agreement, the Exchange Securities. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to the Global Security (as appointed by the Depository), or any successor entity thereto and shall initially be the Trustee. "Senior Bank Facilities" means the credit agreement dated as of the Original Issue Date, as amended, waived or otherwise modified from time to time, among Holdings, the Company, the lenders party thereto from time to time, and The Chase Manhattan Bank, a New York banking corporation, as agent (except to the extent that any such amendment, waiver or other modification thereto would be prohibited by the terms of this Indenture. "Senior Indebtedness" of the Company means all principal of, premium (if any), accrued interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and other amounts owing with respect to all Indebtedness of the Company, and including all Bank Indebtedness, whether outstanding on the Issue Date or thereafter incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is 33 25 outstanding it is expressly provided that such obligations are not superior in right of payment to the Securities; provided, however, that Senior Indebtedness shall not include (1) any obligation of the Company to any Subsidiary, (2) any liability for federal, foreign, state, local or other taxes owed or owing by the Company, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness or obligation of the Company which is subordinate or junior in any respect (other than as a result of the Indebtedness being unsecured) to any other Indebtedness or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock or (6) any Indebtedness Incurred in violation of this Indenture. "Senior Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Senior Subordinated Indebtedness" means the Securities and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Securities and is not subordinated by its terms to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any Guarantor Subsidiary has a correlative meaning. "Shelf Registration Statement" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of clause (w)(1) or (2) of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the purchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" of the Company means any Indebtedness of the Company (whether outstanding on the Original Issue Date or thereafter Incurred) which is 34 26 expressly subordinate in right of payment to the Securities pursuant to a written agreement. "Subordinated Obligation" of any Guarantor Subsidiary shall have a correlative meaning. "Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or members of any other governing body thereof is at the time owned or controlled, directly or indirectly, by (i) such Person or (ii) one or more Subsidiaries of such Person. "Subsidiary Guaranty" means any Guarantee of the Securities which may from time to time be executed and delivered pursuant to the terms of this Indenture. Each such Subsidiary Guaranty shall be in the form prescribed in this Indenture. "Temporary Cash Investments" means any of the following: (i) any investment in direct obligations (x) of the United States of America or any agency thereof or obligations Guaranteed by the United States of America or any agency thereof or (y) of any foreign country recognized by the United States of America rated at least "A" by S&P or "A-1" by Moody's; (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 365 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital and surplus in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above; (iv) investments in commercial paper, maturing not more than 365 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) 35 27 according to Moody's or "A-1" (or higher) according to S&P; (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's; (vi) any money market deposit accounts issued or offered by a domestic commercial bank or a commercial bank organized and located in a country recognized by the United States of America, in each case, having capital and surplus in excess of $250,000,000 (or the foreign currency equivalent thereof), or investments in money market funds complying with the risk limiting conditions of Rule 2a-7 (or any successor rule) of the Commission under the Investment Company Act of 1940, as amended; and (vii) similar investments approved by the Board of Directors in the ordinary course of business. "Total Assets" means, at any date of determination, the total consolidated assets of the Company and its Restricted Subsidiaries, as set forth on the Company's then most recent consolidated balance sheet. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) as in effect on the date of this Indenture. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled by, and published in, the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for redemption of the Securities following a Change of Control (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the then remaining Average Life to Stated Maturity of the Securities; provided, however, that if the Average Life to Stated Maturity of the Securities is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such 36 28 yields are given, except that if the Average Life to Stated Maturity of the Securities is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total Consolidated assets of $1,000 or less or (B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under the Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of Section 4.03 and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of 37 29 America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders) is owned by the Company or another Wholly Owned Subsidiary (including shares held of record by a nominee for the benefit of the Company or another Wholly Owned Subsidiary). 38 30 SECTION 1.02. Other Definitions. Term Defined in ---- Section ------- "Affiliate Transaction"........................................... 4.07 "Bankruptcy Law".................................................. 6.01 "covenant defeasance option"...................................... 8.01(b) "Custodian"....................................................... 6.01 "Event of Default"................................................ 6.01 "IAI"............................................................. 2.01(b) "IAI Global Note"................................................. 2.01(b) "legal defeasance option"......................................... 8.01(b) "Legal Holiday"................................................... 13.08 "Obligations"..................................................... 10.01 "Offer"........................................................... 4.06(b) "Offer Amount".................................................... 4.06(c) "Offer Period".................................................... 4.06(c) "Offshore Securities Exchange Date"............................... 2.01(c) "Paying Agent".................................................... 2.03 "Permanent Offshore Physical Securities".......................... 2.01(c) "Purchase Date"................................................... 4.06(c) "QIB Global Note"................................................. 2.01(b) "QIBs"............................................................ 2.01(b) "Registrar"....................................................... 2.03 "Restricted Payment".............................................. 4.04 "Rule 144A"....................................................... 2.01(b) "Successor Company"............................................... 5.01 "Temporary Offshore Physical Securities".......................... 2.01(c) "U.S. Global Security"............................................ 2.01(b) "U.S. Physical Securities"........................................ 2.01(d) 39 31 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture Securityholder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness of the Company or a Guarantor Subsidiary, as the case may be, merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a 40 32 balance sheet of the issuer dated such date prepared in accordance with GAAP and accretion of principal on such security shall be deemed to be the Incurrence of Indebtedness; and (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater. ARTICLE II The Securities SECTION 2.01. Form and Dating. (a) The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture, and as otherwise provided in this Article II. Any Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B, which is incorporated in and expressly made a part of this Indenture, and as otherwise provided in this Article II. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Guarantor Subsidiary is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A and B are part of the terms of this Indenture. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. (b) The Initial Securities are being offered and sold by the Company pursuant to the Purchase Agreement. Initial Securities offered and sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") and institutional "Accredited Investors" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) ("IAIs"), in each case in accordance with Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be issued on the Issue Date initially in the form of two permanent global Securities (with separate CUSIP numbers) substantially in the form set forth in Exhibit A (each a "U.S. Global Security") deposited with the Trustee, as 41 33 custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. One U.S. Global Security (which may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate) will represent Initial Securities sold to QIBs (the "QIB Global Note"), and the other will represent Initial Securities sold to IAIs (the "IAI Global Note"). The aggregate principal amount of each U.S. Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Transfers of Initial Securities from QIBs to IAIs, and from IAIs to QIBs, will be represented by appropriate increases and decreases to the respective amounts of the appropriate U.S. Global Securities, as more fully provided in Section 2.13. (c) Initial Securities offered and sold in reliance on Regulation S, if any, shall be issued initially in the form of temporary certificated Securities in registered form substantially in the form set forth in Exhibit A (the "Temporary Offshore Physical Securities"). The Temporary Offshore Physical Securities will be registered in the name of, and held by, a temporary certificate holder designated by the Initial Purchaser until the later of the completion of the distribution of the Initial Securities and the termination of the "restricted period" (as defined in Regulation S) with respect to the offer and sale of the Initial Securities (the "Offshore Securities Exchange Date"). The Company shall promptly notify the Trustee in writing of the occurrence of the Offshore Securities Exchange Date and, at any time following the Offshore Securities Exchange Date, upon receipt by the Trustee and the Company of a certificate substantially in the form set forth in Exhibit E, the Company shall execute, and the Trustee shall authenticate and deliver, one or more permanent certificated Securities in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Physical Securities") in exchange for the Temporary Offshore Physical Securities of like tenor and amount. (d) Initial Securities offered and sold other than as described in the preceding two paragraphs, if any, shall be issued in the form of permanent certificated Securities in registered form in substantially the form set forth in Exhibit A (the "U.S. Physical Securities"). 42 34 (e) The Temporary Offshore Physical Securities, Permanent Offshore Physical Securities and U.S. Physical Securities are sometimes collectively herein referred to as the "Physical Securities". SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and deliver (1) Initial Securities for original issue in an aggregate principal amount of $45,000,000 and (2) Exchange Securities for issue only in a Registered Exchange Offer, pursuant to the Exchange and Registration Rights Agreement, for Initial Securities for a like principal amount of Initial Securities exchanged pursuant thereto, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $45,000,000 except as provided in Section 2.07. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Any such appointment shall be evidenced by an instrument signed by an authorized officer of the Trustee, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. 43 35 SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provi- sions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. The Company initially appoints The Depository Trust Company to act as Depositary with respect to the Global Securities. The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided that no such removal shall become effective until (1) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (2) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (1) above. The Registrar or Paying Agent may resign at any time upon written notice; provided, however, that the Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 7.08. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying 44 36 Agent (or if the Company or a Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. Any money deposited with any Paying Agent, or then held by the Company or a Subsidiary in trust for the payment of principal or interest on any Security and remaining unclaimed for two years after such principal and interest has become due and payable shall be paid to the Company at its request, or, if then held by the Company or a Subsidiary, shall be discharged from such trust; and the Securityholders shall thereafter, as unsecured general creditors, look only to the Company for payment thereof, and all liability of the Paying Agent with respect to such money, and all liability of the Company or such Subsidiary as trustee thereof, shall thereupon cease. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(l) of the 45 37 Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Company shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed. Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co registrar shall be affected by notice to the contrary. Any Holder of a U.S. Global Security shall, by acceptance of such Global Note, agree that transfers of beneficial interest in such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security(or its agent), and that ownership of a beneficial interest in such Global Security shall be required to be reflected in a book entry. All Securities issued upon any transfer or exchange pursuant to this Section 2.06 will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i) satisfies the Company or 46 38 the Trustee within a reasonable time after he has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (ii) makes such request to the Company or the Trustee prior to the Security being acquired by a bona fide purchaser and (iii) satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. In the event any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof. Every replacement Security is an additional obligation of the Company. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Securities. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. 47 39 In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or any of its Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows or has reason to know are so owned shall be disregarded. SECTION 2.09. Temporary Securities. Until Definitive Securities and Global Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities and deliver them in exchange for temporary Securities upon surrender of such temporary Securities at the office or agency of the Company, without charge to the Holder. SECTION 2.10. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation unless the Company directs the Trustee to deliver canceled Securities to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. The Trustee shall not authenticate Securities in place of canceled Securities other than pursuant to the terms of this Indenture. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. 48 40 The Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements (if applicable) of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this paragraph, such manner of payment shall be deemed practicable by the Trustee. SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.13. Book-Entry Provisions for U.S. Global Security. (a) Each U.S. Global Security initially shall (i) be registered in the name of the Depositary for such U.S. Global Security or the nominee of such Depositary and (ii) be delivered to the Trustee as custodian for such Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any U.S. Global Security held on their behalf by the Depositary, or the Trustee as its custodian, or under such U.S. Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such U.S. Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of a U.S. Global Security shall be limited to transfers of such U.S. Global Security in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a 49 41 U.S. Global Security may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.14. If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain U.S. Physical Securities in exchange for their beneficial interests in a U.S. Global Security upon written request in accordance with the Depositary's and the Registrar's procedures. In addition, U.S. Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in a U.S. Global Security if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such U.S. Global Security or the Depositary ceases to be a clearing agency registered under the Exchange Act, at a time when the Depositary is required to be so registered in order to act as Depositary, and in each case a successor depositary is not appointed by the Company within 90 days of such notice or, (ii) the Company executes and delivers to the Trustee and Security Registrar an Officers' Certificate stating that such U.S. Global Security shall be so exchangeable or (iii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary. (c) In connection with any transfer of a portion of the beneficial interest in a U.S. Global Security pursuant to subsection (b) of this Section to beneficial owners who are required to hold U.S. Physical Securities, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the beneficial interest in the U.S. Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (d) In connection with the transfer of an entire U.S. Global Security to beneficial owners pursuant to subsection (b) of this Section, such U.S. Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Security, an equal aggregate principal amount of U.S. Physical Securities of authorized denominations. (e) Any U.S. Physical Security delivered in exchange for an interest in a U.S. Global Security pursuant to subsection (c) or subsection (d) of this Section shall, 50 42 except as otherwise provided by paragraph (f) of Section 2.14, bear the applicable legend regarding transfer restrictions applicable to the U.S. Physical Security set forth in Exhibit A. (f) The registered holder of a U.S. Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 2.14. Special Transfer Provisions. Unless and until an Initial Security is transferred or exchanged under an effective registration statement under the Securities Act, the following provisions shall apply: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Security to any IAI which is not a QIB (excluding Non-U.S. Persons) that is consistent with the Private Placement Legend: (i) The Registrar shall register the transfer of any Initial Security if (x) the requested transfer is at least two years after the original issue date of the Initial Security or (y) the proposed transferee has delivered to the Registrar a certificate substantially in the form set forth in Exhibit C. (ii) If the proposed transferee is an Agent Member, and the Initial Security to be transferred consists of U.S. Physical Securities or an interest in the QIB Global Security, upon receipt by the Registrar of (x) the document, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the IAI Global Security in an amount equal to (x) the principal amount of the U.S. Physical Securities to be transferred, and the Trustee shall cancel the U.S. Physical Security so transferred or (y) the amount of the beneficial interest in the QIB Global Security to be so transferred (in which case the Registrar shall reflect on its books and records the date and an 51 43 appropriate decrease in the principal amount of the QIB Global Security). (iii) If the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13 and the proposed transferor is an Agent Member holding a beneficial interest in a U.S. Global Security, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the beneficial interest in such U.S. Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (iv) If the Initial Security to be transferred consists of U.S. Physical Securities and the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13, upon receipt by the Registrar of the document, if any, required by paragraph (i), the Registrar shall register such transfer and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Security to a QIB (excluding Non-U.S. Persons): (i) If the Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities, Permanent Offshore Physical Securities or an interest in the IAI Global Security, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has provided the Registrar with a certificate substantially in the form set forth in Exhibit F hereto. (ii) If the proposed transferee is an Agent Member, and the Initial Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities, Permanent Offshore Physical Securities or an interest in the IAI Global Security, upon receipt by the Registrar of (x) the 52 44 document, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the QIB Global Security in an amount equal to (x) the principal amount of the U.S. Physical Securities, Temporary Offshore Physical Securities or Permanent Offshore Physical Securities, as the case may be, to be transferred, and the Trustee shall cancel the Physical Security so transferred or (y) the amount of the beneficial interest in the IAI Global Security to be so transferred (in which case the Registrar shall reflect on its books and records the date and an appropriate decrease in the principal amount of the IAI Global Security). (iii) If the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13 and the proposed transferor is an Agent Member holding a beneficial interest in a U.S. Global Security, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the beneficial interest in such U.S. Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (iv) If the Initial Security to be transferred consists of U.S. Physical Securities, Temporary Offshore Physical Securities or Permanent Offshore Physical Securities and the proposed transferee is entitled to receive a U.S. Physical Security as provided in Section 2.13, upon receipt by the Registrar of the document, if any, required by paragraph (i), the Registrar shall register such transfer and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Securities of like tenor and amount. (c) Transfers by Non-U.S. Persons Prior to August 10, 1997. The following provisions shall apply with 53 45 respect to registration of any proposed transfer of an Initial Security by a Non-U.S. Person prior to August 10, 1997: (i) The Registrar shall register the transfer of any Initial Security (x) if the proposed transferee is a Non-U.S. Person and the proposed transferor has provided the Registrar with a certificate substantially in the form set forth in Exhibit G hereto or (y) if the proposed transferee is a QIB and the proposed transferor has provided the Registrar with a certificate substantially in the form set forth in Exhibit F hereto. Unless clause (ii) below is applicable, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Temporary Offshore Physical Securities of like tenor and amount. (ii) If the proposed transferee is an Agent Member in connection with a proposed transfer of an Initial Security to a QIB, upon receipt by the Registrar of (x) the document, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the QIB Global Security in an amount equal to the principal amount of the Temporary Offshore Physical Security to be transferred, and the Registrar shall cancel the Temporary Offshore Physical Securities so transferred. (d) Transfers by Non-U.S. Persons on or After August 10, 1997. The following provisions shall apply with respect to any transfer of an Initial Security by a Non-U.S. Person on or after August 10, 1997: (i) (x) If the Initial Security to be transferred is a Permanent Offshore Physical Note, the Registrar shall register such transfer, (y) if the Initial Security to be transferred is a Temporary Offshore Physical Note, upon receipt of a certificate substantially in the form set forth in Exhibit E from the proposed transferor, the Registrar shall register such transfer and (z) in the case of either clause (x) or (y), unless clause (ii) below is applicable, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (ii) If the proposed transferee is an Agent Member in connection with a proposed transfer of an Initial 54 46 Security to a QIB, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the QIB Global Security in an amount equal to the principal amount of the Temporary Offshore Physical Security or of the Permanent Offshore Physical Security to be transferred, and the Trustee shall cancel the Physical Security so transferred. (e) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any transfer of an Initial Security to a Non-U.S. Person: (i) Prior to August 10, 1997, the Registrar shall register any proposed transfer of an Initial Security to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth in Exhibit G from the proposed transferor and the Company shall execute, and the Trustee shall authenticate and make available for delivery, one or more Temporary Offshore Physical Securities. (ii) On and after August 10, 1997, the Registrar shall register any proposed transfer to any Non-U.S. Person (w) if the Initial Security to be transferred is a Permanent Offshore Physical Note, (x) if the Initial Security to be transferred is a Temporary Offshore Physical Note, upon receipt of a certificate substantially in the form set forth in Exhibit E from the proposed transferor, (y) if the Initial Security to be transferred is a U.S. Physical Security or an interest in a U.S. Global Security, upon receipt of a certificate substantially in the form set forth in Exhibit E from the proposed transferor and (z) in the case of either clause (w), (x) or (y), the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (iii) If the proposed transferor is an Agent Member holding a beneficial interest in a U.S. Global Security, upon receipt by the Registrar of (x) the document, if any, required by paragraph (i), and (y) instructions in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such U.S. Global Security in an amount equal to the principal amount of the 55 47 beneficial interest in the U.S. Global Security to be transferred and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Permanent Offshore Physical Securities of like tenor and amount. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (c) of Section 2.01 (relating to Permanent Offshore Physical Securities) or paragraph (a)(i)(x), (d)(i) or (e)(ii) of this Section 2.14 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (g) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.13 or this Section 2.14. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Interest payable on the Securities shall be computed on the basis of a 360-day year comprised of 30-day months. ARTICLE III Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to Section 3.07, it 56 48 shall notify the Trustee in writing of the redemption date and the principal amount of Securities to be redeemed. The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein; provided, however, that an Opinion of Counsel shall not be required in connection with a redemption pursuant to Section 3.07. If fewer than all the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not less than 15 days after the date of notice to the Trustee (unless a shorter period shall be acceptable to the Trustee). Any such notice may be canceled by notice in writing to the Trustee at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. Selection of Securities to be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. 57 The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (7) the CUSIP number, if any, printed on the Securities being redeemed; (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities; and (9) that if a Security is to be redeemed in part, only the portion of the principal amount (equal to $1,000 or an integral multiple thereof) of such Security to be redeemed and that a new Security in the aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the holder. At the Company's request (which may be revoked at any time in writing prior to the time at which the Trustee shall have given such notice to the Holders), the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for 58 50 redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest, if any, to the redemption date; provided that if the redemption date is after a regular record date and on or prior to the interest payment date, the accrued interest shall be payable to the Securityholder of the redeemed Securities registered on the relevant record date. If mailed in the manner provided herein, the notice shall be conclusively presumed to have been given whether or not the Holder receives such notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. At least one Business Day prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. SECTION 3.07. Optional Redemption. (a) Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole or in part, at any time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record 59 51 date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below:
Redemption Period Price - ------ ----- 2002 ............................................. 105.5625% 2003 ............................................. 103.7083% 2004 ............................................. 101.8542% 2005 and thereafter............................... 100.0000%
(b) Notwithstanding the foregoing, at any time on or prior to May 1, 2000, the Company may redeem in the aggregate up to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount thereof) of 111.125% plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption); provided, however, that at least 60% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. (c) Notwithstanding paragraphs (a) and (b) above, the Company shall not redeem the Original Securities unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Securities (rounded to the nearest integral multiple of $1000) equal to the product of: (1) a fraction, the numerator of which is the aggregate principal amount of Original Securities to be so redeemed and the denominator of which is the aggregate principal amount of Original Securities outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Securities outstanding immediately prior to such proposed redemption. The Company shall not redeem the Securities unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Original Securities (rounded to the nearest integral multiple of $1000) equal to the product of: (1) a fraction, the numerator of which is the aggregate principal amount of Securities to be so redeemed and the denominator of which is the aggregate principal amount of Securities outstanding immediately prior to such 60 52 proposed redemption, and (2) the aggregate principal amount of Original Securities outstanding immediately prior to such proposed redemption. (d) At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at any time within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. ARTICLE IV Covenants SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be required to be or remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC (after the date that either the Exchange Offer, Registration Statement or the Shelf Registration Statement becomes effective), and provide (both prior to and after such effective date) the Trustee and Securityholders and prospective Securityholders (upon request) with the annual reports and the information, documents and other reports which are specified in Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA Section 314(a). 61 53 SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness (other than pursuant to the following paragraph (b)) unless on the date of such Incurrence the Consolidated Coverage Ratio exceeds 2.00 to 1. (b) Notwithstanding Section 4.03(a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness consisting of revolving credit, working capital or letters of credit financing in an aggregate principal amount at any time outstanding not in excess of the greater of $35,000,000 and the Borrowing Base in effect from time to time (in each case less the aggregate amount of all repayments of principal actually made thereunder since the Original Issue Date with Net Available Cash from Asset Dispositions pursuant to Section 4.06(a)(iii)(A)); (ii) Indebtedness of the Company owing to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Wholly Owned Subsidiary) will be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (iii) Indebtedness of the Company represented by the Securities and the Original Securities; (iv) any Indebtedness of the Company and its Restricted Subsidiaries (other than the Indebtedness described in clauses (i) or (ii) above) outstanding on the Original Issue Date and Indebtedness Incurred under Section 4.03(a) of the Original Indenture prior to the Issue Date; (v) Indebtedness of the Company and its Restricted Subsidiaries, (A) in respect of judgment, appeal, surety, performance and other like bonds, bankers' acceptances and letters of credit provided by the Company and its Restricted Subsidiaries in the ordinary course of their business and which do not secure other Indebtedness and (B) under 62 54 Commodity Agreements, Currency Agreements and Interest Rate Agreements that are designed to protect the Company and its Restricted Subsidiaries against fluctuations in commodity prices (for raw materials used by them), interest rates or currency exchange rates and not for the purposes of speculation; (vi) Indebtedness represented by Guarantees by the Company of Indebtedness of a Restricted Subsidiary, or in respect of letters of credit provided by the Company to support such Indebtedness, or Guarantees by a Restricted Subsidiary of Indebtedness of the Company or a Restricted Subsidiary, or in respect of letters of credit provided by a Restricted Subsidiary to support such Indebtedness; provided, however, that only Indebtedness that is incurred in compliance with this covenant may be guaranteed pursuant to this clause (vi); (vii) Purchase Money Indebtedness, industrial revenue bonds or similar Indebtedness and Capitalized Lease Obligations of the Company and its Restricted Subsidiaries in an aggregate principal amount at any time outstanding not in excess of 10% of Total Assets; (viii) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments, in connection with the acquisition or disposition of any business, assets or Subsidiary of the Company permitted under this Indenture; (ix) Indebtedness of the Company and its Restricted Subsidiaries, to the extent the proceeds thereof are immediately used after the Incurrence thereof to purchase Original Securities or Securities, tendered in an offer to purchase made as a result of a Change of Control; (x) Indebtedness of the Company or a Restricted Subsidiary owed to (including obligations in respect of letters of credit for the benefit of) any Person in connection with liability insurance provided by such Person to the Company or such Restricted Subsidiary, pursuant to reimbursement or indemnification obligations to such Person, in each case Incurred in the ordinary course of business; (xi) Indebtedness of the Company consisting of guarantees of up to an aggregate principal amount of $2,000,000 of borrowings by Management Investors in 63 55 connection with purchases of Voting Stock of Holdings on or after the Original Issue Date and in accordance with Section 4.04; (xii) Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount at any time outstanding not in excess of $15,000,000 million which Indebtedness may be incurred pursuant to clause (i) above; and (xiii) any Refinancing Indebtedness Incurred in respect of any Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (ii), (iv), (vii), (ix) or (xiii) of this paragraph (b). Notwithstanding the foregoing, the Company shall not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Company unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of the Company. In addition, the Company shall not Incur any Secured Indebtedness which is not Senior Indebtedness of the Company unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Securities) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A Guarantor Subsidiary shall not incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Subsidiary Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Subsidiary Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Subsidiary Guarantor. In addition, a Guarantor Subsidiary shall not incur any Secured Indebtedness which is not Senior Indebtedness of such Guarantor Subsidiary unless contemporaneously therewith effective provision is made to secure the Subsidiary Guaranty equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Subsidiary Guaranty) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (d) For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this section 4.03, (i) Indebtedness permitted by this section need not be permitted solely by reference to one provision permitting such Indebtedness but may be 64 56 permitted in part by one such provision and in part by one or more other provisions of this provision permitting such Indebtedness and (ii) in the event that Indebtedness or any portion thereof meets the criteria of more than one of the types of Indebtedness described in this section, the Company, in its sole discretion, shall classify such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses. SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of equal or greater value); (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary; (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement, Investment or payment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company could not Incur at least $1.00 of additional Indebtedness under Section 4.03(a); or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount 65 57 so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Original Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the Original Issue Date to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) 100% of the aggregate net proceeds received by the Company (including the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) of property received by the Company; provided, however, that such property is related, ancillary or complementary to any business of the Company and the Restricted Subsidiaries conducted on the Issue Date) as a capital contribution or from the issue or sale of its Capital Stock (other than Disqualified Stock) of the Company or Holdings subsequent to the Original Issue Date (other than an issuance or sale to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries to the extent the purchase by such plan or trust is financed by Indebtedness of such plan or trust and for which the Company or a Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary) of any Indebtedness of the Company or its Restricted Subsidiaries issued subsequent to the Original Issue Date and convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or other 66 58 property (other than such Capital Stock) distributed by the Company or any Restricted Subsidiary upon such conversion or exchange) (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares or scrip); (D) the aggregate Net Cash Proceeds received subsequent to the Original Issue Date by the Company or Holdings (other than from any Restricted Subsidiary) upon the exercise of any options or warrants to purchase Capital Stock (other than Disqualified Stock) of the Company or Holdings; and (E) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (i) payments of dividends, repayments of the principal of loans, return of capital or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") or the receipt of proceeds from the sale or other disposition of any portion of any Investment in an Unrestricted Subsidiary not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments. (b) The provisions of Section 4.04(a) shall not prohibit: (i) any purchase, redemption, retirement or other acquisition of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries to the extent the purchase by such plan or trust is financed by Indebtedness of such plan or trust and for which the Company or a Subsidiary is liable, directly or indirectly, as a guarantor or 67 59 otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); provided, however, that (A) such purchase, redemption, retirement or other acquisition shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale to the extent so used shall be excluded from Section 4.04(a)(iv)(B); (ii) any purchase, defeasance, retirement, redemption or other acquisition of (A) Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to Section 4.03(b) or (B) Subordinated Obligations of a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of any Restricted Subsidiary or the Company which is permitted to be Incurred pursuant to Section 4.03(b); provided, however, that such purchase, defeasance, retirement, redemption or other acquisition shall be excluded in the calculation of the amount of Restricted Payments; (iii) any purchase, retirement, redemption or other acquisition of Disqualified Stock made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock; provided, however, that such purchase, retirement, redemption or other acquisition shall be excluded in the calculation of the amount of Restricted Payments; (iv) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.06; provided, however, that such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; (v) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the Securities pursuant to Section 4.08 (including the purchase of all Securities tendered), any purchase, defeasance, retirement, redemption or other acquisition of Subordinated Obligations required pursuant to the terms thereof as a result of such Change of Control; provided, however, that such purchase, defeasance, retirement, redemption or other acquisition shall be included in the calculation of the amount of Restricted Payments; 68 60 (vi) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that such dividend shall be included in the calculation of the amount of Restricted Payments; (vii) the repurchase, for cash or notes, of shares of, or options or warrants to purchase shares of, or payments to Holdings to enable Holdings to repurchase shares of, or options or warrants to purchase shares of, Capital Stock of Holdings, the Company or any of the Subsidiaries of the Company from present or former Management Investors in an amount not in excess of $2,000,000 in any one year and $5,000,000 in the aggregate; provided, however, that the amount of such repurchase shall be included in the calculation of the amount of Restricted Payments; (viii) payments in lieu of fractional shares in amount not in excess of $250,000 in the aggregate; (ix) payments by the Company to Holdings to pay Federal, state and local taxes to the extent such taxes are attributable to the Company and its Restricted Subsidiaries; provided, however, that such payments shall be excluded from the calculation of the amount of Restricted Payments; (x) loans, advances, dividends or distributions by the Company to Holdings to pay dividends on the common stock of Holdings following a Public Equity Offering of such stock; but only to the extent that such loans, advances, dividends or distributions do not exceed 6% per annum of the net proceeds received by the Company in such Public Equity Offering; provided, however, that the amount of such loans, advances, dividends or distributions shall be included in the amount of Restricted Payments; or (xi) in each case to the extent such payments by Holdings are attributable to the Company and its Restricted Subsidiaries, payments by the Company to Holdings not to exceed an amount necessary to permit Holdings to (A) make payments in respect to its indemnification obligations owing to directors, officers or other Persons under Holding's charter or by-laws or pursuant to written agreements with any such Person, (B) make payments in respect of its other operational expenses (other than taxes) incurred in the 69 61 ordinary course of business, or (C) make payments in respect of indemnification obligations and costs and expenses incurred by Holdings in connection with any offering of common stock of Holdings; provided, however, that all such payments shall be included in the calculation of the amount of Restricted Payments. SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness owed to the Company, (ii) make any loans or advances to the Company or (iii) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Original Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness entered into prior to the date on which such Restricted Subsidiary was acquired or designated as a Restricted Subsidiary by the Company (other than as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company); (3) any encumbrance or restriction pursuant to (x) an agreement constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this Section or contained in any amendment to an agreement referred to in clause (1) or (2) of this Section 4.05 or this clause (3) or (y) Indebtedness Incurred pursuant to clause (i) of paragraph (b) of Section 4.03; provided, however, that the encumbrances and restrictions contained in (A) any such refinancing agreement or amendment referred to in clause (x) above are, collectively, no more restrictive in any material respect, than the encumbrances and restrictions contained in such agreements (as determined in good faith by the Company) and (B) any instrument relating to any Indebtedness referred to in clause (y) above, 70 62 are, collectively, no more restrictive in any material respect than the encumbrances and restrictions contained in the Senior Bank Facilities as in effect on the Original Issue Date (as determined in good faith by the Company); (4) in the case of clause (iii) of this Section 4.05, any encumbrance or restriction contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary which are not prohibited by Section 4.12 to the extent such encumbrances or restrictions restrict the transfer of the property or assets subject to such security agreements or mortgages; (5) any encumbrance or restriction existing under or by reason of applicable law; (6) customary non-assignment provisions of any licensing agreement or of any lease; (7) any encumbrance or restriction contained in contracts for sales of assets otherwise permitted by this Indenture; (8) with respect to a Restricted Subsidiary, any encumbrance or restriction imposed pursuant to an agreement that has been entered into for the sale of all or substantially all of the Capital Stock of such Restricted Subsidiary; and (9) Purchase Money Obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (iii) of this Section 4.05. SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value, as may be determined (and shall be determined, to the extent an Asset Disposition (or a series of related Asset Dispositions) involves a fair market value greater than $1,000,000) in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors 71 63 (including as to the value of all non-cash consideration), of the shares and assets subject to such Asset Disposition, (ii) in the case of an Asset Disposition (or a series of related Asset Dispositions) having a fair market value of $1,000,000 or more at least 80% (or 100% in the case of lease payments) of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness), to prepay, repay or purchase Senior Indebtedness of the Company or a Wholly Owned Subsidiary or, in the case of a sale by a Restricted Subsidiary which is not a Wholly Owned Subsidiary, to prepay, repay or purchase Senior Indebtedness of such Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 365 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of Net Available Cash after application in accordance with clause (A), to the extent the Company or such Restricted Subsidiary elects, to reinvest (or enter into a binding contract to do so) in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary), within 365 days from the later of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an Offer (as defined below) to purchase Securities and Original Securities pursuant to and subject to the conditions of Section 4.06(b) and (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to fund (to the extent consistent with any other applicable provision of this Indenture) any corporate purpose; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this covenant, the Company and its Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions in any year which are not applied in 72 64 accordance with this covenant exceed $5,000,000 in such year. For the purposes of Section 4.06(a)(ii), the following are deemed to be cash: (w) the assumption of Indebtedness of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition, (x) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash, (y) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Disposition, to the extent that the Company and each other Restricted Subsidiary is released from any Guarantee of such Indebtedness in connection with such Asset Disposition, and (z) consideration consisting of Indebtedness of the Company or any Restricted Subsidiary. (b) In the event of an Asset Disposition that requires the purchase of Securities pursuant to Section 4.06(a)(iii)(C), the Company shall be required to purchase Securities and Original Securities, tendered pursuant to an offer, commenced within 30 days following the expiration of the 365 day period referred to in Section 4.06(a)(iii)(B) (or, if the Company so elects, at any time within such 365 day period), by the Company for the Securities and Original Securities (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest, if any, to the date of purchase in accordance with the procedures (including prorationing in the event of oversubscription) set forth in Section 4.06(c) below, in the case of the Securities and Section 4.06 of the Original Indenture, in the case of the Original Securities. If the aggregate purchase price of Securities and Original Securities tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Securities and Original Securities, the Company shall apply the remaining Net Available Cash in accordance with Section 4.06(a)(iii)(D) and upon completion of the purchase of the Securities and Original Securities tendered pursuant to the Offer, the remaining amount of Net Available Cash, if any, will be reset at zero. The Company shall not be required to make an Offer for Securities and Original Securities pursuant to this Section if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (A) and (B) of Section 4.06(a)(iii)) is less than $5,000,000 (which lesser amount shall be carried forward for purposes of determining whether an Offer is required with 73 65 respect to the Net Available Cash from any subsequent Asset Disposition). (c)(1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorationing as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports, and (iii) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (3). (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.06(a). On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancellation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee (or paying 74 66 agent) shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee (or paying agent) shall deliver the excess to the Company (or if the Company is acting as paying agent, the Company may release such amount from trust) promptly after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than 5:00 PM Eastern Standard Time one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate and an Opinion of Counsel stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of 75 67 this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.07. Limitation on Transactions with Affiliates. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate and (ii) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $1,000,000, are not in writing and have not been approved by a majority of the members of the Board of Directors having no material direct or indirect financial interest in or with respect to such Affiliate Transaction. In addition, if such Affiliate Transaction involves an amount in excess of $5,000,000, a fairness opinion must be obtained from a nationally recognized appraisal or investment banking firm. (b) The provisions of Section 4.07(a) shall not prohibit (i) any Restricted Payment or Permitted Investment permitted to be made pursuant to Section 4.04, (ii) fees, compensation or employee benefit arrangements paid to, and any indemnity provided for the benefit of directors, officers or employees of the Company, Holdings or any Subsidiary of the Company in the ordinary course of business or any Indebtedness permitted to be Incurred pursuant to Section 4.03(b)(xii), or any payments in respect thereof, (iii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (iv) transactions pursuant to agreements entered into or in effect on the Original Issue Date, including amendments thereto entered into after the Original Issue Date, provided that the terms of any such amendment are not, in the aggregate, less favorable to the Company or such Restricted Subsidiary than the terms of such agreement prior to such amendment and provided further that such agreements are set forth on Schedule 4.07 hereto, (v) loans or advances to employees that are Affiliates of the Company in the ordinary course of business, but in any event not to exceed $2,000,000 in the aggregate outstanding at any one time, 76 68 (vi) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries (so long as the other stockholders of any participating Restricted Subsidiaries which are not Wholly Owned Subsidiaries are not themselves Affiliates of the Company) or (vii) payments with respect to Indebtedness Incurred pursuant to Section 4.03(b)(viii). SECTION 4.08. Change of Control. (a) Upon a Change of Control, each Holder shall have the right to require that the Company repurchase all or any part of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, in accordance with the terms contemplated in Section 4.08(b); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to purchase the Securities pursuant to this Section 4.08 in the event that it has mailed notice of its election to redeem all the Securities under Section 3.07. (b) Subject to the proviso to Section 4.08(a), within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating, among other things: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or any portion in integral multiples of $1,000 of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on a record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Securities or any portion thereof purchased. 77 69 (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than 5:00 PM Eastern Standard Time one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered to the Trustee for cancellation, and the Company shall pay the purchase price plus accrued and unpaid interest to the purchase date, if any, to the Holders entitled thereto. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.09. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year and within 60 days of the end of the first three fiscal quarters of the Company an Officers' Certificate complying with Section 314(a)(4) of the TIA and stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and, if such signer does know of such a Default or Event of Default, the certificate shall describe such Default or Event of Default with particularity and describe what actions, if any, the Company proposes to take with respect to such Default or Event of Default. SECTION 4.10. Further Instruments and Acts. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. 78 70 SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company shall not sell any shares of Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock, except (i) to the Company or a Wholly Owned Subsidiary, (ii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, (iii) directors' qualifying shares or (iv) in a Public Equity Offering as a result of or after which a Public Market exists. The proceeds of any sale of such Capital Stock permitted by clause (ii) shall be treated as Net Available Cash from an Asset Disposition and must be applied in accordance with the terms of Section 4.06. SECTION 4.12. Limitation on Liens. (a) The Company shall not, and shall not permit any Guarantor Subsidiary to, directly or indirectly, create or permit to exist any Lien (the "Initial Lien") on any of its property or assets (including Capital Stock), whether owned on the Original Issue Date or thereafter acquired, securing any Indebtedness other than Senior Indebtedness of the Company in the case of the Company, or Senior Indebtedness of a Guarantor Subsidiary, in the case of a Guarantor Subsidiary, unless contemporaneously therewith effective provision is made to secure the Securities and, in respect of Liens on any Guarantor Subsidiary's property or assets, the Subsidiary Guaranty of such Guarantor Subsidiary equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Securities and such Subsidiary Guaranty) such obligation for so long as such obligation is so secured. The preceding sentence shall not require the Company or any Restricted Subsidiary to equally ratably secure the Securities if the Initial Lien consists of Permitted Liens. (b) Any Lien created for the benefit of the Holders of the Securities pursuant to the foregoing paragraph (a) shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien. SECTION 4.13. Limitation on Sale/Leaseback Transactions. The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless (i) the Company or such Restricted Subsidiary would be entitled to Incur Indebtedness in an amount equal to the Attributable 79 71 Debt with respect to such Sale/Leaseback Transaction pursuant to Section 4.03 and (ii) the net cash proceeds received by the Company or any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair market value (in the case of Sale/Leaseback Transactions involving amounts in excess of $1,000,000, as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) of such property and (iii) the transfer of such property is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.06. SECTION 4.14. Limitation on Lines of Business. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than (i) a Related Business and (ii) the making of Permitted Investments and the operations of any business that is part of a Permitted Investment. Holdings will not engage in any business other than managing its investment in the Company. SECTION 4.15. Future Guarantor Subsidiaries. The Company shall cause (a) each Restricted Subsidiary that is a Domestic Subsidiary which Incurs Indebtedness and (b) each Restricted Subsidiary that is not a Domestic Subsidiary and that after the Original Issue Date enters into a Guarantee of any of the obligations of the Company, Holdings or any of the Company's Subsidiaries pursuant to the Senior Bank Facilities to execute and deliver to the Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to which such Subsidiary shall Guarantee payment of the Securities as provided in Section 10.06; provided, however, that such Subsidiary shall not be required to execute and deliver a supplemental indenture pursuant to this Section in the event that such Subsidiary is a party to this Indenture at the time of such Incurrence of Indebtedness. ARTICLE V Successor Company SECTION 5.01. When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to any Person unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a corporation 80 72 organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness under Section 4.03(a); (iv) immediately after giving effect to such transaction, the Successor Company shall have Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction; and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture. Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets shall not be released from the obligation to pay the principal of and interest on the Securities. 81 73 ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) a default occurs in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article X, and such default continues for a period of 30 days; (2) a default occurs in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article X; (3) the Company fails to comply with Section 5.01; (4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14 or 4.15 (other than a failure to purchase Securities when required under Section 4.06 or 4.08) and such failure continues for 30 days after the notice specified in the penultimate paragraph of this Section 6.01; (5) the Company or any Guarantor Subsidiary fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified in the penultimate paragraph of this Section 6.01; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders of such Indebtedness because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $5,000,000 or its foreign currency equivalent at the time; 82 74 (7) the Company or any Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Restricted Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Restricted Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Restricted Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) the rendering of any judgment or decree for the payment of money in excess of $5,000,000 or its foreign currency equivalent (net of amounts paid within 30 days of such judgment or decree under any insurance, indemnity, bond, surety or similar instrument) against the Company or any Restricted Subsidiary and is not discharged, waived or stayed and either (A) an enforcement proceeding is commenced with respect to such judgment or decree or (B) such judgment or decree remains outstanding the later of (i) the day which is the sixtieth day after the judgment is rendered and (ii) the day on which any right to appeal expires; or 83 75 (10) any Subsidiary Guaranty ceases to be in full force and effect (except as contemplated by the terms thereof) or any Guarantor Subsidiary shall deny or disaffirm its obligations under this Indenture or any Subsidiary Guaranty and such Default continues for 10 days. The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4) or (5) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified in clauses (4) or (5) hereof after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default." The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (3), (6), (7) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5), (8) or (9), its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the outstanding Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the Company occurs and is continuing, the principal of and 84 76 interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed 85 77 proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Security holder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or 6.01(2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. 86 78 SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents and take such other actions, including participating as a member, voting or otherwise, of any committee of creditors appointed in the matter, as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, any Subsidiary, their respective creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Securityholder, any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Securityholder, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money or property from the Company pursuant to this Article VI, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that 87 79 states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Company, a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 6.13. Restoration of Rights and Remedies. If the Trustee or any Securityholder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Securityholder, then, and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Securityholders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, Trustee and Securityholders shall continue as though no such proceeding had been instituted. 88 80 ARTICLE VII Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section and Section 7.02(e); (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a written direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. 89 81 (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it here under in good faith and in accordance with the advice or opinion of such counsel. 90 82 (f) The Trustee shall be under no obligation to exercise any of the rights or powers created in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, it will not be responsible for the use or application of any monies received by a Paying Agent other than the Trustee, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to a Trust Officer of the Trustee, the Trustee shall mail to each Securityholder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in payment of principal of, premium (if any) or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. 91 83 SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with May 15, 1998, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report shall be transmitted). The Trustee will also comply with TIA Section 313(b) and TIA Section 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee, Paying Agent and Registrar from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and other professionals. Any costs and expenses associated with the Exchange Securities shall be paid by the Company. The Company shall indemnify the Trustee, Paying Agent, Registrar, and each of their officers, directors and employees (each in their respective capacities), for and hold each of them harmless against any and all loss, liability or expense (including attorneys' fees) incurred by them without negligence or bad faith on their part in connection with the administration of this trust and the performance of their duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the acceptance, exercise or performance of any of its powers or duties hereunder. The Trustee, Paying Agent and Registrar shall notify the Company of any claim for which they may seek indemnity promptly upon obtaining actual knowledge thereof; provided that any failure so to notify the Company shall not relieve the Company of its indemnity obligations hereunder except to the extent the Company shall have been adversely affected thereby. The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company's expense in the defense. Such indemnified 92 84 parties may have separate counsel and the Company shall pay the fees and expenses of such counsel; provided that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and such parties in connection with such defense. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee, Paying Agent or Registrar incurs expenses after the occurrence of a Default specified in Section 6.01(7) or 6.01(8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company in writing. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee with the consent of the Company, which shall not be unreasonably withheld. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the 93 85 office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is 94 86 anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are out standing if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III hereof and the Company irrevocably deposits with the Trustee funds or U.S. Government Obligations on which payment of principal and interest when due will be sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company including, but not limited to fees and expenses of the Trustee and its counsel, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. 95 87 (b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15, 5.01(iii) and 5.01(iv) and the operation of Sections 6.01(4), 6.01(6), 6.01(7) (with respect to Restricted Subsidiaries only), 6.01(8) (with respect to Restricted Subsidiaries only), 6.01(9) and 6.01(10) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7) (with respect to Restricted Subsidiaries only), 6.01(8) (with respect to Restricted Subsidiaries only), 6.01(9) and 6.01(10) or because of the failure of the Company to comply with Sections 5.01(iii) and 5.01(iv). Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without 96 88 reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(7) or 6.01(8) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article X; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance 97 89 and discharge of the Securities as contemplated by this Article VIII have been complied with. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to this Section 8.02 or the principal, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities. Anything in this Section 8.02 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request, in writing, by the Company any cash in dollars or U.S. Government Obligations held by it as provided in paragraph (d) above which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent legal defeasance or covenant defeasance. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the 98 90 Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations other than any tax, fee or other charge which by law is for the account of the Securityholders. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. SECTION 8.07. Concurrent Defeasance Of Securities And Original Securities. The Company shall not exercise either of the defeasance options described in this Article with respect to the Securities unless it defeases the Original Securities equivalently and substantially simultaneously. Similarly, the Company shall not defease the Original Securities unless it defeases the Securities equivalently and substantially simultaneously. ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders. The Company, the Guarantor Subsidiaries and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Section 4.15 or Article V; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; 99 91 provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article X or Article XII that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representative therefor) under Article X or Article XII; (5) to add further Guarantees with respect to the Securities or to release Guarantor Subsidiaries when permitted by the terms hereof, or to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying this Indenture under the TIA; (8) to make any change that does not adversely affect the rights of any Securityholder; or (9) to provide for the issuance and authorization of the Exchange Securities. An amendment under this Section may not make any change that adversely affects the rights under Article X or Article XII of any holder of Senior Indebtedness of the Company or any Guarantor Subsidiary then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company, the Guarantor Subsidiaries and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders 100 92 of at least a majority in principal amount of the Securities. The Holders of at least a majority in principal amount of the Securities may waive compliance by the Company or any Guarantor Subsidiary with any provision or covenant of this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment or waiver may not: (1) reduce the amount of Securities whose Holders must consent to an amendment or waiver; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article III; (5) make any Security payable in money other than that stated in the Security; (6) make any change in Article X or Article XII that adversely affects the rights of any Securityholder under Article X or Article XII; (7) impair the right of any Holder to receive payment of principal of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities. (8) modify the Subsidiary Guarantees (except as contemplated by the terms thereof or of this Indenture) in any manner adverse to the Holders; or (9) make any change in Section 6.04, Section 6.07 or the third sentence of this Section. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article X or Article XII of any holder of Senior Indebtedness of the Company or a Guarantor Subsidiary then outstanding unless 101 93 the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Security holder. An amendment or waiver becomes effective once the consents from the Holders of the requisite percentage in principal amount of outstanding Securities are received by the Company or the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate 102 94 notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and complies with the provisions hereof (including Section 9.03). SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE X Subordination of the Securities SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article X, to the prior payment in full of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness of the Company. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company, including, without limitation, the Original Securities, and only Indebtedness of the Company that is Senior Indebtedness of the Company shall rank senior to the Securities in accordance with the provisions set forth 103 95 herein. For purposes of these subordination provisions, the Indebtedness evidenced by the Securities is deemed to include the liquidated damages payable pursuant to the provisions set forth in the Securities and the Exchange and Registration Rights Agreement. All provisions of this Article X shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company and its properties: (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of such Senior Indebtedness before Securityholders shall be entitled to receive any payment of principal of or interest on the Securities; and (2) until the Senior Indebtedness of the Company is paid in full, any payment or distribution to which Securityholders would be entitled but for this Article X shall be made to holders of such Senior Indebtedness as their respective interests may appear. SECTION 10.03. Default on Senior Indebtedness of the Company. The Company may not pay the principal of, premium (if any) or interest on the Securities or make any deposit pursuant to Section 8.01 and may not otherwise purchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (i) any Senior Indebtedness of the Company is not paid when due or (ii) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the holders of such Senior Indebtedness with respect to which either of the events in clause (i) or (ii) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further 104 96 notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the holders of the Designated Senior Indebtedness of the Company specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee (with a copy to the Company) from the Person or Persons who gave such Blockage Notice, (ii) because such Designated Senior Indebtedness has been repaid in full or (iii) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of the Company during such period; provided, however, that if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness of the Company (other than the Bank Indebtedness), the Representative of the Bank Indebtedness may give another Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or the Representative of such holders) of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, the Company may not pay the Securities until five Business Days after such holders or the Representative of the holders of the Designated Senior Indebtedness of the Company receive notice of such acceleration and, thereafter, may pay the Securities only if this Article X otherwise permits payment at that time. 105 97 SECTION 10.05. When Distribution Must Be Paid Over. If a payment or distribution is made to Securityholders that because of this Article X should not have been made to them, the Securityholders who receive the payment or distribution shall hold such payment or distribution in trust for holders of the Senior Indebtedness of the Company and pay it over to them as their respective interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness of the Company to receive distributions applicable to Senior Indebtedness of the Company. A distribution made under this Article X to holders of Senior Indebtedness of the Company which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on Senior Indebtedness of the Company. SECTION 10.07. Relative Rights. This Article X defines the relative rights of Securityholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Securityholders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of 106 98 such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article X. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company may give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the Representative may give the notice. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness of the Company (or a Representative of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or Representative thereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article X with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Company; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article X shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article X shall not be construed as preventing the occurrence of a Default. Nothing in this Article X shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article VIII by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of 107 99 any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article X, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article X, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Security holders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of the Company and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article X, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Company held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article X, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article X. SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of the Company as provided in this Article X and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company. The Trustee shall 108 100 not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article X or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness of the Company shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in this Article shall apply to amounts due to the Trustee pursuant to other sections of this Indenture. ARTICLE XI Subsidiary Guarantees SECTION 11.01. Subsidiary Guarantees. Each Guarantor Subsidiary hereby jointly and severally unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture (including obligations to the Trustee) and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company whether for expenses, indemnification or otherwise under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Guarantor Subsidiary further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor Subsidiary, and that 109 101 each such Guarantor Subsidiary shall remain bound under this Article XI notwithstanding any extension or renewal of any Obligation. Each Guarantor Subsidiary waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Guarantor Subsidiary waives notice of any default under the Securities or the Obligations. The obligations of each Guarantor Subsidiary hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such Guarantor Subsidiary, except as provided in Section 11.02(b). Each Guarantor Subsidiary further agrees that its Subsidiary Guaranty herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. The obligations of each Guarantor Subsidiary hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor Subsidiary herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any 110 102 Guarantor Subsidiary or would otherwise operate as a discharge of any Guarantor Subsidiary as a matter of law or equity. Each Guarantor Subsidiary further agrees that its Subsidiary Guaranty herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor Subsidiary by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Guarantor Subsidiary hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Each Guarantor Subsidiary agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations. Each Guarantor Subsidiary further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of any Subsidiary Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article VI, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor Subsidiary for the purposes of this Section. Each Guarantor Subsidiary also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section. 111 103 SECTION 11.02. Limitation on Liability. (a) Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the obligations guaranteed hereunder by any Guarantor Subsidiary shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to any Guarantor Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. (b) This Subsidiary Guaranty as to any Guarantor Subsidiary shall terminate and be of no further force or effect upon the sale or other transfer (i) by such Guarantor Subsidiary of all or substantially all of its assets or (ii) by the Company of all of its stock or other equity interests in such Guarantor Subsidiary, to a Person that is not an Affiliate of the Company; provided, however, that such sale or transfer shall be deemed to constitute an Asset Disposition and the Company shall comply with its obligations under Section 4.06. SECTION 11.03. Successors and Assigns. This Article XI shall be binding upon each Guarantor Subsidiary and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article XI shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article XI at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of any provision of this Article XI, nor the consent to any departure by any Guarantor Subsidiary therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific 112 104 instance and for the purpose for which given. No notice to or demand on any Guarantor Subsidiary in any case shall entitle such Guarantor Subsidiary to any other or further notice or demand in the same, similar or other circumstances. SECTION 11.06. Initial Guarantors; Execution of Supplemental Indenture for Future Guarantor Subsidiaries. (a) Upon their execution and delivery of this Indenture, the Initial Guarantors will each become Guarantor Subsidiaries. (b) Each Subsidiary which is required to become a Guarantor Subsidiary pursuant to Section 4.15 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to which such Subsidiary shall become a Guarantor Subsidiary under this Article XI and shall guarantee the Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel and an Officers' Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Subsidiary Guaranty of such Guarantor Subsidiary is a legal, valid and binding obligation of such Guarantor Subsidiary, enforceable against such Guarantor Subsidiary in accordance with its terms. ARTICLE XII Subordination of the Subsidiary Guaranties SECTION 12.01. Agreement To Subordinate. Each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, that the Obligations of a Guarantor Subsidiary are subordinated in right of payment, to the extent and in the manner provided in this Article XII, to the prior payment in full of all Senior Indebtedness of such Guarantor Subsidiary and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness of such Guarantor Subsidiary. The Obligations with respect to a Guarantor Subsidiary shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such Guarantor Subsidiary, and only Indebtedness of such Guarantor Subsidiary that is Senior Indebtedness of such Guarantor Subsidiary shall rank 113 105 senior to the Obligations of such Guarantor Subsidiary in accordance with the provisions set forth herein. SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of a Guarantor Subsidiary to creditors upon a total or partial liquidation or a total or partial dissolution of such Guarantor Subsidiary or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Guarantor Subsidiary and its properties: (1) holders of Senior Indebtedness of such Guarantor Subsidiary shall be entitled to receive payment in full of such Senior Indebtedness before Securityholders shall be entitled to receive any payment of any Obligations from such Guarantor Subsidiary; and (2) until the Senior Indebtedness of such Guarantor Subsidiary is paid in full, any payment or distribution to which Securityholders would be entitled but for this Article XII shall be made to holders of such Senior Indebtedness as their respective interests may appear. SECTION 12.03. Default on Senior Indebtedness of a Guarantor Subsidiary. A Guarantor Subsidiary may not make any payment pursuant to any of the Obligations or repurchase, redeem or otherwise retire any Securities (collectively, "pay its Guaranty") if (i) any Senior Indebtedness of such Guarantor Subsidiary is not paid when due or (ii) any other default on Senior Indebtedness of such Guarantor Subsidiary occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full; provided, however, that such Guarantor Subsidiary may pay its Guaranty without regard to the foregoing if such Guarantor Subsidiary and the Trustee receive written notice approving such payment from the Representative of the holders of such Senior Indebtedness with respect to which either of the events in clause (i) or (ii) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness of a Guarantor Subsidiary pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the 114 106 expiration of any applicable grace periods, such Subsidiary Guarantor may not pay its Guaranty for a period (a "Guarantor Subsidiary Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to such Guarantor Subsidiary and the Company) of written notice (a "Guarantor Subsidiary Blockage Notice") of such default from the Representative of the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary specifying an election to effect a Guarantor Subsidiary Payment Blockage Period and ending 179 days thereafter (or earlier if such Guarantor Subsidiary Payment Blockage Period is terminated (i) by written notice to the Trustee (with a copy to such Guarantor Subsidiary and the Company) from the Person or Persons who gave such Guarantor Subsidiary Blockage Notice, (ii) because such Designated Senior Indebtedness has been repaid in full or (iii) because the default giving rise to such Guarantor Subsidiary Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, such Guarantor Subsidiary may resume to pay its Guaranty after such Guarantor Subsidiary Payment Blockage Period, including any missed payments. Not more than one Guarantor Subsidiary Blockage Notice may be given with respect to a Guarantor Subsidiary in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of such Guarantor Subsidiary during such period; provided, however, that if any Guarantor Subsidiary Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness of such Guarantor Subsidiary (other than the Bank Indebtedness), the Representative of the Bank Indebtedness may give another Guarantor Subsidiary Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Guarantor Subsidiary Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. SECTION 12.04. Demand for Payment. If payment of the Securities is accelerated because of an Event of Default and a demand for payment is made on a Guarantor Subsidiary pursuant to Article XI the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary (or the Representative of such holders) of such demand. If any Designated Senior Indebtedness of such Guarantor Subsidiary is outstanding, such Guarantor 115 107 Subsidiary may not pay its Guaranty until five Business Days after such holders or the Representative of the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary receive notice of such demand and, thereafter, may pay its Guaranty only if this Article XII otherwise permits payment at that time. SECTION 12.05. When Distribution Must Be Paid Over. If a payment or distribution is made to Securityholders that because of this Article XII should not have been made to them, the Securityholders who receive the payment or distribution shall hold such payment or distribution in trust for holders of the Senior Indebtedness of the relevant Guarantor Subsidiary and pay it over to them as their respective interests may appear. SECTION 12.06. Subrogation. After all Senior Indebtedness of a Guarantor Subsidiary is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Indebtedness of such Guarantor Subsidiary to receive distributions applicable to Senior Indebtedness of such Guarantor Subsidiary. A distribution made under this Article XII to holders of Senior Indebtedness of such Guarantor Subsidiary which otherwise would have been made to Securityholders is not, as between such Guarantor Subsidiary and Securityholders, a payment by such Guarantor Subsidiary on Senior Indebtedness of such Guarantor Subsidiary. SECTION 12.07. Relative Rights. This Article XII defines the relative rights of Securityholders and holders of Senior Indebtedness of a Guarantor Subsidiary. Nothing in this Indenture shall: (1) impair, as between a Guarantor Subsidiary and Securityholders, the obligation of a Guarantor Subsidiary which is absolute and unconditional, to pay its Obligations to the extent set forth in Article XI; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a default by a Guarantor Subsidiary under its Obligations, subject to the rights of holders of Senior Indebtedness of such Guarantor Subsidiary to receive distributions otherwise payable to Securityholders. SECTION 12.08. Subordination May Not Be Impaired by a Guarantor Subsidiary. No right of any holder of Senior Indebtedness of a Guarantor Subsidiary to enforce the 116 108 subordination of the Obligations of such Guarantor Subsidiary shall be impaired by any act or failure to act by such Guarantor Subsidiary or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section 12.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article XII. A Guarantor Subsidiary, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of a Guarantor Subsidiary may give the notice; provided, however, that, if an issue of Senior Indebtedness of a Guarantor Subsidiary has a Representative, only the Representative may give the notice. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness of a Guarantor Subsidiary (or a Representative of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or Representative thereof. The Trustee in its individual or any other capacity may hold Senior Indebtedness of a Guarantor Subsidiary with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article XII with respect to any Senior Indebtedness of a Guarantor Subsidiary which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of such Guarantor Subsidiary; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 12.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of a Guarantor Subsidiary, the distribution may be made and the notice given to their Representative (if any). SECTION 12.11. Article XII Not To Prevent Events of Default or Limit Right To Accelerate. The failure of a Guarantor Subsidiary to make a payment on any of its Obligations by reason of any provision in this Article XII 117 109 shall not be construed as preventing the occurrence of a default by such Guarantor Subsidiary under its Obligations. Nothing in this Article XII shall have any effect on the right of the Securityholders or the Trustee to make a demand for payment on a Guarantor Subsidiary pursuant to Article XI. SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article XII, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Security holders or (iii) upon the Representatives for the holders of Senior Indebtedness of a Guarantor Subsidiary for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of a Guarantor Subsidiary and other Indebtedness of a Guarantor Subsidiary, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of a Guarantor Subsidiary to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Guarantor Subsidiary held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article XII, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article XII. SECTION 12.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of each of the Guarantor Subsidiaries as provided in this Article XII and appoints the Trustee as attorney-in-fact for any and all such purposes. 118 110 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of a Guarantor Subsidiary. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of a Guarantor Subsidiary and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the relevant Guarantor Subsidiary or any other Person, money or assets to which any holders of Senior Indebtedness of such Guarantor Subsidiary shall be entitled by virtue of this Article XII or otherwise. SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Guarantor Subsidiary on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of a Guarantor Subsidiary, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE XIII Miscellaneous SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail or by national overnight courier service addressed as follows: if to the Company or any Guarantor Subsidiary: 2121 Brooks Avenue Neenah, WI 54957 Attention of: Chief Financial Officer 119 111 if to the Trustee: United States Trust Company of New York 114 West 47th Street, 25th Floor New York, New York 10036 Attention: Corporate Trust Division The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Security holder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed by first class mail within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it, except that any such notice to the Trustee must be received by a Trust Officer to be duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. SECTION 13.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee and complying with Section 11.05 stating that, in the opinion of the signers, all conditions precedent, if any, provided for 120 112 in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee and complying with Section 11.05 stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the fore going, only Securities outstanding at the time shall be considered in any such determination. SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action 121 113 by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which commercial banking institutions (including, without limitation, the Federal Reserve System) are authorized or required by law to close in New York City. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 13.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company of any Guarantor Subsidiary shall not have any liability for any obligations of the Company or any Guarantor Subsidiary under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 122 114 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. NEENAH CORPORATION, by ------------------------------------- Name: Title: NEENAH TRANSPORT, INC., by ------------------------------------- Name: Title: HARTLEY CONTROLS CORPORATION by ------------------------------------- Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK, by ------------------------------------- Name: Title: EX-4.8 13 PURCHASE AGREEMENT DATED AS OF JUNE 26,1997 1 EXHIBIT 4.8 EXECUTION COPY NEENAH CORPORATION $45,000,000 11-1/8 % SERIES C SENIOR SUBORDINATED NOTES DUE 2007 PURCHASE AGREEMENT June 26, 1997 CHASE SECURITIES INC. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Neenah Corporation, a Wisconsin corporation (the "Company"), proposes to issue and sell $45,000,000 aggregate principal amount of its 11-1/8% Series C Senior Subordinated Notes due 2007 (the "Notes"). The Notes will be issued pursuant to an Indenture to be dated as of July 1, 1997 (the "Indenture") between the Company and United States Trust Company of New York, as trustee (the "Trustee") and will be guaranteed on an unsecured senior subordinated basis (the "Guarantees", and together with the Notes, the "Securities") by the principal operating subsidiaries of the Company (collectively, the "Guarantors"). The Company confirms its agreement with Chase Securities Inc., (the "Initial Purchaser") concerning the purchase of the Securities from the Company by the Initial Purchaser. The Securities will be offered and sold to the Initial Purchaser without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption therefrom. The Company has prepared an offering memorandum dated the date hereof (the "Offering Memorandum") setting forth information concerning the Company, the Guarantors and the Securities. Copies of the Offering Memorandum will be delivered by the Company to the Initial Purchaser pursuant to the terms of this Agreement. Any references herein to the Offering Memorandum shall be deemed to include all amendments and supplements thereto, unless otherwise noted. The Company hereby confirms that it has authorized the use of the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchaser in accordance with Section 2. Holders of the Securities (including the Initial Purchaser and its direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights Agreement, substantially in the form attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to which the Company and the Guarantors 2 2 will agree to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of senior subordinated notes of the Company (the "Exchange Securities") which are identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum. 1. Representations, Warranties and Agreements of the Company. The Company represents and warrants to, and agrees with, the Initial Purchaser on and as of the date hereof and the Closing Date (as defined in Section 3) that: (a) The Offering Memorandum, as of the date hereof does not, and on the Closing Date will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchaser furnished to the Company by or on behalf of the Initial Purchaser specifically for use therein (the "Initial Purchaser's Information"). (b) The Offering Memorandum, as of the date hereof, contains all of the information that, if requested by a prospective purchaser of the Securities, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act. (c) Assuming the accuracy of the representations and warranties of the Initial Purchaser contained in Section 2 and its compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchaser and the offer, resale and delivery of the Securities by the Initial Purchaser in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) NFC Castings, Inc., a Delaware corporation ("Holdings") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and the Company and each of the Company's subsidiaries have been duly incorporated and are validly existing as corporations under the laws of the State of Wisconsin; and each of the Company, Holdings, and each of the Company's subsidiaries are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective 3 3 businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged and to take the actions necessary to consummate each of the transactions contemplated by this Agreement and the Offering Memorandum (the "Transactions"), except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a material adverse effect on the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). (e) The Company has a capitalization as set forth in the Offering Memorandum under the heading "Capitalization"; all of the outstanding shares of capital stock of Holdings, the Company, and each of the Company's Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable, except as set forth in Section 180.0622(2)(b) of the Wisconsin statutes, as judicially interpreted; and conform in all material respects to the description thereof contained in the Offering Memorandum. All of the outstanding shares of capital stock of the Company and its subsidiaries will be owned directly or indirectly by Holdings, free and clear of any lien, charge, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party, other than liens arising under the Senior Bank Facilities. (f) Each of the Company and the Guarantors have full right, power and authority to execute and deliver any of this Agreement, the Indenture, the Registration Rights Agreement and the Securities (collectively, the "Transaction Documents") to which it is or will be a party and to perform its respective obligations hereunder and thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly and validly taken. (g) This Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors and constitutes a valid and legally binding agreement of the Company and each of the Guarantors. (h) The Registration Rights Agreement has been or will be duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by the Company, the Guarantors and the Initial Purchaser, will constitute a valid and legally binding agreement of the Company and each of the Guarantors, enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). 4 4 (i) The Indenture has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by the Company and the Trustee, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (j) The Securities have been duly authorized by the Company and each of the Guarantors and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company, as primary obligor, and of each of the Guarantors, as note guarantors entitled to the benefits of the Indenture and enforceable against the Company and each of the Guarantors, in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (k) Each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum. (l) The execution, delivery and performance by the Company, and each of the Guarantors of each of the Transaction Documents to which it is or will be a party, the issuance, authentication, sale and delivery of the Securities and compliance by the Company, and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents (i) will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Company's subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which any of them is a party or by which any of them is bound or to which any of their respective properties or assets are subject, except where such conflict, breach, violation or default would not (A) result in a Material Adverse Effect on the Company or any of the Company's subsidiaries, or (B) have a material adverse effect on the Company's ability to perform its obligations under any of the Transaction Documents to which it is a party, and (ii) such actions will not result in any violation of (A) the provisions of the charter or by-laws of the Company or any of the Company's subsidiaries or (B) to the Company's best knowledge, any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body 5 5 having jurisdiction over the Company or any of the Company's subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which it is or will be a party, the issuance, authentication, sale and delivery of the Securities and compliance by the Company and each of the Guarantors (as applicable) with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which shall have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement. (m) Ernst & Young LLP are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The historical financial statements (including the related notes) contained in the Offering Memorandum comply in all material respects with the requirements applicable to a registration statement on Form S-1 under the Securities Act (except that certain consolidated financial statement schedules and net income per common share data are omitted); such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby and fairly present the financial position of the entities purported to be covered thereby at the respective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained in the Offering Memorandum under the headings "Summary--Summary Consolidated Financial and Other Data", "Capitalization", "Selected Consolidated Financial and Other Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Management--Compensation of Executive Officers" are derived from the accounting records of the Company and its subsidiaries and fairly present the information purported to be shown thereby. The pro forma financial information contained in the Offering Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Offering Memorandum (except for the pro forma adjustments specified therein), includes all material adjustments to the historical financial information required by Rule 11-02 of Regulation S-X under the Securities Act and the Exchange Act to reflect the transactions described in the Offering Memorandum, gives effect to assumptions made on a reasonable basis and fairly presents the historical and proposed transactions contemplated by the Offering Memorandum and the Transaction Documents. The other historical financial and statistical information and data included in the Offering Memorandum are, in all material respects, fairly presented. 6 6 (n) There are no legal or governmental proceedings pending to which the Company or any of the Company's subsidiaries is a party or of which any of their respective property or assets is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of the Company's subsidiaries, could reasonably be expected to have a Material Adverse Effect; and to the best knowledge of the Company, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (o) To the best knowledge of the Company, no action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the issuance of the Securities or suspends the sale of the Securities in any jurisdiction; to the best knowledge of the Company, no injunction, restraining order or order of any nature by any federal or state court of competent jurisdiction has been issued with respect to the Company or any of the Company's subsidiaries which would prevent or suspend the issuance or sale of the Securities or the use of the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company, threatened against or affecting the Company or any of the Company's subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Securities or in any manner draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and the Company has complied with any and all requests by any securities authority in any jurisdiction for additional information to be included in the Offering Memorandum. (p) None of the Company, Holdings or any of the Company's subsidiaries is (i) in violation of its charter or by-laws, (ii) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets are subject or (iii) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its properties or assets may be subject, except for any violation or default under clauses (ii) or (iii) that would not have a Material Adverse Effect. (q) The Company and each of its subsidiaries possess all material licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate federal, state or foreign regulatory agencies or bodies which are necessary or desirable for the ownership of their respective properties or the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to possess or make the same would not, singularly or in the aggregate, have a Material Adverse Effect, and none of the Company or any of its subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or 7 7 permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course. (r) The Company and each of its subsidiaries have filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due thereon, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had (nor does the Company have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have) a Material Adverse Effect. (s) None of the Company, or any of its subsidiaries is (i) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder or (ii) a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended. (t) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (u) The Company and each of its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks as are adequate to protect the Company and its subsidiaries and their respective businesses. Neither the Company nor any of its subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance. (y) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses; and the Company has no reason to believe that the conduct of their respective businesses will conflict in any material respect with, and the Company and its subsidiaries have not received any notice of any claim of conflict with, any such rights of others. 8 8 (v) The Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property which are material to the business of the Company and its subsidiaries, in each case free and clear of all liens (other than liens arising under the Senior Bank Facilities), encumbrances, claims and defects and imperfections of title except such as (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) could not reasonably be expected to have a Material Adverse Effect. (aa) No material labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened. (bb) No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Company or any of its subsidiaries which could reasonably be expected to have a Material Adverse Effect; each such employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; the Company and each of its subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the Company or any of its subsidiaries would have any liability; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification. (cc) There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to or caused by the Company or any of its subsidiaries (or, to the best knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of the Company's subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability could not reasonably be expected to have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or 9 9 into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. (dd) Neither the Company nor, to the best knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (ee) On and immediately after the Closing Date, the Company (on a consolidated basis, after giving effect to the issuance of the Securities and to the other Transactions as described in the Offering Memorandum) will be Solvent. As used in this paragraph, the term "Solvent" means, with respect to a particular date, that on such date (i) the present fair market value (or present fair saleable value) of the assets of the Company is not less than the total amount required to pay the probable liabilities of the Company on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (ii) the Company is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (iii) assuming the sale of the Securities as contemplated by this Agreement and the Offering Memorandum, the Company is not incurring debts or liabilities beyond its ability to pay as such debts and liabilities mature and (iv) the Company is not engaged in any business or transaction, and is not about to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which the Company is engaged. In computing the amount of such contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (ff) Except as described in the Offering Memorandum, there are no outstanding subscriptions, rights, warrants, calls or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity or other ownership interest in Holdings, the Company, or any of the Company's subsidiaries. (gg) Neither the Company nor any of its subsidiaries owns any "margin securities" as that term is defined in Regulations G and U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and 10 10 none of the proceeds of the sale of the Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Securities to be considered a "purpose credit" within the meanings of Regulation G, T, U or X of the Federal Reserve Board. (hh) None of the Company or any of the Company's subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Initial Purchaser for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Securities. (ii) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (jj) None of the Company any of its affiliates or any person acting on behalf of any of them has engaged or will engage in any directed selling efforts (as such term is defined in Regulation S under the Securities Act ("Regulation S")), and all such persons have complied and will comply with the offering restrictions requirement of Regulation S to the extent applicable. (kk) None of the Company or any of its affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as such term is defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act. (ll) None of the Company or any of its affiliates or any other person acting on behalf of any of them has engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (mm) There are no securities of the Company registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed on a national securities exchange or quoted in a U.S. automated inter-dealer quotation system. (nn) The Company has not taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (oo) No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. 11 11 (pp) None of the Company or any of its subsidiaries does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Florida Statutes Section 517.075. (qq) Since the date as of which information is given in the Offering Memorandum, except as contemplated by the Transactions, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company or any of its subsidiaries, whether or not arising in the ordinary course of business, (ii) neither the Company nor any of the subsidiaries have incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) neither the Company nor any of its subsidiaries have entered into any material transaction other than in the ordinary course of business and (iv) there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. 2. Purchase and Resale of the Securities. (a) On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, $45,000,000 principal amount of Securities at a purchase price equal to 103.75% of the principal amount thereof. The Company shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be purchased as provided herein. (b) The Initial Purchaser has advised the Company that it proposes to offer the Securities for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. The Initial Purchaser, represents and warrants to, and agrees with, the Company that (i) it is purchasing the Securities pursuant to a private sale exempt from registration under the Securities Act, (ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act ("Regulation D") or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and (iii) it has solicited and will solicit offers for the Securities only from, and has offered or sold and will offer, sell or deliver the Securities, as part of its initial offering, only to persons whom it reasonably believes to be qualified institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the Securities Act, or if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and in each case, in transactions in accordance with Rule 144A. In addition to the foregoing, the Initial Purchaser acknowledges and agrees that the Company and, for purposes of the opinions to be delivered to the Initial Purchaser pursuant to Sections 5(d) and (e), counsel for the Company and for the Initial 12 12 Purchaser, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchaser and their compliance with their agreements contained in this Section 2, and Initial Purchaser hereby consents to such reliance. (c) The Company acknowledges and agrees that the Initial Purchaser may sell Securities to any affiliate of the Initial Purchaser and that any such affiliate may sell Securities purchased by it to the Initial Purchaser. 3. Delivery of and Payment for the Securities. (a) Delivery of and payment for the Securities shall be made at the offices of Cravath, Swaine & Moore ("CSM"), New York, New York, or at such other place as shall be agreed upon by the Initial Purchaser and the Company, at 10:00 A.M., New York City time, on July 1 1997, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchaser and the Company (such date and time of payment and delivery being referred to herein as the "Closing Date"). (b) On the Closing Date, payment of the purchase price for the Securities shall be made to the Company by wire or book-entry transfer of same-day funds to such account or accounts as the Company shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against delivery to the Initial Purchaser of the certificates evidencing the Notes. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchaser hereunder. Upon delivery, the Notes shall be in global form, registered in such names and in such denominations as the Initial Purchaser shall have requested in writing not less than two full business days prior to the Closing Date. The Company agrees to make one or more global certificates evidencing the Notes available for inspection by the Initial Purchaser in New York, New York at least 24 hours prior to the Closing Date. 4. Further Agreements of the Company. The Company agrees with the Initial Purchaser: (a) to advise the Initial Purchaser promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; to advise the Initial Purchaser promptly of any order preventing or suspending the use of the Offering Memorandum, of any suspension of the qualification of the Securities for offering or sale in any jurisdiction and of the initiation or threatening of any proceeding for any such purpose; and to use its best efforts to prevent the issuance of any such order preventing or suspending the use of the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to obtain the lifting thereof at the earliest possible time; 13 13 (b) to furnish promptly to the Initial Purchaser and counsel for the Initial Purchaser, without charge, as many copies of the Offering Memorandum (and any amendments or supplements thereto) as may be reasonably requested; (c) prior to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to the Initial Purchaser and counsel for the Initial Purchaser and not to effect any such amendment or supplement to which the Initial Purchaser shall reasonably object by notice to the Company after a reasonable period to review; (d) if, at any time prior to completion of the resale of the Securities by the Initial Purchaser, any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchaser or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; (e) for so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act and are not saleable pursuant to Rule 144(k) under the Securities Act, to furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being for the benefit of the holders from time to time of the Securities and prospective purchasers of the Securities designated by such holders); (f) for so long as the Securities are outstanding, to furnish to the Initial Purchaser copies of any annual reports, quarterly reports and current reports filed by the Company with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to the Trustee or to the holders of the Securities pursuant to the Indenture or the Exchange Act or any rule or regulation of the Commission thereunder; (g) to promptly take from time to time such actions as the Initial Purchaser may reasonably request to qualify the Securities for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchaser may designate and to continue such qualifications in effect for so long as required for the resale of the Securities; and to arrange for the determination of the eligibility for investment of the Securities under the laws of such 14 14 jurisdictions as the Initial Purchaser may reasonably request; provided that the Company and the Company's subsidiaries shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction; (h) to assist the Initial Purchaser in arranging for the Securities to be designated Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for the Securities to be eligible for clearance and settlement through the Depository Trust Company ("DTC"); (i) not to, and to cause their affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as such term is defined in the Securities Act) which could be integrated with the sale of the Securities in a manner which would require registration of the Securities under the Securities Act; (j) except following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and to cause their affiliates not to, and not to authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; (k) for a period of 180 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities or the Exchange Securities) without the prior written consent of the Initial Purchaser; (l) during the period from the Closing Date until two years after the Closing Date, without the prior written consent of the Initial Purchaser, not to, and not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act; (m) not to, for so long as the Securities are outstanding, be or become, or be or become owned by, an open-end investment company, unit investment 15 15 trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act, and to not be or become, or be or become owned by, a closed-end investment company required to be registered, but not registered thereunder; (n) in connection with the offering of the Securities, until the Initial Purchaser has notified the Company of the completion of the resale of the Securities, not to, and to use its reasonable best efforts to cause its affiliated purchasers (as defined in Rule 100 of Regulation M under the Exchange Act) not to, directly or indirectly, either alone or with one or more other persons, bid for, purchase, or attempt to induce any person to bid for or purchase, a covered security during the applicable restricted period; (o) in connection with the offering of the Securities, to make the officers, employees, independent accountants and legal counsel of the Company, Holdings and the Company's subsidiaries reasonably available upon request by the Initial Purchaser; (p) to furnish to the Initial Purchaser on the date hereof a copy of the independent accountants' report included in the Offering Memorandum signed by the accountants rendering such report; (q) to do and perform all things required to be done and performed by it under this Agreement that are within its control prior to or after the Closing Date, and to use its best efforts to satisfy all conditions precedent to the delivery of the Securities; (r) to not take, and to use best efforts to cause Holdings, the Company and each of the Company's subsidiaries to not take, any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the covenants contained in the Indenture; (s) to not take, and to use best efforts to cause Holdings, the Company and each of the Company's subsidiaries to not take, any action prior to the Closing Date which would require the Offering Memorandum to be amended or supplemented pursuant to Section 4(d); (t) prior to the Closing Date, not to issue, and to use best efforts to cause Holdings, the Company and each of the Company's subsidiaries not to issue, any press release or other communication directly or indirectly or hold any press conference with respect to the Company or the Company's subsidiaries, their respective conditions, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Initial Purchaser is notified), without the prior written consent of the Initial Purchaser, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchaser, such press release or communication is required by law; and 16 16 (u) to apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds". 5. Conditions of Initial Purchaser's Obligation. The obligation of the Initial Purchaser hereunder is subject to (i) the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of the Company contained herein, (ii) the accuracy of the statements of the Company and the Guarantors and their respective officers made in any certificates delivered pursuant hereto, (iii) the performance by the Company and each of the Guarantors of their respective obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchaser as promptly as practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchaser and the Company may agree; and no stop order suspending the sale of the Securities in any jurisdiction shall have been issued and no proceeding for that purpose shall have been commenced or shall be pending or threatened. (b) The Initial Purchaser shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Initial Purchaser, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Initial Purchaser, and the Company, Holdings and the Guarantors shall have furnished to the Initial Purchaser all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (d) Kirkland & Ellis ("K&E"), as counsel to the Company, and Foley & Lardner, as counsel for the Company and the Guarantors, shall have furnished to the Initial Purchaser their written opinions, addressed to the Initial Purchaser and dated the Closing Date, each in form and substance reasonably satisfactory to the Initial Purchaser. (e) The Initial Purchaser shall have received from CSM, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchaser may reasonably require, and the Company, Holdings and the Guarantors shall have furnished to such counsel such documents and information as CSM requests for the purpose of enabling them to pass upon such matters. 17 17 (f) The Company shall have furnished to the Initial Purchaser a letter (the "Initial Letter") of Ernst & Young LLP, addressed to the Initial Purchaser and dated June 26, 1997, in form and substance satisfactory to the Initial Purchaser, substantially to the effect set forth in Annex B hereto. (g) The Company shall have furnished to the Initial Purchaser a letter (the "Bring-Down Letter") of Ernst & Young LLP, addressed to the Initial Purchaser and dated the Closing Date (i) confirming that they are independent public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings thereunder, (ii) stating, as of the date of the Bring-Down Letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than three business days prior to the date of the Bring-Down Letter), that the conclusions and findings of such accountants with respect to the financial information and other matters covered by the Initial Letter are accurate and (iii) confirming in all material respects the conclusions and findings set forth in the Initial Letter. In addition, The Company shall have received letters from such accountants consenting to the use, in connection with the offering of the Securities, of the audited consolidated financial statements of The Company prepared by such accountants and included in the Offering Memorandum. (h) Each of the Company and the Guarantors shall have furnished to the Initial Purchaser a certificate, dated the Closing Date, of its chief executive officer or president and its chief financial officer stating that (A) such officers have carefully examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (C) as of the Closing Date, the representations and warranties of the Company and each of the Guarantors in this Agreement are true and correct in all material respects, the Company and each of the Guarantors have complied with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder on or prior to the Closing Date, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum, there has been no material adverse change in the financial position or results of operation of The Company or any of its subsidiaries, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole. 18 18 (i) The Indenture shall have been duly executed and delivered by the Company and each of the Guarantors and the Trustee, and the Notes shall have been duly executed and delivered by the Company and duly authenticated by the Trustee. (j) The Securities shall have been approved by the NASD for trading in the PORTAL Market. (k) If any event shall have occurred that requires the Company under Section 4(d) to prepare an amendment or supplement to the Offering Memorandum, such amendment or supplement shall have been prepared, the Initial Purchaser shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchaser reasonably in advance of the Closing Date. (l) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which in the judgment of the Initial Purchaser would materially impair the ability of the Initial Purchaser to purchase, hold or effect resales of the Securities as contemplated hereby. (m) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change in the capital stock or long-term debt or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole, the effect of which, in any such case described above, is, in the judgment of the Initial Purchaser, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). (n) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities. (o) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Securities or the Company's 11-1/8% Senior Subordinated Notes due 2007 (the "Old Notes") by any "nationally recognized statistical rating organization", as such term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and 19 19 regulations of the Commission under the Securities Act and (ii) no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Securities or the Old Notes. (p) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange, the NASDAQ market or the over-the-counter market shall have been suspended or limited, or minimum prices shall have been established on any such exchange or market by the Commission, by any such exchange or by any other regulatory body or governmental authority having jurisdiction, or (ii) any moratorium on commercial banking activities shall have been declared by federal or New York state authorities or (iii) an outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war or (iv) a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) the effect of which, in the case of this clause (iv), is, in the judgment of the Initial Purchaser, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery of the Securities on the terms and in the manner contemplated by this Agreement and in the Offering Memorandum (exclusive of any amendment or supplement thereto). (q) Substantially simultaneously with the sale of the Securities hereunder (i) the bank waiver allowing the issuance of the Notes contemplated by the Offering Memorandum shall have been obtained; and (ii) the Initial Purchaser shall have received a counterpart of the Registration Rights Agreement which shall have been executed and delivered by a duly authorized officer of the Company and each of the Guarantors. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchaser. 6. Termination. The obligations of the Initial Purchaser hereunder may be terminated by the Initial Purchaser, in its absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in Section 5(l), (m), (n), (o) or (p) shall have occurred and be continuing. 7. Reimbursement of Initial Purchaser's Expenses. If (a) this Agreement shall have been terminated pursuant to Section 6, (b) the Company shall fail to tender the Securities for delivery to the Initial Purchaser for any reason permitted under this Agreement or (c) the Initial Purchaser shall decline to purchase the Securities for any reason permitted under this Agreement, the Company shall reimburse the Initial Purchaser for such out-of-pocket expenses (including reasonable fees and disbursements 20 20 of counsel) as shall have been reasonably incurred by the Initial Purchaser in connection with this Agreement and the proposed purchase and resale of the Securities. 8. Indemnification. (a) The Company shall indemnify and hold harmless the Initial Purchaser, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 8(a) and Section 9 as the Initial Purchaser), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Securities), to which the Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum or in any amendment or supplement thereto or in the Initial Purchaser's information provided by the Company pursuant to Section 4(e) or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse the Initial Purchaser promptly upon demand for any legal or other expenses reasonably incurred by the Initial Purchaser in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with the Initial Purchaser's Information; and provided, further, that with respect to any such untrue statement in or omission from the Preliminary Offering Memorandum, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of the Initial Purchaser to the extent that the sale to the person asserting any such loss, claim, damage, liability or action was an initial resale by the Initial Purchaser and any such loss, claim, damage, liability or action of or with respect to the Initial Purchaser results from the fact that to the extent required by applicable law, a copy of the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such person unless such failure to deliver the Offering Memorandum was a result of non-compliance by the Company with Section 4(b). (b) The Initial Purchaser shall indemnify and hold harmless the Company, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 8(b) and Section 9 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is 21 21 based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with the Initial Purchaser's Information, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 8(a) or 8(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable 22 22 fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 8(a) and 8(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. The obligations of the Company and the Initial Purchaser in this Section 8 and in Section 9 are in addition to any other liability that the Company or the Initial Purchaser, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 9. Contribution. If the indemnification provided for in Section 8 is unavailable or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchaser on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Initial Purchaser on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchaser on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company, on the one hand, and the total discounts and commissions received by the Initial Purchaser with respect to the Securities purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the Securities under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company or information supplied by the Company on the one hand or to the Initial Purchaser's Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Initial Purchaser agree that it would not be just and equitable if 23 23 contributions pursuant to this Section 9 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 9 shall be deemed to include, for purposes of this Section 9, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 9, the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total discounts and commissions received by the Initial Purchaser with respect to the Securities purchased by it under this Agreement exceeds the amount of any damages which the Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 10. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser, the Company and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided in Sections 8 and 9 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Company and the Initial Purchaser and in Section 4(e) with respect to holders and prospective purchasers of the Securities. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 10, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 11. Expenses. The Company agrees with the Initial Purchaser to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Securities, including stamp duties and transfer taxes, if any, payable upon issuance of the Securities; (e) the fees and expenses of the Company's counsel and independent accountants; (f) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in Section 4(h) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of counsel for the Initial Purchaser); (g) any fees charged by rating agencies for rating the Securities; (h) the fees and expenses of the Trustee and any paying agent (including related fees and expenses of any counsel to such parties); (i) all expenses and application fees incurred in connection with the application for the inclusion of the Securities on the PORTAL Market and the approval of the Securities for book-entry transfer by DTC; and (j) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement which are not otherwise specifically provided for in this Section 11; provided, however, that except as 24 24 provided in this Section 11 and Section 7, the Initial Purchaser shall pay its own costs and expenses. 12. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company and the Initial Purchaser contained in this Agreement or made by or on behalf of the Company or the Initial Purchaser pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers, directors, employees, representatives, agents or controlling persons. 13. Notices, etc.. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchaser, shall be delivered or sent by mail or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Gerard J. Murray (telecopier no.: (212) 270-0994); or (b) if to the Company, shall be delivered or sent by mail or telecopy transmission to the address of the Company set forth in the Offering Memorandum, Attention: James K. Hildebrand (telecopier no.: 614-889-8308); provided that any notice to the Initial Purchaser pursuant to Section 8(c) shall also be delivered or sent by mail to the Initial Purchaser at its address set forth on the signature page hereof. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. 14. Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 15. Initial Purchaser's Information. The parties hereto acknowledge and agree that the Initial Purchaser's Information consists solely of the following information in the Offering Memorandum: (i) the last paragraph on the front cover page concerning the terms of the offering by the Initial Purchaser; (ii) the first paragraph on the inside front cover page concerning over-allotment and trading activities by the Initial Purchaser; and (iii) the statements concerning the Initial Purchaser contained in the third, fourth, sixth and seventh paragraphs under the heading "Plan of Distribution". 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 25 25 17. Counterparts. This Agreement may be executed in one or more counterparts (which may include counterparts delivered by telecopier) and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 18. Amendments. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 19. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 26 26 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Company, the Guarantors and the Initial Purchaser in accordance with its terms. Very truly yours, NEENAH CORPORATION By______________________________________ Name: Title: NEENAH FOUNDRY COMPANY By______________________________________ Name: Title: HARTLEY CONTROLS CORPORATION By______________________________________ Name: Title: NEENAH TRANSPORT, INC. By______________________________________ Name: Title: Accepted: CHASE SECURITIES INC. By____________________________ 27 27 Authorized Signatory Address for notices pursuant to Section 9(c): 1 Chase Plaza, 25th floor New York, New York 10081 Attention: Legal Department 28 ANNEX A [Form of Exchange and Registration Rights Agreement] 29 29 ANNEX B-1 [Form of Opinion of Counsel for the Company] Kirkland & Ellis shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) Holdings has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged (except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a Material Adverse Effect); (ii) all of the outstanding shares of capital stock of Holdings have been, and upon the consummation of the Merger all of the outstanding shares of capital stock of Holdings will be, duly and validly authorized and issued and fully paid and non-assessable; (iii) the statements in the Offering Memorandum under the heading "Certain United States Federal Income Tax Considerations", to the extent that they constitute summaries of matters of law or regulation or legal conclusions, have been reviewed by such counsel and fairly summarize the matters described therein in all material respects; and such counsel does not have actual knowledge of any current or pending legal or governmental actions, suits or proceedings which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required; (iv) the Indenture conforms in all material respects with the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; (v) Holdings has full right, power and authority to execute and deliver each of the Transaction Documents to which is a party and to perform its obligations thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents to which Holdings is a party and the consummation of the transactions contemplated thereby have been duly and validly taken; 30 30 (vi) assuming the due authorization, execution and delivery of the Purchase Agreement by the Company, the Purchase Agreement constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution, and delivery of the Neenah Letter Agreement by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah and each of the Guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification provisions thereof may be limited by applicable law; (vii) upon the due authorization, execution and delivery of the Registration Rights Agreement by Neenah and the Guarantors, the Registration Rights Agreement will constitute a valid and legally binding agreement of the Neenah and each of the Guarantors, enforceable against each of them in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification provisions thereof may be limited by applicable law; (viii) assuming the due authorization, execution and delivery of the Indenture by the Company and the Trustee, the Indenture constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution and delivery of the Supplemental Indenture by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah as primary obligor and each of the Guarantors as note guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (ix) assuming the due authorization and execution of the Securities by the Company and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with the Purchase Agreement, the Securities constitute valid and legally binding obligations of the Company (and, upon the due authorization, execution and delivery of the Supplemental Indenture by the parties thereto, of Neenah and the Guarantors) entitled to the benefits of the Indenture and enforceable against the Company (and Neenah as primary obligor and each of the Guarantors as note guarantors) in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); 31 31 (x) the Merger Agreement has been duly authorized, executed and delivered by Holdings; (xi) each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum; (xii) the execution, delivery and performance by Holdings of each of the Transaction Documents to which it is a party, the compliance by Holdings with the terms of each of the Transaction Documents to which it is a party and the consummation of the Transactions will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Holdings pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Holdings is a party or by which it is bound or to which its property or assets is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of Holdings or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over Holdings or any of its properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by Holdings of each of the Transaction Documents to which it is a party, the compliance by Holdings with the terms of each of the Transaction Documents to which it is a party and the consummation of the Transactions, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement; (xiii) to the best knowledge of such counsel, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which Holdings is a party or of which any property or assets of Holdings is the subject which (A) singularly or in the aggregate, if determined adversely to Holdings, could reasonably be expected to have a Material Adverse Effect or (B) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (xiv) Holdings is not (A) in violation of its charter or by-laws, (B) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (C) in violation in any material respect of any 32 32 law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject; (xv) neither the consummation of the transactions contemplated by the Purchase Agreement nor the sale, issuance, execution or delivery of the Securities will violate Regulation G, T, U or X of the Federal Reserve Board; and (xvi) assuming the accuracy of the representations, warranties and agreements of the Company (and, upon the due authorization, execution and delivery of the Neenah Letter Agreement, of Neenah and the Guarantors) and of the Initial Purchasers contained in the Purchase Agreement, the issuance and sale of the Securities and the offer, resale and delivery of the Securities in the manner contemplated by the Purchase Agreement and the Offering Memorandum, are exempt from the registration requirements of the Securities Act, and it is not necessary to qualify the Indenture under the Trust Indenture Act. Such counsel shall also state that they have participated in conferences with representatives of the Company and Neenah and with representatives of Neenah's independent accountants and counsel at which conferences the contents of the Offering Memorandum and any amendment and supplement thereto and related matters were discussed and, although such counsel assume no responsibility for the accuracy, completeness or fairness of the Offering Memorandum, any amendment or supplement thereto (except as expressly provided above), nothing has come to the attention of such counsel to cause such counsel to believe that the Offering Memorandum or any amendment or supplement thereto (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of Neenah and public officials which are furnished to the Initial Purchasers. 33 33 ANNEX B-2 [Form of Opinion of Counsel for the Company and Neenah] Foley & Lardner shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company and to Neenah, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) The Company has been, and upon consummation of the Merger each of Neenah and each of the Guarantors will be, duly incorporated and validly existing as corporations under the laws of the State of Wisconsin; (ii) all of the outstanding shares of capital stock of the Company have been, and upon the consummation of the Merger all of the outstanding shares of capital stock of Neenah will be, duly and validly authorized and issued and fully paid and non-assessable, except as set forth in Section 180.0622(2)(b) of the Wisconsin Statutes, as judicially interpreted; and upon the consummation of the Merger and the other Transactions the capital stock of Neenah will conform in all material respects to the description thereof contained in the Offering Memorandum; (iii) each of the Company, Neenah and each of the Guarantors has full right, power and authority to execute and deliver each of the Transaction Documents to which is a party and to perform its obligations thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents to which any of the Company, Neenah or any of the Guarantors is a party and the consummation of the transactions contemplated thereby have been duly and validly taken; (iv) the Purchase Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution, and delivery of the Neenah Letter Agreement by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah and each of the Guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification provisions thereof may be limited by applicable law; (v) the Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding agreement of the Company (and, upon the due authorization, execution and delivery of the Supplemental 34 34 Indenture by the parties thereto, of Neenah and the Guarantors) enforceable against the Company (and Neenah as primary obligor and each of the Guarantors as note guarantors) in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (vi) the Securities have been duly authorized and issued by the Company and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with the Purchase Agreement, will constitute valid and legally binding obligations of the Company (and, upon the due authorization, execution and delivery of the Supplemental Indenture by the parties thereto, of Neenah and the Guarantors) entitled to the benefits of the Indenture and enforce able against the Company (and Neenah as primary obligor and each of the Guarantors as note guarantors) in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (vii) the Merger Agreement has been duly authorized, executed and delivered by the Company, and assuming due authorization, execution and delivery by Neenah and Holdings, will constitute a valid and legally binding agreement of Neenah, the Company and Holdings enforceable against Neenah, the Company and Holdings in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (viii) the execution, delivery and performance by each of the Company, Neenah and each of the Guarantors of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities by the Company, the compliance by each of the Company, Neenah and each of the Guarantors with the terms of each of the Transaction Documents to which each is a party and the consummation of the Transactions will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, Neenah or any of the Guarantors pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company, Neenah or any of the Guarantors is a party or by which any of them are bound or to which the property or assets of any of them is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of any of the Company, Neenah or any of the Guarantors or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over any of the Company, Neenah or any of the Guarantors or any of their properties or assets; 35 35 and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by each of the Company, Neenah and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance, authentication, sale and delivery of the Securities by the Company, the compliance by each of the Company, Neenah and each of the Guarantors with the terms of each of the Transaction Documents to which each is a party and the consummation of the Transactions, except for such consents, approvals, authorizations, filings, registrations or qualifications (i) which have been obtained or made prior to the Closing Date and (ii) as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement; (ix) to the best knowledge of such counsel, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which the Company is a party or of which any property or assets of the Company is the subject which (A) singularly or in the aggregate, if determined adversely to the Company, could reasonably be expected to have a Material Adverse Effect or (B) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (x) the Company is not (A) in violation of its charter or by-laws, (B) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (C) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject; (xi) neither the Company, Neenah nor any of Neenah's subsidiaries is (A) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act and the rules and regulations of the Commission thereunder, without taking account of any exemption under the Investment Company Act arising out of the number of holders of securities of the Company, Neenah or Neenah's subsidiaries or (B) a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended; (xii) each of the Letter Agreement, the Supplemental Indenture and the Registration Rights Agreement has been duly authorized, executed and delivered by Neenah and each of the Guarantors, and each of the Letter Agreement, the Supplemental Indenture and the Registration Rights 36 36 Agreement is enforceable against Neenah and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (xii) neither the consummation of the transactions contemplated by the Purchase Agreement nor the assumption of the Notes by Neenah or the guarantee of the Notes by the Guarantors will violate Regulation G, T, U or X of the Federal Reserve Board. In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company, Neenah and public officials which are furnished to the Initial Purchasers. 37 37 ANNEX B-3 [Form of Opinion of Counsel for Neenah] Quarles & Brady shall have furnished to the Initial Purchasers their written opinion, as counsel to Neenah and the Guarantors, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) Neenah and each of the Guarantors has been duly incorporated and is validly existing as a corporation under the laws of Wisconsin, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged (except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a Material Adverse Effect), (ii) all of the outstanding shares of capital stock of Neenah and each of the Guarantors have been duly and validly authorized and issued and are fully paid and non-assessable, except as set forth in Section 180.0622(2)(b) of the Wisconsin Statutes, as judicially interpretated. Upon consummation of and by virtue of the Merger, each outstanding share of the Company's common stock, without par value, will be converted into one share of the Class A Common Stock of Neenah, and each outstanding share of the Common Stock of Neenah will be converted into cash as provided in the Merger Agreement; (iii) to the best knowledge of such counsel, there are not any current or pending legal or governmental actions, suits or proceedings which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required; (iv) the Merger Agreement has been duly authorized, executed and delivered by Neenah, and assuming due authorization, execution and delivery by the Company and Holdings, will constitute a valid and legally binding agreement of Neenah enforceable against Neenah in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law); (v) the execution, delivery and performance by Neenah of the Merger Agreement and compliance by Neenah with the terms thereof will not conflict with or result in a breach or violation of any of the terms or provisions of, or 38 38 constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Neenah or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which Neenah or any of its subsidiaries is a party or by which Neenah or any of its subsidiaries is bound or to which any of the property or assets of Neenah or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of Neenah or any of its subsidiaries or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over Neenah or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by Neenah of the Merger Agreement, and compliance by Neenah with the terms thereof and the consummation of the Merger, except for such consents, approvals, authorizations, filings, registrations or qualifications which have been obtained or made prior to the Closing Date; (vi) to the best knowledge of such counsel, there are no pending actions or suits or judicial, arbitral, rule-making, administrative or other proceedings to which Neenah or any of its subsidiaries is a party or of which any property or assets of Neenah or any of its subsidiaries is the subject which (A) singularly or in the aggregate, if determined adversely to Neenah or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect or (B) questions the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (vii) neither Neenah nor any of its subsidiaries is (A) in violation of its charter or by-laws, (B) in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (C) in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject; [Such counsel shall also state that they have participated in conferences with representatives of Neenah and with representatives of Neenah's independent accountants and counsel at which conferences the contents of the Offering Memorandum and any amendment and supplement thereto and related matters were discussed and, although such counsel assume no responsibility for the accuracy, completeness or fairness of the Offering Memorandum, any amendment or supplement thereto (except as expressly provided above), nothing has come to the attention of such counsel to cause such counsel to believe that the Offering Memorandum or any 39 39 amendment or supplement thereto (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.] In rendering such opinion, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of Neenah and public officials which are furnished to the Initial Purchasers. 40 40 ANNEX C [Form of Initial Comfort Letter] Neenah shall have furnished to the Initial Purchasers a letter of Ernst & Young LLP, addressed to the Initial Purchasers and dated the date of the Purchase Agreement, in form and substance satisfactory to the Initial Purchasers, substantially to the effect set forth below: (i) they are independent certified public accountants with respect to the Company within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings; (ii) in their opinion, the audited financial statements and pro forma financial information included in the Offering Memorandum and reported on by them comply in form in all material respects with the accounting requirements of the Exchange Act and the related published rules and regulations of the Commission thereunder that would apply to the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); (iii) based upon a reading of the latest unaudited financial statements made available by Neenah, the procedures of the AICPA for a review of interim financial information as described in Statement of Auditing Standards No. 71, reading of minutes and inquiries of certain officials of Neenah who have responsibility for financial and accounting matters and certain other limited procedures requested by the Initial Purchasers and described in detail in such letter, nothing has come to their attention that causes them to believe that (A) any unaudited consolidated financial statements included in the Offering Memorandum do not comply as to form in all material respects with applicable accounting requirements, (B) any material modifications should be made to the unaudited consolidated financial statements included in the Offering Memorandum for them to be in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited consolidated financial statements included in the Offering Memorandum or (C) the information included under the headings ["Summary--Summary Consolidated Financial and Other Data", "Capitalization", "Selected Consolidated Financial and Other Data", "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Management-Compensation of Executive Officers"] is not in conformity with the disclosure requirements of Regulation S-K that would apply to the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act; 41 41 (iv) based upon the procedures detailed in such letter with respect to the period subsequent to the date of the last available balance sheet, including reading of minutes and inquiries of certain officials of Neenah who have responsibility for financial and accounting matters, nothing has come to their attention that causes them to believe that (A) at a specified date not more than three business days prior to the date of such letter, there was any change in capital stock, increase in long-term debt or decrease in net current assets as compared with the amounts shown in the December 31, 1996 unaudited balance sheet included in the Offering Memorandum or (B) for the period from December 31, 1996 to a specified date not more than three business days prior to the date of such letter, there were any decreases, as compared with the corresponding period in the preceding year, in net sales, income from operations, EBITDA or net income, except in all instances for changes, increases or decreases that the Offering Memorandum discloses have occurred or which are set forth in such letter, in which case the letter shall be accompanied by an explanation by Neenah as to the significance thereof unless said explanation is not deemed necessary by the Initial Purchasers; (v) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company) set forth in the Offering Memorandum agrees with the accounting records of Neenah, excluding any questions of legal interpretation; and (vi) on the basis of a reading of the unaudited pro forma financial information included in the Offering Memorandum, carrying out certain specified procedures, reading of minutes and inquiries of certain officials of Neenah who have responsibility for financial and accounting matters and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial information, nothing came to their attention which caused them to believe that the pro forma financial information does not comply in form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such information. 42 42 EXHIBIT D April__, 1997 CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED c/o CHASE SECURITIES INC. 270 Park Avenue New York, NY 10017 Dear Sirs: Reference is hereby made to the Purchase Agreement dated April__, 1997 (the "Purchase Agreement"), between NC Merger Company, a Wisconsin corporation (the "Company"), and you pursuant to which the Company has agreed to issue and sell and you have agreed to purchase the Securities described therein on the terms set forth therein. Capitalized terms used herein but not otherwise defined herein have meanings assigned thereto in the Purchase Agreement (including by reference therein to the Offering Memorandum). This is the letter agreement referred to in Section 5(q) of the Purchase Agreement. The parties hereto agree that this Letter Agreement is being executed and delivered in connection with the issue and sale of the Securities pursuant to the Purchase Agreement and to induce the Initial Purchasers to purchase the Securities thereunder. Neenah (as the Company's successor after the Merger) and each of the Guarantors hereby confirm their agreement with you as follows: SECTION 1. In accordance with Section 5(q) of the Purchase Agreement, Neenah and each of the Guarantors by their respective signatures below each becomes a party to the Purchase Agreement on the same terms and with the same ongoing obligations and rights as the Company thereunder with the same force and effect as if originally named therein as a party and Neenah and each of the Guarantors jointly and severally agrees to all the terms and provisions of the Purchase Agreement applicable to the Company thereunder including, but not limited to, under Sections 8, 9, 10 and 12 thereof. SECTION 2. Neenah and each of the Guarantors hereby represents and warrants to, and agrees with, each of you as of the date hereof that: (a) each of them has full right, power and authority to execute and deliver this Letter Agreement and perform its obligations hereunder and all 43 43 corporate action required to be taken by each of them for the due and proper authorization, execution, delivery and performance of this Letter Agreement and the consummation of the transactions contemplated hereby has been duly and validly taken and this Letter Agreement has been duly authorized and validly executed and delivered by each of them and is the valid and legally binding agreement of each of them enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and except as rights to indemnity and contribution may be limited under applicable law; (b) each of them has full right, power and authority to execute and deliver the Supplemental Indenture and perform its obligations thereunder and all corporate action required to be taken by each of them for the due and proper authorization, execution, delivery and performance of the Supplemental Indenture and the consummation of the transactions contemplated thereby have been duly and validly taken; the Supplemental Indenture has been duly authorized by each of them, and, when duly executed and delivered in accordance with its terms by each party thereto, the Supplemental Indenture will constitute the valid and legally binding agreement of Neenah as primary obligor, and of each of the Guarantors, as note guarantors, and will be enforceable against Neenah and each of the Guarantors in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); and (c) the representations, warranties and agreements set forth in Section 1 of the Purchase Agreement are true and accurate on the date hereof as if made on such date by Neenah and each of the Guarantors, and each reference therein to the knowledge of the Company shall be deemed to be a reference to the knowledge of Neenah and each of the Guarantors. SECTION 3. THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 4. This Letter Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. SECTION 5. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Letter Agreement. 44 44 If the foregoing is in accordance with your understanding of the agreement among the parties hereto, kindly indicate your acceptance in the space provided for that purpose below. Very truly yours, NEENAH CORPORATION, By ______________________ Name: Title: NEENAH FOUNDRY COMPANY, By ______________________ Name: Title: HARTLEY CONTROLS CORPORATION, By ______________________ Name: Title: NEENAH TRANSPORT, INC., By ______________________ Name: Title: CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED By CHASE SECURITIES INC., By _________________ Name: Title: EX-4.9 14 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT 1 Exhibit 4.9 EXECUTION COPY NEENAH CORPORATION $45,000,000 11-1/8 % SERIES C SENIOR SUBORDINATED NOTES DUE 2007 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT July 1, 1997 CHASE SECURITIES INC. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Neenah Corporation, a Wisconsin corporation (the "Company"), proposes to issue and sell to you (the "Initial Purchaser"), upon the terms and subject to the conditions set forth in a purchase agreement dated June 26, 1997 (the "Purchase Agreement"), $45,000,000 aggregate principal amount of its 11-1/8 % Series C Senior Subordinated Notes due 2007 (the "Notes"). The Notes will be issued pursuant to an Indenture to be dated as of July 1, 1997 (the "Indenture") between the Company and United States Trust Company of New York, as Trustee (the "Trustee") and will be fully guaranteed (the "Guarantees", and collectively with the Notes, the "Securities") on an unsecured senior subordinated basis as to payment, premium, if any, and interest by the Company's principal operating subsidiaries (collectively, the "Guarantors"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. Pursuant to the Purchase Agreement, substantially simultaneously with the sale of the Notes to the Initial Purchaser, the Company and the Guarantors are required to enter into an exchange and registration rights agreement in the form hereof. Accordingly, the Company and the Guarantors hereby agree with you, for the benefit of the holders of the Securities (including the Initial Purchaser) (the "Holders"), as follows: 1. Registered Exchange Offer. The Company and the Guarantors shall (i) prepare and, not later than 45 days following the date of original issuance of the Securities (the "Issue Date"), file with the Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act 2 2 with respect to a proposed offer to the Holders (the "Registered Exchange Offer") to issue and deliver to such Holders, in exchange for the Securities, a like aggregate principal amount of debt securities of the Company (the "Exchange Securities") identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use their reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 105 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 135 days after the Issue Date, and (iii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date that notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture or an indenture (the "Exchange Securities Indenture") between the Company, the Guarantors and the Trustee or such other bank or trust company reasonably satisfactory to you, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture except for the transfer restrictions relating to the Securities (as described above). Upon the effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder to elect to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company, a Guarantor or an Exchanging Dealer (as defined below) not complying with the requirements of the next sentence, (b) acquires the Exchange Securities in the ordinary course of such Holder's business and (c) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Guarantors, the Initial Purchaser and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, (i) each Holder which is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if the Initial Purchaser elects to sell Exchange Securities acquired in exchange for Securities constituting any unsold portion of the original offering, it is required to deliver a prospectus containing the 3 3 information required by Items 507 or 508 of Regulation S-K under the Securities Act and the Exchange Act ("Regulation S-K"), as applicable, in connection with such a sale. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 20 business days after the date that notice of the Registered Exchange Offer is mailed to the Holders (or longer if required by applicable law); (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; and (d) otherwise comply in all respects with all laws applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (a) accept for exchange all Securities validly tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (b) deliver to the Trustee for cancelation all Securities so accepted for exchange; and (c) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder of Securities, Exchange Securities equal in principal amount to the Securities of such Holder so accepted for exchange. The Company shall make available, for a period of 180 days after the consummation of the Registered Exchange Offer, a copy of the prospectus forming part of the Exchange Offer Registration Statement to any broker-dealer for use in connection with any resale of any Exchange Securities. Interest on each Exchange Security issued pursuant to the Registered Exchange Offer will accrue from the last interest payment date on which interest was paid 4 4 on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or any of the Guarantors, or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Company and the Guarantors will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include, as of the consummation of the Registered Exchange Offer, an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations of the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason the Registered Exchange Offer is not consummated within 135 days after the Issue Date, or (iii) the Initial Purchaser so requests with respect to Securities not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by the Initial Purchaser following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: (a) The Company and the Guarantors shall use their reasonable best efforts to file as promptly as practicable with the Commission, and thereafter shall use their reasonable best efforts to cause to be declared effective, a shelf registration statement on 5 5 an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company and the Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders for a period of two years from the Issue Date or such shorter period that will terminate when all the Securities and Exchange Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company and the Guarantors shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if any one of them voluntarily takes any action that would result in Holders of Securities or Exchange Securities covered thereby not being able to offer and sell such Securities or Exchange Securities during that period, unless such action is required by applicable law (c) Notwithstanding any other provisions hereof, the Company and the Guarantors will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. Liquidated Damages. (a) The parties hereto agree that the Holders of Securities will suffer damages if the Company and the Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the applicable Registration Statement is not filed with the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case 6 6 may be, is not declared effective within 105 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation), (iii) the Registered Exchange Offer is not consummated on or prior to 135 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation) but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors will be obligated to pay liquidated damages to each holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. As used herein, the term "Transfer Restricted Securities" means each Security or Exchange Security until (i) the date on which such Security or Exchange Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) the date on which such Security or Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Security or Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company and the Guarantors shall not be required to pay liquidated damages to the holder of Transfer Restricted Securities if such holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company and the Guarantors shall pay the liquidated damages due on the Transfer Restricted Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the liquidated damages then due. The liquidated damages 7 7 due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay liquidated damages shall be deemed to accrue from and including the date of the applicable Registration Default. (c) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to you, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that the Initial Purchaser (with respect to any portion unsold from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration, shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably (as determined by the Company) may propose; (ii) if applicable, include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by the Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise you and the Holders (if applicable) and, if requested by you or any such Holder, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; 8 8 (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities or the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Guarantors will make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. (d) The Company will furnish to each holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). (e) The Company will, during the Shelf Registration Period, promptly deliver to each holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Exchanging Dealer and to the Initial Purchaser, as applicable, which so requests, without charge, at least one copy of the 9 9 Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if the Exchanging Dealer or the Initial Purchaser, as applicable, so requests in writing, all exhibits (including those incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Exchanging Dealer and to the Initial Purchaser, as applicable, without charge, as many copies of the prospectus included within the coverage of the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Exchanging Dealer or the Initial Purchaser, as applicable, may reasonably request for delivery by (i) such Exchanging Dealer in connection with a sale of Exchange Securities received by it pursuant to the Registered Exchange Offer or (ii) the Initial Purchaser in connection with a sale of Exchange Securities received by it in exchange for Securities constituting any unsold portion of the original offering; and the Company consents to the use of such prospectus or any amendment or supplement thereto by any such Exchanging Dealer or by the Initial Purchaser, as applicable, as aforesaid. (h) Prior to any public offering of Securities or Exchange Securities pursuant to any Registration Statement, the Company and the Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities or Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities or Exchange Securities covered by such Registration Statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company and the Guarantors will cooperate with the Holders of Securities or Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities or Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing prior to sales of Securities or Exchange Securities pursuant to such Registration Statement. (j) If any event contemplated by paragraphs (b)(ii) through (v) above occurs during the period for which the Company is required to maintain an effective Registration Statement, the Company and the Guarantors will promptly prepare a 10 10 post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities or purchasers of Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities or Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Securities or Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company and the Guarantors will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earnings statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company and the Guarantors will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each holder of Transfer Restricted Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice of the Company pursuant to Section 4(b)(ii) through (v) hereof, such holder will discontinue disposition of such Transfer Restricted Securities until such holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) hereof or until advised in writing (the 11 11 "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Company and the Guarantors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities pursuant to such Shelf Registration Statement. (q) In the case of a Shelf Registration Statement, each of the Company and the Guarantors shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined in Section 5 below) acting for, Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold and any underwriter participating in any disposition of Securities or Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and and the Guarantors and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company and the Guarantors shall, if requested by Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use their reasonable best efforts to cause (i) their counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities or Exchange Securities, as applicable, in customary form, (ii) their officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) and (iii) their independent public accountants to provide a comfort 12 12 letter in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Company and the Guarantors will bear all expenses incurred in connection with the performance of their obligations under Sections 1, 2, 3 and 4 and the Company and the Guarantors will reimburse the Initial Purchaser and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities and the Exchange Securities to be sold pursuant to each Registration Statement (the "Special Counsel") acting for the Initial Purchaser or Holders in connection therewith. 6. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Exchanging Dealer or the Initial Purchaser, as applicable, the Company and the Guarantors shall jointly and severally indemnify and hold harmless each Holder, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities or Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, 13 13 claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities or Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) to the extent required by applicable law, a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities or Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g). (b) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, the Guarantors, their affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company or the Guarantors within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Securities or Exchange Securities pursuant to such Shelf Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) 14 14 by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party(which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such 15 15 settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 7. Contribution. If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, in such proportion as shall be appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other with respect to the actions, statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, has been taken or made by, or relates to information supplied by, such indemnifying party or indemnified party, and the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a holder of Transfer Restricted Securities or Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Transfer Restricted Securities or Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Rules 144 and 144A. The Company and the Guarantors shall use their reasonable best efforts to file the reports required to be filed by them under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company or the Guarantors are not required to file such reports, they will, upon the written request of any holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. 16 16 The Company and the Guarantors covenant that they will take such further action as any holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 9. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, lock-up letters, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities and the Exchange Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of the Holders of Securities or Exchange Securities whose Securities or Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities or Exchange Securities being sold by such Holders pursuant to such Registration Statement. 17 17 (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to the Initial Purchaser; (2) if to the Initial Purchaser, initially at its address set forth in the Purchase Agreement; and (3) if to the Company or a Guarantor, initially at the address of the Company set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) 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. (e) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 18 18 (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (h) Remedies. In the event of a breach by the Company or the Guarantors, or by any holder of Transfer Restricted Securities, of any of their obligations under this Agreement, each holder of Transfer Restricted Securities or the Company and each Guarantor, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or any of the Guarantors of any of their obligations under Sections 1 or 2 hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, the Guarantors and each holder of Transfer Restricted Securities agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. The Company and each of the Guarantors represents, warrants and agrees that (i) it has not entered into and shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities. (k) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired 19 19 or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. Please confirm that the foregoing correctly sets forth the agreement among the Company, the Guarantors and you. Very truly yours, NEENAH CORPORATION By______________________________ Name: Title: HARTLEY CONTROLS CORPORATION By______________________________ Name: Title: NEENAH TRANSPORT, INC. By______________________________ Name: Title: 20 20 Accepted: CHASE SECURITIES INC. By____________________________ Authorized Signatory 21 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company and the Guarantors have agreed that, for a period of 180 days after the Expiration Date (as defined herein) they will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 22 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution." 23 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company and the Guarantors have agreed that, for a period of 180 days after the Expiration Date, they will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until _______________, 1997, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus. 1/ Neither the Company nor the Guarantors will receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company and the Guarantors will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the - -------- 1/ In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Registered Exchange Offer prospectus. 24 Letter of Transmittal. The Company and the Guarantors have agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 25 ANNEX D / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:__________________________________________________________________ Address:_______________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-4.10 15 FORM OF GLOBAL NOTE 1 Exhibit 4.10 EXHIBIT A [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 1/ [Restricted Securities Legend] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE - -------- 1 This paragraph should only be added if the Security is issued in global form. 2 2 PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PURCHASE PRICE OF $250,000 FOR SUCH SECURITIES FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. NEENAH CORPORATION 11-1/8% SERIES C SENIOR SUBORDINATED NOTE DUE 2007 No. # CUSIP No. [ ] $[ ] NEENAH CORPORATION, a Wisconsin corporation, promises to pay to [ ], or registered assigns, the principal sum of $[ ] on May 1, 2007. 3 3 Interest Payment Dates: May 1 and November 1 Record Dates: April 15 and October 15 Additional provisions of this Security are set forth on the other side of this Security. Dated: July 1, 1997 NEENAH CORPORATION, by ----------------------- Name: Title: ----------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by --------------------------- Authorized Signatory 4 4 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11-1/8% Series C Senior Subordinated Note due 2007 1. Interest Neenah Corporation, a Wisconsin corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company and the Guarantor Subsidiaries will use their best efforts to have the Exchange Offer Registration Statement or, if applicable, the Shelf Registration Statement (each a "Registration Statement") declared effective by the Commission as promptly as practicable after the filing thereof. If (i) the Shelf Registration Statement or Exchange Offer Registration Statement, as applicable under the Exchange and Registration Rights Agreement is not filed with the Commission on or prior to 45 days after the Issue Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 105 days after the Issue Date, (iii) the Exchange Offer is not consummated on or prior to 135 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 105 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company will pay liquidated damages to each 5 5 holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such holder until the applicable Registration Statement is filed or declared effective, the Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such liquidated damages. For purposes of the foregoing, "Transfer Restricted Securities" means each Initial Security until (i) the date on which such Initial Security has been exchanged for a freely transferable Exchange Security in the Exchange Offer, (ii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Initial Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. The Company will pay interest and liquidated damages, if any, semiannually on May 1 and November 1 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from July 1, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment The Company will pay interest (except defaulted interest) on and liquidated damages, if any, in respect of the Securities to the Persons who are registered holders of Securities at the close of business on the April 15 or 6 6 October 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money or by wire transfer of federal funds. 7 7 3. Paying Agent and Registrar Initially, UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to the Holders. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture and First Supplemental Indenture The Company issued the Securities under an Indenture dated as of July 1, 1997 ("Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are unsecured senior subordinated obligations of the Company limited to $45,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation 8 8 of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; Sale/Leaseback Transactions and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Initial Guarantors have guaranteed the Company's obligations under the Indenture on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below:
Redemption Period Price - ------ ----- 2002........................................................ 105.5625% 2003........................................................ 103.7083% 2004........................................................ 101.8542% 2005 and thereafter......................................... 100.0000%
Notwithstanding the foregoing, at any time prior to May 1, 2000, the Company may redeem in the aggregate up 9 9 to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings by the Company at a redemption price (expressed as a percentage of principal amount) of 111.125% plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 60% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. Notwithstanding the preceding two paragraphs, the Company shall not redeem the Original Securities unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Securities (rounded to the nearest integral multiple of $1000) equal to the product of: (1) a fraction, the numerator of which is the aggregate principal amount of Original Securities to be so redeemed and the denominator of which is the aggregate principal amount of Original Securities outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Securities outstanding immediately prior to such proposed redemption. The Company shall not redeem the Securities unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Original Securities (rounded to the nearest integral multiple of $1000) equal to the product of: (1) a fraction, the numerator of which is the aggregate principal amount of Securities to be so redeemed and the denominator of which is the aggregate principal amount of Securities outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Original Securities outstanding immediately prior to such proposed redemption. At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at the option of the Company within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or 10 10 prior to the date of redemption) plus (iii) the Applicable Premium. 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Guarantor Subsidiary, 11 11 as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12 12 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. The Company shall not exercise its option to defease the Securities unless it defeases the Original Securities equivalently and substantially simultaneously, and the Company shall not exercise its option to defease the Original Securities unless it defeases the Securities equivalently and substantially simultaneously. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount then outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to release Guarantor Subsidiaries when permitted by the Indenture, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any other change that does not adversely affect the rights of any Securityholder, or to provide for the issuance and authorization of the Exchange Securities. 13 13 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by Article X), Securities when required; (iii) failure by the Company or any Guarantor Subsidiary to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000 or its foreign currency equivalent; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and its Restricted Subsidiaries; (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $5,000,000 or its foreign currency equivalent against the Company or a Restricted Subsidiary; and (vii) a Subsidiary Guaranty ceasing to be in full force and effect (other than in accordance with its terms) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Subsidiary Guaranty and such Default continues for 10 days. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may with hold from Securityholders notice of any continuing Default (except a Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Trust 14 14 Officers in good faith determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may other wise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Guarantor Subsidiary shall not have any liability for any obligations of the Company or a Guarantor Subsidiary under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 15 15 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TENENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: NEENAH CORPORATION 2121 BROOKS AVENUE NEENAH, WI 54957 ATTENTION OF CHIEF FINANCIAL OFFICER 16 16 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. 17 17 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_________ principal amount of Securities held in (check applicable space) ____ book-entry or _____ definitive form by the undersigned. The undersigned (check one box below): / / has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depository a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); / / has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such 18 18 Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW: (1) / / to the Company; or (2) / / pursuant to an effective registration statement under the Securities Act of 1933; or (3) / / inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) / / outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) / / pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. 19 19 Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ------------------------ Signature Signature Guarantee: - --------------------- -------------------------- Signature must be guaranteed Signature - ------------------------------------------------------------ TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has 20 20 determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer 21 21 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized officer Amount of this Amount of this Security following of Trustee or Global Security Global Security such decrease or Securities increase) Custodian
22 22 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: / / If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: __________________ Your Signature: __________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) 23 EXHIBIT B [FORM OF FACE OF EXCHANGE SECURITY] [Global Securities Legend] UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. (2) NEENAH CORPORATION 11-1/8% SERIES D SENIOR SUBORDINATED NOTE DUE 2007 No. Cusip No. [ ] $[ ] NEENAH CORPORATION, a Wisconsin corporation, promises to pay to [ ], or registered assigns, the principal sum of $ on May 1, 2007. Interest Payment Dates: May 1 and November Record Dates: April 15 and October 15 - -------- (2) This paragraph should only be added if the Security is issued in global form. 24 2 Additional provisions of this Security are set forth on the other side of this Security. Dated: NEENAH CORPORATION, by______________________________ Name: Title: ______________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, certifies [Seal] that this is one of the Securities referred to in the Indenture, by______________________________ Authorized Signatory 25 3 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 11-1/8% Series D Senior Subordinated Note due 2007 1. Interest NEENAH CORPORATION, a Wisconsin corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest and liquidated damages, if any, semiannually on May 1 and November 1 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from July 1, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 15 or October 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money or by wire transfer of federal funds. 3. Paying Agent and Registrar Initially, UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to the Holders. The Company or any of its domestically incorporated 26 4 Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture; First Supplemental Indenture The Company, issued the Securities under the Indenture. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are unsecured senior subordinated obligations of the Company limited to $45,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; the lines of business in which the Company and its Restricted Subsidiaries may operate; Sale/Leaseback Transactions and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Initial Guarantors have 27 5 guaranteed the Company's obligations under the Indenture on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the next two paragraphs, the Securities may not be redeemed prior to May 1, 2002. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after May 1 of the years set forth below:
Redemption Period Price - ------ ----- 2002.................................................................... 105.5625% 2003.................................................................... 103.7083% 2004.................................................................... 101.8542% 2005 and thereafter..................................................... 100.0000%
Notwithstanding the foregoing, at any time on or prior to May 1, 2000, the Company may redeem in the aggregate up to 40% of the original aggregate principal amount of Securities with the proceeds of one or more Public Equity Offerings at a redemption price (expressed as a percentage of principal amount thereof) of 111.125% plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption); provided, however, that at least 60% of the original aggregate principal amount of the Securities must remain outstanding after each such redemption. Notwithstanding the preceding two paragraphs, the Company shall not redeem the Original Securities unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Securities (rounded to the nearest integral multiple of $1000) equal to the product of: (1) a fraction, the numerator of which is the aggregate principal amount of Original Securities to be so redeemed and the 28 6 denominator of which is the aggregate principal amount of Original Securities outstanding immediately prior to such proposed redemption,and (2) the aggregate principal amount of Securities outstanding immediately prior to such proposed redemption. The Company shall not redeem the Securities unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Original Securities (rounded to the nearest integral multiple of $1000) equal to the product of: (1) a fraction, the numerator of which is the aggregate principal amount of Securities to be so redeemed and the denominator of which is the aggregate principal amount of Securities outstanding immediately prior to such proposed redemption,and (2) the aggregate principal amount of Original Securities outstanding immediately prior to such proposed redemption. At any time prior to May 1, 2002, the Securities may be redeemed, in whole or in part, at the option of the Company within 180 days after a Change of Control, at a redemption price equal to the sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption) plus (iii) the Applicable Premium. 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 29 7 7. Put Provisions Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to purchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Guarantor Subsidiary, as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 30 8 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. The Company shall not exercise its option to defease the Securities unless it defeases the Original Securities equivalently and substantially simultaneously, and the Company shall not exercise its option to defease the Original Securities unless it defeases the Securities equivalently and substantially simultaneously. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount then outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add 31 9 guarantees with respect to the Securities or to secure the Securities, or to release Guarantor Subsidiaries when permitted by the Indenture or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by Article X), Securities when required; (iii) failure by the Company or any Guarantor Subsidiary to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5,000,000 or its foreign currency equivalent; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and its Restricted Subsidiaries; and (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $5,000,000 or its foreign currency equivalent against the Company or a Restricted Subsidiary; and (vii) a Subsidiary Guaranty ceasing to be in full force and effect (other than in accordance with its terms) or any Guarantor Subsidiary denies or disaffirms its obligations under the Indenture or any Subsidiary Guaranty and such Default continues for 10 days. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the 32 10 Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Guarantor Subsidiary shall not have any liability for any obligations of the Company or a Guarantor Subsidiary under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 33 11 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: NEENAH CORPORATION 2121 Brooks Avenue Neenah, WI 54957 Attention of Chief Financial Officer 34 12 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint _________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ________________ Your Signature: _____________________ Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 35 13 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized officer Amount of this Amount of this Security following of Trustee or Global Security Global Security such decrease or Securities increase) Custodian
36 14 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: / / If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $ Date: __________________ Your Signature: __________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________ (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) 37 EXHIBIT C [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS] Transferee Letter of Representation Neenah Corporation c/o United States Trust Company of New York 114 West 47th Street New York, NY 10036 Dear Ladies and Gentlemen: This certificate is delivered to request a transfer of $ _________ principal amount of the 11-1/8% Series C Senior Subordinated Notes due 2007 (the "Securities") of Neenah Corporation (the "Company"). Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: Name: ___________________________________ Address: ________________________________ Taxpayer ID Number: _____________________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Securities and invest in or purchase securities similar to the Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. 38 2 We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor", in each case in a transaction involving a minimum principal amount of Securities of $250,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Securities 39 3 pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. TRANSFEREE:___________________ BY____________________________ 40 EXHIBIT D FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of [ ], among [NEW GUARANTOR SUBSIDIARY] (the "New Guarantor Subsidiary"), a subsidiary of NEENAH CORPORATION (or its successor), a Wisconsin corporation (the "Company"), THE COMPANY, on behalf of itself and the Guarantor Subsidiaries (the "Existing Guarantor Subsidiaries") under the Indenture referred to below, and UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H : WHEREAS the Company and the Existing Guarantor Subsidiaries have heretofore executed and delivered to the Trustee an Indenture (the "Indenture"), dated as of July 1, 1997, providing for the issuance of an aggregate principal amount of $45,000,000 of 11-1/8% Series C Senior Subordinated Notes due 2007 (the "Securities"). WHEREAS Section 4.15 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor Subsidiary to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor Subsidiary shall unconditionally guarantee all of the Company's obligations under the Securities pursuant to a Subsidiary Guaranty on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and Existing Guarantor Subsidiaries are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor Subsidiary, the Company, the Existing Guarantor Subsidiaries and the Trustee 41 2 mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplement refer to this Supplement as a whole and not to any particular section hereof. 2. Agreement to Guarantee. The New Guarantor Subsidiary hereby agrees, jointly and severally with all other Guarantor Subsidiaries, to Guarantee the Company's obligations under the Securities on the term and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. 3. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 5. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 6. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 42 3 7. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW GUARANTOR SUBSIDIARY], by __________________________________ Name: Title: NEENAH CORPORATION, on behalf of itself and the Existing Guarantor Subsidiaries, by __________________________________ Name: Title: UNITED STATES TRUST COMPANY OF NEW YORK as Trustee, by __________________________________ Name: Title: 43 EXHIBIT E [FORM OF CERTIFICATE TO BE DELIVERED UPON TERMINATION OF RESTRICTED PERIOD] On or after August 10, 1997 Neenah Corporation c/o United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] Re: Neenah Corporation (the "Company") 11-1/8% Series C Senior Subordinated Notes due 2007 (the "Initial Securities") and 11-1/8% Series D Senior Subordinated Notes due 2007 (the "Exchange Securities" and, together with the Initial Securities, the "Securities") Ladies and Gentlemen: This letter relates to Securities represented by a temporary global note certificate (the "Temporary Certificate"). Pursuant to Section 2.01 of the Indenture dated as of July 1, 1997 relating to the Securities (the "Indenture"), we hereby certify that (1) we are the beneficial owner of $[ ] principal amount of Initial Securities represented by the Temporary Certificate and (2) we are a person outside the United States to whom the Initial Securities could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as amended. Accordingly, you are hereby requested to issue a Certificated Note representing the undersigned's interest in the principal amount of Initial Securities represented by the Temporary Certificate, all in the manner provided by the Indenture. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any 44 2 administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By:___________________________ Authorized Signature 45 EXHIBIT F [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO RULE 144A] United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] [date] Re: Neenah Corporation (the "Company") 11-1/8% Series C Senior Subordinated Notes due 2007 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $_______ aggregate principal amount at maturity of the Securities, we hereby certify that such transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we hereby further certify that the Securities are being transferred to a person that we reasonably believe is purchasing the Securities for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Securities are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter 46 2 or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, _________________________________ [Name of Transferor] By:_________________________ Authorized Signature 47 EXHIBIT G [Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S] [date] United States Trust Company of New York 114 West 47th Street New York, NY 10036 Attention: [ ] Re: Neenah Corporation (the "Company") 11-1/8% Series C Senior Subordinated Notes due 2007 (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. 48 2 In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:_______________________ Authorized Signature EX-5.1 16 OPINION OF KIRKLAND & ELLIS 1 EXHIBIT 5.1 [LETTERHEAD OF KIRKLAND & ELLIS] To Call Writer Direct: 212 446-4800 July 25, 1997 Neenah Foundry Company Hartley Controls Corporation Neenah Transport, Inc. 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 Re: Series B 11-1/8% Senior Subordinated Notes due 2007 Ladies and Gentlemen: We are acting as special counsel to Neenah Foundry Company, a Wisconsin corporation (the "Company"), Hartley Controls Corporation, a Wisconsin corporation ("Hartley") and Neenah Transport, Inc., a Wisconsin corporation ("Transport", and together with the Company and Hartley, the "Registrants") in connection with the proposed registration by the Company of up to $150,000,000 in aggregate principal amount of the Company's Series B 11-1/8% Senior Subordinated Notes due 2007 (the "Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the "Commission") on July 25, 1997 under the Securities Act of 1933, as amended (the "Securities Act") (such Registration Statement, as amended or supplemented, is hereinafter referred to as the "Registration Statement"), for the purpose of effecting an exchange offer (the "Exchange Offer") for the Company's 111/8% Senior Subordinated Notes due 2007 (the "Old Notes"). The Exchange Notes are to be issued pursuant to the Indenture (the "Indenture"), dated as of April 30, 1997, among the Registrants and United States Trust Company of New York, as Trustee, in exchange for and in replacement of the Company's outstanding Old Notes, of which $150,000,000 in aggregate principal amount is outstanding. In that connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary for the purposes of this opinion, including (i) the corporate and organizational documents of each of the Registrants, (ii) minutes and records of the corporate proceedings of each of the 2 Neenah Foundry Company July 25, 1997 Page 2 Registrants with respect to the issuance of the Exchange Notes, (iii) the Registration Statement and exhibits thereto and (iv) the Exchange and Registration Rights Agreement, dated as of April 30, 1997, among the Registrants, Chase Securities, Inc. and Morgan Stanley & Co. Incorporated. For purposes of this opinion, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of all documents submitted to us as copies. We have also assumed the genuineness of the signatures of persons signing all documents in connection with which this opinion is rendered, the authority of such persons signing on behalf of the parties thereto other than the Registrants, and the due authorization, execution and delivery of all documents by the parties thereto other than the Registrants. As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Registrants and others. Based upon and subject to the foregoing qualifications, assumptions and limitations and the further limitations set forth below, we are of the opinion that: (1) Each of the Registrants is a corporation existing and in good standing under the Wisconsin Business Corporation Law. (2) The sale and issuance of the Exchange Notes has been validly authorized by the Company. (3) When, as and if (i) the Registration Statement shall have become effective pursuant to the provisions of the Securities Act, (ii) the Indenture shall have been qualified pursuant to the provisions of the Trust Indenture Act of 1939, as amended, (iii) the Old Notes shall have been validly tendered to the Company and (iv) the Exchange Notes shall have been issued in the form and containing the terms described in the Registration Statement, the Indenture, the resolutions of each of the Registrant's Board of Directors (or authorized committee thereof) authorizing the foregoing and any legally required consents, approvals, authorizations and other order of the Commission and any other regulatory authorities to be obtained, the Exchange Notes when issued pursuant to the Exchange Offer will be legally issued, fully paid and nonassessable and will constitute valid and binding obligations of the Registrants. 3 Neenah Foundry Company July 25, 1997 Page 3 Our opinions expressed above are subject to the qualifications that we express no opinion as to the applicability of, compliance with, or effect of (i) any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar law affecting the enforcement of creditors' rights generally, (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), (iii) public policy considerations which may limit the rights of parties to obtain certain remedies and (iv) any laws except the laws of the State of New York. We advise you that issues addressed by this letter may be governed in whole or in part by other laws, but we express no opinion as to whether any relevant difference exists between the laws upon which our opinions are based and any other laws which may actually govern. For purposes of the opinion in paragraph 1, we have relied exclusively upon recent certificates issued by the Wisconsin Secretary of State and such opinion is not intended to provide any conclusion or assurance beyond that conveyed by such certificates. We have assumed without investigation that there has been no relevant change or development between the respective dates of such certificates and the date of this letter. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the heading "Legal Matters" in the Registration Statement. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of the rules and regulations of the Commission. We do not find it necessary for the purposes of this opinion, and accordingly we do not purport to cover herein, the application of the securities or "Blue Sky" laws of the various states to the issuance of the Exchange Notes. This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein. We assume no obligation to revise or supplement this opinion should the present laws of the State of New York be changed by legislative action, judicial decision or otherwise. 4 Neenah Foundry Company July 25, 1997 Page 4 This opinion is furnished to you in connection with the filing of the Registration Statement, and is not to be used, circulated, quoted or otherwise relied upon for any other purposes. Yours very truly, KIRKLAND & ELLIS EX-8.1 17 OPINION OF KIRKLAND & ELLIS RE FED. INCOME TAX 1 EXHIBIT 8.1 July 25, 1997 Neenah Foundry Company 2121 Brooks Avenue -- Box 729 Neenah, Wisconsin 54927 Re: Offer for all outstanding 11 1/8% Series A Senior Subordinated Notes due 2007 in exchange for 11 1/8% Series B Senior Subordinated Notes due 2007 of Neenah Foundry Company Ladies and Gentlemen: We have acted as counsel to Neenah Foundry Company (the "Company") in connection with the proposed offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $150,000,000 of its 11 1/8% Series B Senior Subordinated Notes due 2007 (the "New Notes") for a like principal amount of its 11 1/8% Series A Senior Subordinated Notes due 2007 (the "Old Notes"). On the basis of the foregoing, it is our opinion that the statements regarding the Exchange Offer described in the section titled "Certain Federal Income Tax Considerations" in the Company's Amendment No. 1 Registration Statement on Form S-4 (File No. 333-28751), filed with the Securities and Exchange Commission on July 25, 1997 (the "Registration Statement"), are correct in all material respects. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm in the Registration Statement. Very truly yours, /s/ KIRKLAND & ELLIS -------------------------------------- Kirkland & Ellis EX-10.2 18 AGREEMENT EFFECTIVE APRIL 1, 1995 1 Exhibit 10.2 REDACTED NEENAH FOUNDRY T-78155 ATTACHMENT A SPECIAL PROVISIONS 1) CONTRACT TERM The initial term of this Agreement shall begin effective April 1, 1995 and end March 31, 1998. The parties agree to meet to negotiate new Agreement not less than 90 days prior to contract expiration and further agree to complete said negotiations not less than 60 days from the date said negotiation began, except that the date may be extended or otherwise changed upon mutual agreement in writing signed by both parties. 2) VOLUME/CAPACITY COMMITMENT Buyer agrees to purchase at least of its requirements for the Products listed on Attachment 1A, 1 B. 1 C and 1 D; subject to ISIR approval by Buyer and subject to Products demonstrating acceptable machineability during pre-production qualification testing at Buyers plant or at a designated outside machining source. 2 REDACTED Seller agrees to provide Buyer the necessary capacity to meet 100% of Buyers U. S. and Canadian schedules, unless Buyer's product requirements exceed Sellers total equipment capacity. 3) SCRAP SURCHARGE a) The prices set forth on Attachments 1A through 1D at the time this Agreement is signed shall be known as Base Prices. The Base Price for each Product shall be adjusted up Of down for the cost associated with changes in specifications and for the adjustments made pursuant to Paragraph 4, and each price, as adjusted, shall be the new Base Price for the Product in question. Base Prices shall not be affected by any scrap adjustments made pursuant to this Paragraph 3. b) The effective price for a Product shall be determined by application of a steel scrap adjustment to the then current Base Price according to the formula provided below. Steel scrap adjustment shall be calculated on a semi-annual basis and shall be effective beginning April 1, 1995 and upon each October 1 and April 1 thereafter. c) The base cost of scrap included in the base pricing is $150.00/gross ton. The formula set forth below shall be used to calculate the amount of the steel scrap adjustment when average price (HAP-) exceeds $150.00 per gross ton, downward when price drops below S135.00 per gross ton per the formula shown below. 2 3 REDACTED d) The AP of scrap for six months immediately prior to the April 1 or October 1 steel scrap adjustment date shall be determined by averaging the midpoint of the range shown for the prices for the preceding six months as shown in the Chicago District Iron Ace for low phosphate steel plate 2' and under. e) The amount of the scrap adjustment equals ({AP-BP}/2240) x A where BP equals the scrap base of $150.000/gross ton, A equals the weight in pounds per part number as shown on the Attachments. f) The amount of the scrap adjustment for each period shall be added to the Base Price to determine the operative price for the period. If the AP of steel scrap is between $135.00/ton and $150.00/ton, We Base Price shall be used as the operative price for the applicable period. g) The AP effective on April 1, 1995 and reflected in the initial purchase order prices shall be 'gross ton. 4) PRICING Seller agrees chat base prices for Products identified on Attachments 1A - 1D shall be in accordance with the attached schedule. 5) MACHINE SCRAP 3 4 REDACTED Seller agrees that if Buyer returns Products as defective or non-conforming, Seller shall reimburse Buyer Me When effective price of the Product as shown on the Attachments. Additionally, in the event Buyer has begun machining of Products prior to their identification as unacceptable, Seller agrees to reimburse Buyer on a part number basis its cost not to exceed the value indicated in Attachment II, of said machining as outlined below (hereinafter, the Machine Chargeback Policy). a) In the event Buyer identifies Products as unacceptable, Buyer agrees to promptly notify Seller as below: i. Buyer will promptly contact Seller by telephone or fax, identifying any defective material problem prior to any action by Buyer. ii. Buyer will provide Seller with the opportunity to promptly replace or repair defective material. Seller agrees that replacement of defective material must be done so as not to interrupt Buyer's production schedule. iii. Buyer may in certain instances considered critical by Buyer and after notification to Seller proceed with the machining of defective material in order to salvage satisfactory parts. Buyer agrees to pursue all practical alternatives in an attempt to minimize cost for such work. Seller agrees to absorb machine scrap costs resulting from defective Products at the rate indicated in Attachment 11. 4 5 REDACTED iv. In the event sorting or salvage of Products must be done by the Buyer to accommodate customer needs, a rate of /hour will be charged to Seller for actual hours required for this task. Seller has the right to sort in Buyers plant if time permits. v. If Products are not salvageable and replacement is the only resource, all costs as listed in paragraph 5 are applicable. vi. Seller field quality personnel will make pant visits in a timely manner to review rejected Products and make dispositions. Buyer will provide assistance to Sellers representative without cost to Seller. 6) DELIVERY Seller will be financially responsible for all costs which result from the Sellers failure to deliver Products within the following parameters: All Products ordered on Buyers Vendor Release & Shipping Schedule supplied from Seller's plants two (2) and three (3) will be guaranteed shipped within twenty (20) working days from receipt of the schedule. Working days are defined as Mondays through Fridays exclusive of national holidays. Seller agrees to attempt to make schedule changes upon shorter notice from Buyer; however, Buyer recognizes that Sellers production scheduling system limits aggregate volume changes to +/ 10% for change requests for shipment within twenty (20) working 5 6 REDACTED days from the change request. Buyer also agrees h use its release to schedule material according to the normal parameters of that schedule and afford Seller of as much advance notice of schedule changes as possible within the above. Sellers responsibility for costs attributable to late delivery are limited to the sum of the elements listed below a. Premium freight cost both to Buyer and to the end customer. b. Overtime premium costs at Buyer or its subcontractors. c. Incremental setup costs at Buyer or its subcontractors. d. Other delivery related costs which are mutually agreeable to Buyer and Seller. Buyer recognizes that circumstances arise where failure to perform within specified time frames is not entirely under Sellers control (i.e., timely feedback from Buyer on quality problems, blue print interpretation differences, machine tool setup changes, or events of force majeure). Under such circumstances, Buyer and Seller will mutually agree to responsibilities and incidental delivery costs. 7) THIRD PARTY AUTHORIZATION Products on the Purchase Order and Products which may be added to the Purchase Order during the term of this Agreement, may be purchased by a Buyer location other than that shown on Buyer's purchase order during the term of this Agreement. Furthermore, Buyer may direct shipments of their product to a third park location. These Products will be 6 7 REDACTED supplied to the designated location at the same price as at the original location. Shipping terms shall be FOB Sellers plant. In the event Buyers non-North American locations desire to purchase Products from Seller, the price of said Products will be the same as the price for Products hereunder. Any such purchase will be made under a separately negotiated Agreement but under terms and conditions in commensurate with those of this Order. 8) TECHNOLOGY CHANGE If, at any time during the term of this Agreement, a major technological change should occur which would, in Buyers sole judgment, make like Products purchased from another supplier more attractive or necessary to Buyer, then Buyer may terminate separate Products of the Agreement by giving written notice to Seller, which will become effective twelve (12) months (or such shorter time as may be mutually agreed upon by the parties) after receipt of said notice by Seller. During said notice period Seller shall have the opportunity to acquire such technology and produce and substitute Products derived therefrom at competitive prices, or, subject to Buyers consent, supply the Products shown on the Purchase Order at prices competitive to those derived by the new technology and at a quality similar to those derived from such new technology. Seller shall have the right to renegotiate pricing with Buyer if major technology changes results in purchase by Buyer being less than 50% of the previous annual tonnage. 7 8 REDACTED 9) PLANT CLOSING In the event Seller contemplates the closing of a plant or plants that affects Seller's performance hereunder, Seller shall immediately notify Buyer of such __________________. Seller further agrees to provide manufacturing, engineering, and technical assistance to Buyer to provide a smooth transition and to aid the new supply source selected by Buyer. 10) TOOLING Seller will provide day to day maintenance of tooling due to normal use Once tooling has been determined to be worn out from normal production use, Buyer agrees to pay replacement costs to a level not to exceed a total of per agreement year. Seller is responsible to initiate a request to replace tooling with appropriate justification. Tool modification resulting from Buyer's engineering changes will be at the cost and expense of Buyer. 11) RETURNABLE CONTAINER PROGRAM Seller agrees to assist Buyer in the event a "returnable container" program is established. In the event a returnable container program is initiated Seller agrees to reduce it's prices for the Products on the Purchase Order by an amount equal to the costs charged to Buyer 8 9 REDACTED for packaging which includes but may not be limited to costs for pallets, dividers, separators, binding, wrapping, preservatives and labor. 12) VALUE ENGINEERING Seller agrees to provide technical assistance and implement value engineering programs which include weigh/cost reductions. Seller agrees that Buyer will share equally all cost savings associated with any value engineering effort upon implementation of same. 13) QUALITY RATING Buyer shall have the right to terminate this Agreement for cause in the event that Seller fails to maintain the below listed Buyer Quality Ratings: Location Ratings -------- ------- Sellers Plant #2, #3 Rating #2 14) ACCOUNTS PAYABLE Seller agrees that Buyers scheduled payments are net 5th proxl2nd 5th prox. (Shipments made during the first month through the tenth of the current month will be paid by the fifth of the following month. Shipments made during the 11th through the 31st of the current month will be paid by the fifth of the second following month). 9 10 REDACTED 15) COMPARATIVE PRICING GUARANTEE Seller agrees that Buyer may add additional Products to this contract. Seller agrees that for Products added to the Attachments, Buyer shall receive prices in accordance with Paragraph 4 based on reasonable comparative pricing with like part numbers from the same product family processed from similar molding equipment. 16) CATASTROPHIC MATERIAL COST INCREASES In the event Seller should experience catastrophic increases in the cost of materials used in the production of the Products in this order which drastically affect profit margins, Buyer will assist in seeking alternatives to the increase. Seller agrees to aggressively pursue practical alternatives to offset the price increase and to submit written documentation supporting any price increase request a minimum of sixty (60) days prior to the requested effective date. Justification for the increase includes evidence of ail efforts to avoid the material increase. If no agreement is reached on price within the sixty (60) day notification period, either party may terminate this Agreement upon thirty (30) days written notice given on or after the requested effective date of price increase. 17) VACATION SHUTDOWN 10 11 REDACTED In the event Seller contemplates the closing of a plant for vacation shutdown, Seller shall immediately notify Buyer of such contemplated action. Seller further agrees to provide delivery of Products, as identified in the Products, so as not to interrupt Buyers schedule. 18) DELEGATION AND ASSIGNMENT Seller shall not delegate any of its duties of this Agreement without Buyer s written approval and Seller shall not assign any of its rights hereunder without prior notice to Buyer. 19) ALTERATIONS a) Paragraphs 3,'Warranty"; 15, ~Termination; 9, "Information"; and paragraph 17 Recall Campaigns on the reverse of Buyers Purchase Order are hereby deleted in their entirety and the following is substituted in lieu thereof. "3 Warranty: Seller warrants that Products ordered to specifications will conform thereto and to any drawings, samples or deviations furnished or adopted by Buyer. All Products furnished hereunder will be merchantable, of good material and workmanship, and free from defects. Such warranties shall survive inspections test, acceptance of and payment for the Products and shall run to Buyer its successors, assigns, and customers. The warranty period shall be for five (5) years or 500,000 miles of use, 11 12 beginning with the first use of the vehicle by its first legal and lawful owner. Seller's obligation to reimburse Buyer for warranty costs is limited to $300.00 per individual failure and an aggregate of $250,000 per contract year. To the extent Products supplied hereunder are of Buyers design and specifications, the implied warranty of fitness for a particular purpose is excluded for Products shipped under this Agreement". "15 Termination: Buyer shall have the right to terminate this Agreement or any part thereof at any time upon ninety (90) days written notice for cause if Seller chronically fails to make shipments in accordance with the obligations described in Paragraph 6 otherwise fails to observe or comply with any of the other instructions, terms, conditions, or warranties applicable to this Agreement or fails to make progress so as to endanger performance of this Agreement, or fails to maintain adequate capacity to handle Buyer's requirements, or fails to maintain machineability in accordance with drawing specifications, or fails to maintain quality ratings as specified in Paragraph 14. Buyer may, in addition to any other right or remedy provided by this Agreement or by law, terminate all or any part of this Agreement for cause by telegraphic or other written notice to Seller without any liability by Buyer to Seller on account thereof. In the event of 12 13 REDACTED termination for cause, Buyer may produce or purchase or otherwise acquire Products elsewhere on such terms or in such manner as Buyer may deem appropriate and Seller shall be liable to Buyer for any excess cost or other expenses incurred by Buyer. "9 Information: (a) Drawings, data, designs, inventions, computer software and other technical information supplied by Buyer, or generated, by Seller, in the performance of this Agreement, shall be and remain Buyers and shall be held in confidence by Seller. Such information shall be not reproduced, used or disclosed to others by Seller without Buyers prior written consent, and shall be returned to Buyer upon completion by Seller of its obligations under this Agreement or upon demand. (b) In the event that Seller discloses any trade secret information originated by, or within the knowledge of Seller on or before the effective date of the Agreement, to Buyer, in connection with the performance of this Agreement which is neither generally available to others, previously known to Buyer, nor independency developed by Buyer, Buyer shall hold such information in confidence; provided, however, that nothing in this Agreement shall require Buyer to exercise any greater degree of care for the protection of such information than Buyer normally exercises for its own information of 13 14 like character. Buyer's obligation of confidentiality shall be limited to information disclosed in writing which is marked or stamped "confidential" or "proprietary". "17 Recall Campaigns: Seller shall indemnify and hold Buyer harmless against all damages and expenses incurred by Buyer as a result of Buyer being required by law (a) to recall from Buyer's customers or others any Products furnished hereunder or an end product employing any such Products as a part or component thereof and (b) to repair, replace or refund the purchase price of such Products or end product, provided that such recall and such repair, replacement or refund is based upon a defect of manufacture in the Products furnished by Seller or the failure of such Products to conform to any specification or standard to which it is ordered which creates the reasonable possibility of injury to persons or property. Buyer shall notify Seller promptly of the possibility that Buyer may be required to take an action described in this paragraph. Seller acknowledges that Buyer has the right to make the final decision about such action independent of Seller. In the event that Products supplied by Seller shall not be the sole cause for such a recall, repair, replacement, or refund, the costs, damages 14 15 REDACTED and expenses shall be apportioned according to the proportion of cause in such manner as is reasonable and equitable under the circumstances. Buyer shall not be required to consult with, or seek Seller's concurrence in, the reporting by Buyer to any administrative or regulatory body, of any information which Buyer obtains indicating chat the Products furnished by Seller either fail to conform to any standard required by law, or constitute or create of Themselves or within the end product of which they are a part or component, a situation requiring recall or notice as defined by the applicable law. Buyer shall promptly furnish to Seller a copy of any information reported to any administrator or regulatory body under this paragraph with respect to Products furnished by Seller. Seller shall prepare, maintain and file with the appropriate authority such records and reports as pertain to the manufacture, sale, use and characteristics of the Products furnished to Buyer hereunder as may be required by any federal, state, or local law or regulation concerning Me manufacture, sale, or use of the Products or the end Products of which ale Products may be a part or component and shall provide Buyer with copies of such records as Buyer may require and permit Buyer access to Sellers records to permit Buyer to ascertain Seller's obligation to reimburse Buyer for recall expenses is limited to $500,000 per contract year". 15 16 REDACTED b) Buyer agrees to provide its own fire and other hazard insurance on all Buyers property in storage at Seller's facility and Seller agrees to provide reasonable and adequate physical protection for Buyers property as stated". 20) TERMINATION CLAUSE a) Buyer or Seller shall have the right to terminate this agreement at any time upon ninety (90) days written notice for cause if the Buyer or Seller fails to observe or comply with any other instructions, terms, conditions or warranties applicable to this Agreement or in the event of any proceedings by or against Buyer or Seller in bankruptcy or insolvency or appointment of a receiver or trustee or any assignment for the benefit of creditors. b) The breaching party shall have sixty (60) days in which to cure the default, breach, or such reason identified in the notice of termination for cause under paragraph 1. Should the breaching party fail to cure within the sixty (60) day period, this Agreement automatically expires at the end of the ninety (90) day period identified in the Notice of Termination. NEENAH FOUNDRY COMPANY ROCKWELL INTERNATIONAL CORPORATION By: _________________________ By: ____________________________ Title:_________________________ Title:____________________________ 16 17 REDACTED 17 18 REDACTED ATTACHMENT 1A DIFF CARRIERS
PART NUMBER WEIGHT 4/1/95 4/1/96 4/1/97 ----------- ------ ------ ------ ------
MISCELLANEOUS PARTS
PART NUMBER WEIGHT 4/1/95 4/1/96 4/1/97 ----------- ------ ------ ------ ------
18 19 REDACTED ATTACHMENT 1B DIFF CASES
PART NUMBER WEIGHT 4/1/95 4/1/96 4/1/97 ----------- ------ ------ ------ ------
19 20 REDACTED ATTACHMENT 1C BEARING CAGES
PART NUMBER WEIGHT 4/1/95 4/1/96 4/1/97 ----------- ------ ------ ------ ------
20 21 REDACTED ATTACHMENT 1D BEARING CAPS
PART NUMBER WEIGHT 4/1/95 4/1/96 4/1/97 ----------- ------ ------ ------ ------
STEERING KNUCKLES
PART NUMBER WEIGHT 4/1/95 4/1/96 4/1/97 ----------- ------ ------ ------ ------
21 22 REDACTED ATTACHMENT II DIFF CARRIERS PART NUMBER PRICING ----------- ------- DIFF CASES PART NUMBER PRICING ----------- ------- 22 23 REDACTED ATTACHMENT II BEARING CAGES PART NUMBER PRICING ----------- ------- MISCELLANEOUS PARTS PART NUMBER PRICING ----------- ------- 23 EX-10.3 19 LETTER AGREEMENT DATED APRIL 4, 1996 1 Exhibit 10.3 April 4, 1996 Mr. Oren Gillette EATON Corporation 13100 E. Michigan Ave. Galesburg, MI 49053-9674 Dear Mr. Gillette: This letter confirms our understanding of future pricing and part sourcing with Neenah Foundry. The steel scrap surcharge base will be lowered to $130/ton effective May 1, 1996. An economic increase of 2% to the then effective base price will be implemented on January 1, 1997, and again on January 1, 1998. Part sourcing will be as follows: - -- Current parts and sourcing revisions as noted below, will remain at least at the present or established sourcing level thru December 31, 1998. - -- Part numbers will be sourced to Neenah Foundry. - -- Part number will be sourced to Neenah Foundry. - -- Part numbers will be sourced 100% to Neenah Foundry. Economics for these parts will remain firm until January 1, 1998. - -- Part numbers will become 100% sourced to Neenah Foundry. - -- Additional parts being quoted (including the 404 axle bearing caps and adjusters) will be evaluated with intention to source with Neenah Foundry based on pricing that is competitive with viable North American Foundries. We ask that you review our understanding and confirm you concurrence. Eaton Corporation remains a major customer at Neenah Foundry Company. We desire that this position erodes no further and appreciate your efforts to afford us replacement business opportunity. Sincerely, William Barrett General Sales Manager Industrial Division djh cc: Andy Aylward Chuck Perry EX-10.5 20 1996-1998 COLLECTIVE BARGAINING AGREEMENT 1 EXHIBIT 10.5 NEENAH FOUNDRY COMPANY 1996-1998 COLLECTIVE BARGAINING AGREEMENT 2 1986-1988 AGREEMENT THIS AGREEMENT is made and entered into between the NEENAH FOUNDRY COMPANY, NEENAH, WISCONSIN, party of the first part, and LOCAL 121 B of the GLASS, MOLDERS, POTTERY, PLASTICS, and ALLIED WORKERS INTERNATIONAL UNION, affiliated with the AFL-CIO-CLC, party of the second part. The Company and the Union will comply with all applicable Federal and State Statutes concerning discrimination in employment. Wherever the words he, him, his or other such male gender references appear in this Agreement, such references shall include and will apply equally to the female gender. ARTICLE 1 - RECOGNITION 1.1 The Company recognizes Local 121B of the Glass, Molders, Pottery, Plastics, and Allied Workers International Union, AFL-CIO-CLC, as the sole bargaining agency for all employees of the Company's Plants 2 and 3 and any truck terminals established now or during the period of this Agreement, relative to wages, hours, and working conditions as provided by the National Labor Relations Act, as amended, but excluded office-clerical, office janitors, watchmen, patternmakers and supervisors as defined by the National Labor Relations Act. The Company's Plants 2 and 3 shall be considered as a single bargaining unit for purposes of this Labor Agreement. A. It is understood that this Agreement will apply to any Bargaining Unit employee assigned to perform work at Plant 1. 1.2 In the event the Company erects a new foundry facility in the State of Wisconsin, the Company will voluntarily recognize the Union as the bargaining representative of the appropriate bargaining unit of employees consisting of production, maintenance, shipping and receiving and truck driver employees. A. In the event that the foregoing paragraph may not be lawfully applied, then in that event, the Company will voluntarily recognize the Union for the appropriate bargaining unit, as described above, upon a proper showing of majority representation as demonstrated by a lawful card check conducted under the authority of the NLRB. 1.3 All present employees and all new employees shall join and become members of the Union no later than their 31st day of employment or no later than 31 days after the execution of this Agreement, whichever is later, and shall, as a condition of employment, maintain their membership in the Union in good standing for the duration of this contract, subject to the provisions of the Labor Management Act, as amended. 3 1.4 The Company agrees to check off the Initiation Fees and Union Dues of such employees who authorize the same, in writing, in proper legal form. The Company will remit the International Union's portion of all dues so collected the first payday of each month and the Local Union's portion of all dues so collected the first payday of each month, to the parties designated by the Union by the 12th day of each month. The written authorization for check-off of dues by any employee will not be effective for any dues or fees owing by such employee prior to the date of the signed authorization executed by him and delivered to the Company and will be effective the first payday of the month following the delivery of such signed authorization to the Company. ARTICLE 2 - HOURS OF WORK 2.1 Eight (8) hours shall constitute a day's work and there shall be a recognized starting and quitting time which shall determine the overtime, if any. 2.2 Except as hereinafter provided, all time in excess of eight (8) hours in any one day or forty (40) hours in any one week, shall be paid for at the rate of one and one-half times the regular hourly earnings computed on the basis of the average straight time weekly earnings excluding overtime premium of any kind and pay received for hours not worked. Such overtime shall be paid for time in excess of eight (8) hours in any one day or forty (40) hours in any one week, whichever is greater but not for both, so that payment of overtime rates shall not be duplicated for the same hours worked. A. Where eight (8) hours appears in Article 2.2, it shall be changed to ten (10) hours for employees working on automated production system operations when they are scheduled for four, ten-hour days in a week. 2.3 SATURDAY WORK is to be paid at the rate of one and one-half times the regular rate. However, if the shift begins on Friday and extends into Saturday the regular rate shall be paid. 2.4 SUNDAY WORK - All work performed from 12:00 A.M. Sunday to midnight Sunday shall be paid at the rate of double the regular rate. 2.5 All employees will be allowed a paid ten (10) minute lunch period at an established time during each scheduled shift. The dinner period shall be a minimum of one-half (1/2) hour, unpaid. A. For automated and/or continuous production systems, including BMD and Disamatic Operations as well as continuous shifts such as melting operations, employees will be provided twenty (20) minutes of total paid break time during each shift if an unpaid dinner period is not provided. B. For automated production systems with a schedule of four, ten-hour shifts, an additional ten (10) minute break period will be provided. 2 4 C. All employees scheduled for ten (10) hours or more and who are provided with 20 minutes of total paid break time instead of an unpaid dinner period will be provided an additional ten (10) minute break period. 2.6 Any employee who is required to start his work shift before his regular starting time shall be permitted to work until his regular quitting time. 2.7 It is mutually agreed that the working hours and overtime schedule provided for in this Agreement shall be governed by all applicable Federal laws. 2.8 REPORTING PAY - When employees are required to report to work or have not been advised at the end of the previous day that there will be no work, they shall be given a minimum of four (4) hours employment or a minimum of four (4) hours pay at their regular straight time hourly earnings, before being dismissed for the day, provided, however, that the Company shall not be liable under this section for unavoidable breakdowns of machinery, power failure, Acts of God, or conditions beyond the control of the Management. 2.9 CALL-IN PAY - If an employee is notified after he has punched out for the work day, that he is to report for work at any time earlier than the scheduled start time of his next shift, he shall be paid two (2) hours straight time call-in pay at his regular base rate, in addition to pay at the appropriate rate for his actual time worked. A. An employee on Company premises prior to his scheduled shift start time who volunteers and is permitted to perform work before the shift start time will not qualify for call-in pay. 2.10 OVERTIME NOTIFICATION - Notice of scheduled Saturday or Sunday overtime will be given to the employees) affected by no later than the end of his (their) scheduled shift on Thursday preceding the weekend. A. When the schedule of a department is to be changed, the Company shall notify the department employees) affected prior to the end of his (their) shift on the preceding day. B. Employees may be notified by bulletin board notice and/or personal communication. Employees so scheduled to work will be expected to work as scheduled unless excused in advance by their supervisor. Should the Company fail to provide such advance notice Of weekend or department schedule changes, the employee or employees affected are free to reject the opportunity to work at the time it is offered. C. It is understood that the preceding paragraphs are not applicable to casual or emergency overtime on a daily basis. ARTICLE 3 - VACATIONS 3 5 3.1 The Company will grant paid vacations to employees covered by this contract during each year as follows: A. Except as hereinafter provided, each employee on the active payroll on June I in any year who has completed one (1) year or more of continuous service shall be granted a paid vacation. 1. Employees with one year but less than three years of service on June I will be entitled to one week of vacation. 2. Employees with three years but less than eight years of service on June I will be entitled to two weeks of vacation. 3. Employees with eight years but less than fourteen years of service on June I will be entitled to three weeks of vacation. 4. Employees with fourteen years but less than twenty years of service on June I will be entitled to four weeks of vacation. 5. Employees with twenty years but less than twenty-eight years of service on June I will be entitled to five weeks of vacation. 6. Employees with twenty-eight years or more of service on June I will be entitled to six weeks of vacation. 3.2 June 1 shall be the anniversary date for all employees for the purpose of determining vacation eligibility. Employees hired on or after June 1 and before November 1 shall have June 1 as an anniversary date for purposes of becoming eligible for more than one week of vacation. 3.3 The vacation pay basis period shall be the last fifty-two (52) week period ending before May 18. 3.4 Each week of vacation shall be one calendar week. Each week of vacation pay shall be two percent (2%) of the employee's gross earnings in the basis period. However, an employee who has worked 1500 hours or more during the basis period shall have the option of receiving forty (40) hours of pay at his regular straight time base rate for each week of vacation. Time lost as a result of compensable injury incurred while on duty at Neenah Foundry Company shall be included in hours worked, at the rate of eight (8) hours per work day, for purposes of determining vacation pay eligibility. 3.5 The vacation year shall be June I through May 31. The Company reserves the right to establish a vacation shutdown period of up to two weeks in any vacation year for any or all of its operations. The Company shall notify the Union of its selection prior to April I of each year. All 4 6 employees affected must schedule at least one week of their vacation during the first vacation shutdown. A. It is understood that if the plant closes, a certain amount of maintenance and/or production work may be carried on during the shutdown. The Company will arrange with employees who are to work during the shutdown period. B. Those employees who are entitled to more than one week vacation shall arrange for the additional vacation time by agreement with the Plant Manager. No employee entitled to two weeks or more vacation shall have his remaining vacation scheduled immediately before or after the scheduled vacation shutdown period except by mutual agreement with the Company. C. Employees eligible for three or more weeks of vacation shall have the option of accepting vacation pay only for weeks over two, instead of taking time off, by mutual agreement with the Company and the Union President. 3.6 Vacation requests shall be considered on the basis of Company seniority, providing normal operations of the Company are not impaired. There will be a vacation sign-up period each year January 1 through January 15 for the vacation year commencing the next June 1. Vacation requests received during this sign-up period, after approval, are not subject to change through exercise of seniority by other employees. Vacation requests made after the sign-up period shall be submitted to the Company in writing at least thirty (30) days prior to the requested vacation period. To insure normal operations, the Company shall have the right to limit the number of employees taking vacation simultaneously. A. During the sign-up period, each employee in each vacation group will be asked, in Company seniority order, to submit his vacation request. Any employee failing to submit his vacation request at the time he is asked will not be eligible to use the vacation sign-up period for that vacation year. EMPLOYEES WITH LESS THAN ONE YEAR'S SERVICE 3.7 Any employee who has been continuously employed for three months or more and who is on the active payroll on June I shall be granted vacation pay, which shall be two percent (2%) of his gross earnings as vacation pay for such period, as computed above. LAYOFF, MILITARY LEAVE, RETIREMENT, DEATH 3.8 In the event any employee who was eligible for vacation pay on June 1 is laid off, enters military service, retires, or dies during the vacation ear, he shall receive his unused vacation plus pro-rata vacation pay in the amount of two percent (2%) of his gross earnings up to and including the date of termination, for each week of vacation for which he would otherwise have qualified. 5 7 EMPLOYEES RETURNING FROM MILITARY LEAVE OR LAYOFF 3.9 Any employee who returns from Military Leave or Layoff and who is on the active payroll June I shall be entitled to a vacation computed the same as any other employee on the active payroll June 1. ARTICLE 4 - SENIORITY 4.1 Seniority of employees shall be on the basis of length of employment. In the event of scarcity of work necessitating reduction in the size of the total work force, the last man hired shall be the first laid off, and such layoffs shall be in accordance with straight seniority until the work force has been reduced to two thirds of the average employment for the twelve (12) months preceding the last layoff. After such layoffs according to seniority, the Company may deviate from straight seniority if by following the rule of straight seniority the efficient operation of the plant(s) would be impaired. If the Company proposes to deviate, it will discuss all such deviations with the Union Business Committee and if agreement is reached, deviations shall be as agreed upon. If no agreement is reached, the Company will be at liberty to make such deviations and in any event all employees affected by such deviations shall have the right of grievance pursuant to the grievance procedure outlined in the contract. A. The above is applicable to Maintenance Department employees, Electrical Maintenance Department employees, and Over-the-Road Drivers only if the layoff of the employees would exceed sixty (60) days. 4.2 All new employees shall serve a probationary period of sixty (60) days worked. Probationary employees shall have no seniority rights and may be released at any time prior to the expiration of their probationary period. However, the Company may not discharge or discipline for the purpose of evading this Agreement or for the purpose of discriminating against Union members. If they are retained at the expiration of their probationary period, their Company seniority shall be from the date of hire. Departmental seniority will begin at the completion of the probationary period. The Union may represent such probationary employees on wages, hours and conditions of employment, but it is agreed that the termination of employment of such employees during the probationary period shall not be subject to the grievance procedure or arbitration. 4.3 Student workers hired for the purpose of working during school vacation period shall not be required to join the Union and shall not be eligible for any fringe benefits and will accumulate no seniority. When a student becomes a regular full-time employee, his seniority begins as of the date of change in his work status. 4.4 Part-time workers who are employed on a regular basis throughout the year but are normally scheduled for short hour weeks shall be required to Join the Union pursuant to Article 1 and shall acquire seniority only as it relates to other part-time workers and shall be entitled to eligibility for vacations on a percentage of pay basis only and paid holidays on a pro-rata basis and 6 8 excluded from all other fringe benefits. In the event a part-time worker becomes a regular full-time employee he shall be entitled to one week of retroactive seniority for each 40 hours of work employed on a part-time basis. 4.5 Prior to laying off any regular employees, students and probationary employees shall be laid off first and part-time employees shall be laid off next if additional layoffs are necessary. 4.6 Under no conditions shall new employees be added to the payroll before those on layoff are notified to return to work. New employees shall not be added to the payroll during short work weeks. 4.7 When a vacancy occurs, prior to posting such vacancy, available employees qualified to fill the vacancy who are within that department and plant will be given the opportunity to change their shift, by virtue of department seniority. it is understood, so as not to impair normal operations, that from time to time it may be necessary to reassign senior employees temporarily to other shifts or temporarily delay the above shift change assignment pending the training of employees. 4.8 On recall to work the most senior employee on active layoff will be the first called to work and the remainder of the employees on the active recall list will be recalled in the same manner. A. The Company may deviate from recalling employees on a straight seniority basis by recalling people qualified to perform necessary work for Maintenance Mechanics, Maintenance Electricians, and Over-the-Road Drivers (in their seniority order) if by following the rule of straight seniority the efficient operation of the plant(s) would be impaired. If the Company proposes to deviate, it will discuss all such deviations with the Union Business Committee and if agreement is reached, deviations shall be as agreed upon. If no agreement is reached, the Company will be at liberty to make such deviations and in any event all employees affected by such deviations shall have the right of grievance pursuant to the grievance procedure outlined in the contract. 4.9 In the event of layoff or layoffs due to lack of work, the employees affected and the Union Business Committee Chairman shall be given written notice of at least two (2) days prior to such layoffs. A. When an employee can no longer perform the essential functions of their assigned job, due to permanent medical restrictions, and they are placed on medical leave, the Company will notify the Union President, in writing, within two (2) working days of such leave. 4.10 Members of the Union, who hold positions that require part of their functions to perform in the capacity of "Steward-like Duties", shall be granted Super Seniority in the case of lay-off. Super Seniority shall be limited to thirty (30) members or 5% of the average bargaining unit employment for the previous six (6) months, whichever is greater. It shall be the responsibility of 7 9 the Union Recording Secretary to notify the Company, in writing, as to who shall be granted Super Seniority. LOSS OF SENIORITY 4.11 An employee shall lose his seniority for the following reasons only: A. If he shall quit. B. If he shall have been discharged for just cause. C. If a laid-off employee or employees on leave of absence shall fail to report for work within five (5) working days after notice was- sent by the Company to his last known address, unless a satisfactory reason for failure to report is given. A copy of such notice to report to work is to be given to the Union President. D. If an employee has been laid off for a period equal to his length of service with the Company. However, the minimum shall be one (1) year and the maximum three (3) years. SPECIAL PROCEDURE TO FOLLOW DURING SHORT WORK WEEKS 4.12 The purpose of this procedure is to afford senior qualified employees an opportunity to replace students, probationary, and part-time employees on those days when the work week schedule is reduced to less than five (5) days due to economic conditions. The number of senior qualified employees given this opportunity must be consistent with production requirements. A. When the Company determines it is necessary to reduce the work schedule to less than five (5) days (excluding holiday weeks) in a department or a plant for two consecutive weeks or more, the following procedure will be followed: 1. The Company shall meet with the Union Business Committee on the day following the decision to implement the short weeks, and notice of the short work weeks shall be posted no later than Wednesday preceding, the first short work week. 2. Beginning with the first week of the reduced work schedule, a list of jobs occupied by student, probationary, and part-time employees will be prepared. A senior employee who is on the reduced work schedule in his own department or plant will be asked to work a listed job on the day or days when he is not scheduled in his own department or plant. Selection will be by seniority, experience and ability. The number of senior qualified employees selected shall be limited to the 8 10 number of student, probationary, and part-time jobs. The student, probationary, or part-time employee so replaced will then work the reduced schedule in his own department or plant. 3. Beginning with the second consecutive week of the reduced work week schedule, part-time employees will be offered regular full-time work, if available. If the part-time employee declines the offer or full-time work is not available, he shall be terminated. 4. A senior qualified employee who agrees to work shall be paid the higher of his regular base rate or the base rate of the . ob to which he is assigned, plus incentive, if any. If such employee fails to report for work without just cause, the absence shall be treated as an unauthorized absence. 5. During the fourth consecutive week of the reduced work schedule, Management and the Union Business Committee shall meet for the purpose of reviewing the reduced work week schedule, and to discuss the future outlook. 6. The foregoing is not a guarantee expressed, implied or otherwise, that the Company will operate on a five-day work schedule or 40 hour work schedule. SPECIAL PROCEDURE TO FOLLOW DURING SHORT-TERM SHUTDOWNS OF ONE OR MORE PLANTS OR PARTS OF ONE OR MORE PLANTS 4.13 The purpose of this section is to set forth the procedure to be followed when all or part of one or more of the Company's plant operations are scheduled to be shut down due to economic conditions for one week or two consecutive weeks, excluding vacation shutdown periods. A. The Company shall inform the Union Business Committee of the decision to schedule as indicated above on the day following the day the decision is made. B. The Company shall schedule the employees needed in the plant(s) that is shut down according to the following procedure: 1. Schedule the necessary work. 2. Schedule the job(s) necessary to accomplish the scheduled work. 3. Schedule the people who normally perform the job(s) that is scheduled. 9 11 4. Replace all summer, part-time and probationary employees with regular full-time employees. 5. If all the people who normally perform the jobs scheduled are not needed, then schedule employees who have the most Company seniority who normally perform those jobs. 6. If more people are needed than normally perform the scheduled job, then schedule the employees) assigned to that plant most qualified to perform that job. If two or more employees are equally qualified, then schedule the employees) who has the most Company seniority within that plant. C. When the Company determines it is necessary to extend the shutdown or partial operations in a plant for more than two consecutive weeks (excluding vacation shutdown periods) it will follow the provisions of Article 4.1. D. The intent of this procedure is to provide work to as many employees as we have work available for, rather than having to shut down additional operations in order to meet the deviation requirements provided for in Article 4.1. ARTICLE 5 - GRIEVANCES 5.1 It is recognized that from time to time, incidents may occur or events may take place which question the interpretation of the provisions of this Agreement. It is the intent of the parties to this Agreement to promptly investigate and resolve differences of opinion or job-related problems. Accordingly, each employee is encouraged to discuss with his supervisor any problem that may arise in connection with his work. The Company will not discriminate against any employee for thereafter referring the problem as a grievance through the grievance procedure. 5.2 Should differences arise between the Company and its employees, either individually or collectively, as to the meaning and application of this Agreement, an earnest effort shall be made to settle any such differences at the earliest possible time by use of the following grievance procedure: Step 1. a. As soon as possible but not more than ten (10) working days of the occurrence of the incident or condition giving rise to any grievance, an aggrieved employee shall present his grievance to his supervisor, accompanied by his Committeeman or Steward. If a settlement is not reached within two (2) working days from the time the grievance is presented, then; b. It shall be reduced to writing within two (2) working days, signed by the aggrieved employee or his representative, and presented to the supervisor, who will provide a written answer within three (3) working days of the receipt of the written grievance. Should this procedure not result in settlement, then; 10 12 Step 2. Within two (2) working days of receipt of the Supervisor's Step 1 written answer, the grievance shall be presented by a member of the Shop Stewards Committee to the Plant Manager or his representative, who will schedule a grievance hearing to be held within three (3) working days following receipt of the Step 2 grievance, and who will within three (3) working days of such meeting, provide his written answer to the grievance. If such answer does not result in settlement of the grievance, then; Step 3. Within two (2) working days of the receipt of the Step 2 written answer, the grievance shall be referred to the Union Business Committee and the Company Committee, who will meet on a date satisfactory to both parties, within ten (10) working days following receipt of the Step 3 grievance to resolve the issue. Either or both parties may be represented at this meeting by outside representatives of their own choosing. Within three (3) working days of such meeting, the Company will provide a written answer to the Grievance. Within the times outlined above, the meetings will be scheduled on a date satisfactory to both parties. In the event that this procedure does not result in settlement of the Grievance, then; Step 4. Within forty (40) days from the date of the Step 3 answer, the grievance may be referred by either party to arbitration by serving written notice on the other. If either party fails to refer an unresolved grievance to arbitration within the forty (40) day period, the grievance shall be considered withdrawn and not arbitrable. 5.3 The Union Business Committee and the Company Committee referred to above in Step 3 shall consist of a maximum of nine (9) employees each, designated respectively by the Union and the Company. 5.4 The time limits referred to above may be accelerated, or extended, or any step of the procedure may be continued upon mutual agreement of the parties to this Agreement. If the Union fails to comply with the time requirements in Steps lb, 2, or 3, the grievance shall be automatically dropped. If the Company fails to comply with the time requirements in Steps lb, 2, or 3, the grievance shall be automatically granted. 5.5 An agreement reached between the committees shall be final and binding on the Company, the Union and the employees involved. SELECTION OF ARBITRATOR 5.6 The Arbitrator for the purpose of this contract, shall be selected in the following manner, to wit: A. In the event a grievance has not been resolved under Step 3 of this Article, either party may notify the Federal Mediation and Conciliation Service of the dispute and request 11 13 a panel of seven arbitrators. If the panel is not acceptable to either party, then either party shall request a second panel, prior to striking any names from the first panel. The parties will select one arbitrator, by alternately striking from the panel a total of six arbitrators. The Arbitrator chosen by this procedure will then arbitrate the grievance. More than one grievance may, by mutual agreement, be submitted simultaneously to the same Arbitrator. 5.7 The Arbitrator shall have no authority to change or modify the terms of this Agreement, but he shall have authority to apply or interpret the meaning of the terms of this Agreement, and resolve all grievances referred to him under the terms of this Agreement. 5.8 Within a reasonable time after the hearing the Arbitrator shall tender to the parties his disposition of the grievances involved. Such disposition shall be final and binding upon both parties. 5.9 The Arbitrator's charge and expense in connection with any grievance submitted to arbitration shall be borne by the party losing the arbitration. 5.10 The Company shall compensate Union officers and members of the Business and Shop Stewards committees at their average straight time hourly earnings, and individual aggrieved employees at the straight time hourly base rates at which they are then employed, for all time actually spent with representatives of the Company in collective bargain' nations and Grievance adjustments pursuant to this Agreement, when the officers, committeemen and employees so engaged otherwise would be at work. Time spent in negotiations and grievance ad' handled outside of the normal working adjustments handled outside of the normal working day will not be paid by the Company. Negotiations and grievance adjustment meetings will be scheduled by the Company and may be held during regular working hours. The number of employees in attendance at bargaining and Grievance meetings shall be scheduled to the extent that the number of employees attending such meetings shall not interfere with normal production. ARTICLE 6 - DISCHARGE AND DISCIPLINE 6.1 The Company agrees not to discharge or suspend any of its employees except for In the event of discharge or just cause. In the event of discharge or suspension, the Company agrees to give the Shop Stewards Assistant written notice of such discharge or discipline, stating the reason therefor. Such notice shall be delivered to the Union within twenty-four (24) hours of the occurrence of such event. Any employee who is discharged or suspended under the provisions of this contract shall have the right of grievance as provided herein. 6.2 Grievances involving discharge shall enter the grievance procedure at Step 3. 6.3 It is further agreed that in all cases of discharge or suspension, if the employee or employees affected desire to file a grievance, he must file a written grievance immediately or at least within ten (10) days of such discharge or discipline. In the event it is decided that an employee was 12 14 unjustly discharged or suspended, he shall be reinstated to his former position without loss of seniority and reimbursed for all time lost while under discharge or suspension, unless some other agreement is reached between the Company and the Union Business Committee. 6.4 Unexcused absence for three (3) or more consecutive working days shall be considered grounds for discharge or discipline. 6.5 Employees who receive three written warning notices on unexcused absences for periods less than indicated in Section 6.4 above, within twelve (12) consecutive months, shall be given a three-day suspension from duty without pay. More than three written warning notices on unexcused absences, for periods less than indicated above in Section 6.4 within twelve (12) consecutive months, shall be considered just cause for discharge or discipline. As a written warning notice is issued, one copy shall be delivered to the employee and one copy to the Union Shop Steward Assistant within 24 hours of the time such warning is issued. 6.6 Written warning notices for any disciplinary reasons shall remain in effect for twelve (12) months from date of issuance. Written warning notices more than twelve (12) months old shall not be used against the employee in future progressive discipline. ARTICLE 7 - WAGES 7.1 The Company and the Union hereby agree that the minimum wage rates for each job classification are as set forth in the attached schedules marked Exhibit "A" entitled "Minimum Rates" and Exhibit "D" entitled "Trucking" and will be effective for the periods indicated during the term of this Agreement. 7.2 For shift premium pay purposes only, the hours of the first shift will be 6:00 A.M. to 2:00 P.M.; the second shift will be from 2:00 P.M. to 10:00 P.M.; and the third shift will be from 10:00 P.M. to 6:00 A.M. The employee will be paid the shift premium applicable to the shift on which he works the majority of hours. Shift premiums will be 250 per hour for the second shift and 35(cent) per hour for the third shift. 7.3 All employees shall be paid weekly on Thursday during their regular shift. If a Holiday occurs, the payday may be advanced or delayed within the same work week, Saturday excluded. 7.4 The Contract rates shown in Exhibits "A" and "D" are minimum rates, and are guaranteed. WAGE INCENTIVE PROVISIONS 13 15 7.5 The Company agrees to establish incentive plans on the basis of fairness and equity consistent with the quality of workmanship, efficiency of operations and reasonable working capacities of normal operators working at incentive pace. 7.6 Other matters pertaining to production standards or incentives shall be contained in a supplementary agreement. Such agreement, attached to this contract as Exhibit "C," shall become a part of this contract and a part of each individual incentive plan. PAID HOLIDAYS 7.7 Effective during the life of this contract the Company will pay holiday pay for the following holidays: New Year's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Day following Thanksgiving Day, Christmas Eve Day, Christmas Day, a "floating holiday" to be scheduled by the Company annually, and New Year's Eve Day. Such pay is to be eight (8) hours at the average straight time hourly earnings, and all employees covered by this Agreement, performing service, except those who have not completed their probationary period, will be entitled to paid holidays. A. The Company will pay ten (10) hours (in lieu of 8) holiday pay at average straight time hourly earnings to all employees who are working four, ten-hour shifts on all auto mated systems the week before and/or the week after and the week of the holiday(s). When a holiday(s) falls during a scheduled vacation shutdown week, the Company will pay ten (10) hours holiday pay to all employees who are working four, ten-hour shifts on all automated systems the week before and/or the week after the holiday(s). B. All work performed on any of the holidays recognized in 7.7 or on the day celebrated in lieu thereof, such as when a holiday falls on Sunday and is celebrated on Monday, shall be paid for at the rate of double (2) time. If a shift starts during a holiday and extends into a non-holiday period, all hours worked on such shift shall be paid for at double time. The above premium pay for time worked shall be in addition to holiday pay. C. To qualify for holiday pay an employee who is scheduled to work must have worked his last scheduled work shift prior to and his first scheduled work shift after such holiday unless excused by the Plant Manager for personal compelling reasons. D. Employees who have been laid off because of lack of work within fifteen (15) days immediately prior to the date of the holiday, or who after having been laid off are recalled to work within fifteen (15) days after the date of the holiday shall be eligible for holiday pay. ARTICLE 8 -TRANSFERS, JOB POSTINGS, AND PROMOTIONS 14 16 TEMPORARY TRANSFERS 8.1 When any employee is temporarily transferred by the Company for a period of one week or less, he shall be paid the base rate of his regular job or the base rate of the temporary job, whichever is higher, plus any applicable shift premium. If the employee is not returned to his regular job after one week, and his temporary transfer is renewed, he will continue to be paid the base rate of his regular job or the base rate of the temporary job, whichever is higher, plus any applicable shift premium. While on temporary transfer, the employee will continue to accrue seniority in his home department. 8.2 When any employee is temporarily transferred at his own request, he shall be paid the base rate of the temporary job, plus any applicable shift premium. 8.3 For the purpose of protecting the earnings of senior incentive employees who are temporarily transferred by the Company, the following procedures will be used: A. When any incentive employee is temporarily transferred to another department while any employee with less departmental seniority performs incentive work in the department (defined in 8.4, E below) of the transferred employee, such transferred employee will be paid his average earnings or his earnings on the temporary job, whichever are higher. B. When any incentive employee is temporarily transferred within his department to another Work Section (defined in 8.4, F below) while any employee with less departmental seniority performs incentive work in the Work Section of the transferred employee, the transferred employee will be paid his average earnings or his earnings on the temporary job, whichever are higher. C. However, if any incentive employee is temporarily transferred as a result of machinery breakdown which occurs during his scheduled shift, he will be paid base rate of his regular job or the base rate of the temporary job, whichever is higher, plus any applicable shift premium, but not average earnings. TRANSFERS OTHER THAN TEMPORARY 8.4 In the event an employee is transferred as provided for below, he shall be paid the rate of the Job to which he is transferred, effective on the date of transfer. A. When it is necessary to reduce the number of employees in a department, the last man assigned to the department shall be the first selected for transfer. Such employee transferred out of the department shall have the right to transfer back to his last department, except he shall not replace any employee in his former department who has greater departmental seniority. If his last department is not open to him by application of departmental seniority, he will be assigned to available work within the Company. 15 17 B. Any employee who is displaced from his department as a result of the foregoing procedure shall also have the right to transfer back to his former department in the same manner. C. When the department or departments increase the number of employees required in such department, the employees transferred out by the operation of the above paragraphs shall be first entitled to transfer back to the original departments from which they were transferred. If employees elect not to exercise their department seniority rights in the application of this paragraph (8.4, C), they will lose seniority rights in all departments and will be assigned to available work within the Company. D. Whereas the above paragraphs consider the usual and normal transfer procedures, it is recognized that from time to time unforeseen or unusual conditions may occur which may require deviations. Deviations proposed by either party, shall be discussed between the Company and the Union Business Committee and shall include such factors as employee's ability and efficiency of operation. If no agreement is reached, the Company will be at liberty to make such deviations, and in any event all employees affected by such deviation shall have the right of Grievance pursuant to the grievance procedure outlined in this contract. 16 18 E. For purpose only of administration of the above, departments are defined, but not restricted, to the following: 17 19
Plant 2 Plant 3 1. Hydro Slinger Molders........................................ X 2. BMD.......................................................... X 3. BMD Finishing................................................ X 4. Pourers...................................................... X 5. Other Molding Indirect....................................... X 6. Chippers, Grinders, Fitters.................................. X 7. Bore, Mill and Drill Operators............................... X 8. All Cleaning, Indirect....................................... X 9. Shipping..................................................... X *10. Maintenance.................................................. X X *11. Electrical Maintenance....................................... X X 12. Over-the-Road Drivers........................................ X X 13. Pattern Storage.............................................. Transport *14. Receiving and Stores......................................... X 15. Inspection................................................... X 16. Utility Truck Drivers........................................ X 17. All Others................................................... Transport 18. Disamatic System............................................. X X 19. Casting Processing........................................... X 20. Quality Assurance............................................ X 21. Core Support................................................. X X 22. Core Operations.............................................. X X 34. Melt......................................................... X X
*Combined all plants 18 20 F. For the purpose of administering temporary transfers, each incentive employee is assigned to one of the Work Sections listed below. Departmental Seniority shall be used to determine Work Section seniority, in the employee's regularly assigned Work Section, to establish the relative seniority of the transferred employee. WORK SECTIONS PLANT 2 1. Hydro Slinger Molders 4. Pourers Other Molding Indirect: 5. Shakeout 6a. Chippers, Grinders 6b. Fitters 7a. Bore, Mill Operators 7b. Radial Drill Operators 9. Shipping 19 21 JOB POSTING 8.5 All vacancies or new jobs are to be filled by the job posting procedure with the following exceptions: Leadman, Janitor Labor, Core Room Labor, Yard and General Labor, and Cleaning Room General. A vacancy occurs when a new job is created and defined or an established job requires filling to meet manpower planning requirements. A. The Company will post the notice of the vacancy on the bulletin board within three (3) work days from the date the vacancy becomes official. B. The vacancy will remain posted for three (3) work days during which time interested employees who have passed their probationary period may apply. C. The Company shall make its selection within five (5) work days after the posting is closed except in the cases of truck drivers and maintenance and electrical maintenance employees. The employee selected and the Union Shop Stewards Committee Assistants will be notified promptly in writing, normally within two (2) working days, after selection is made. D. The selected employee shall be transferred within one (1) week from date of notification of selection, or receive the higher base rate of his present or new job. E. The employee's date of notification of selection shall be the date the employee begins to accrue seniority in the new department. F. The Company will post on the bulletin board weekly the names of the previous week's successful bidders, their seniority dates and the jobs for which they were selected. G. Employees shall be limited to one (1) successful lateral or downward bid each year from date of selection. There shall be no limit on bids for promotions to higher base rate jobs. H. If the Company selects an employee or employees for such from the bargaining, unit such selection shall be made 8.6 In the event a job or jobs are posted pursuant to 8.5 and no application is made within the period set forth, the Company is at liberty to fill the vacancy as it sees fit. The Company will advise the Union Shop Stewards Assistants and President of the fact that no applications were filed. A. If applications are made as herein provided and after investigation the Company finds that the applicants are qualified or have qualifications for the posted job, selection will be made from the applicants whose applications are on file for the job, as provided in 8.5 hereof. Selection shall be made within five (5) days after the expiration of posting. If, however, the Company is satisfied that none of the applicants is qualified for the job in question then it may fill such job by selection outside of the bargaining unit. The Company shall give the Chairman of the 20 22 Union Business Committee a list of all the applicants who applied and the name of the employee(s) selected to fill the posted job or jobs within two (2) working days after selection is made, whether the selection is made from the bargaining unit or not. B. When an employee is involuntarily selected by the Company in accordance with its right in the above paragraphs such employee will retain and accumulate seniority in his prior department for all time worked in the job to which he was involuntarily placed. C. When an employee through job posting enters a new department as defined in 8.4, E, he shall retain his departmental seniority in immediate prior department until he has worked thirty (30) days. If for any reason, it is necessary to return the employee to his former job during this period, he will then do so with continued accumulated departmental seniority. The employee shall lose all seniority in his former department the day after he completes thirty (30) days worked in the new department, except in the application of Section 8.4. New department seniority shall then be retroactive to the first day of assignment to the new department. 8.7 The employee or employees who file application for a job pursuant to job posting notice and who are not selected and who desire to file a grievance shall file such Grievance immediately but not later than ten (10) working days from the date of selection notice. Such grievance shall be subject to arbitration in accordance with the terms of this contract; but the grievance, if filed, shall not prohibit the Company from filling the job. 8.8 Any employee requesting transfer, other than temporary, out of a department or into another department, without using the job posting procedure, will forfeit all former department seniority rights when the transfer takes place. 8.9 The Company shall establish an apprenticeship and training program in conformity with the State of Wisconsin Department of Industry, Labor and Human Relations Apprenticeship Division for those in maintenance classifications. A. Apprentices must be indentured and attend the appropriate school in accordance with the Wisconsin Apprenticeship Law, Chapter 106 and meet all requirements as may be set up by the Wisconsin Department of Industry, Labor and Human Relations and the Company. TRANSFERS OUT OF THE BARGAINING UNIT 8.10 Both parties agree to the principle of advancing employees to positions outside the bargaining unit. In the event an employee so advanced is demoted or requests demotion during the first year, he shall be promptly returned to his former job at the going rate of pay with credited departmental and Company seniority. A. Employees previously advanced prior to January 1, 1972, shall accrue departmental seniority for a maximum of three (3) years. Employees advanced outside the 21 23 bargaining unit subsequent to January 1, 1972, shall continue to accrue departmental seniority for a maximum of one year. In the event there is a reduction in force the employee shall be entitled to use his departmental seniority he had at the expiration of the accrual period in order to return to the bargaining unit. B. Employees advanced outside the bargaining unit subsequent to January 1, 1993 who do not return to the bargaining unit during the first year shall forfeit all departmental seniority rights. In the event there is a reduction in force during the first ten(10) years after an employee is so advanced, he shall be entitled to use his Company seniority in order to return to the bargaining unit. In the event there is a reduction in force subsequent to ten (10) years after an employee is so advanced, he shall not be entitled to return to the bargaining unit. C. The employee's Company seniority shall continue to accrue during the employee s entire period of employment with the Company. ARTICLE 9 - LEAVES OF ABSENCE 9.1 Employees desiring a leave of absence shall be required to make written request for said leave of absence, outlining the reason for such request. The granting of such request shall be by mutual written consent of the Company and the Union Business Committee Chairman, in triplicate, the original to be retained by the employee, the duplicate by the Company and the triplicate by the Union. A leave of absence shall be granted to members designated by the Chairman of the Union Business Committee for the purpose of attending conventions and Union conferences. Employees on leave of absence shall accrue departmental seniority for a maximum of one (1) year in addition to that already accrued at the time of the leave. 9.2 When members of the Union are serving full time on behalf of the Union, or are selected to represent the International Union, necessitating a leave of absence from the Company, the Company will grant such leave of absence for up to three (3) years. Such leave of absence shall be automatically renewed by request for up to a maximum of ten (10) years. Reasonable advance notice of such leaves shall be given to the Company. A. In the event an employee so serving the Union returns to bargaining unit work during the first year, he shall be promptly returned to his former job at the going rate of pay with credited departmental and Company seniority. 22 24 In the event there is a reduction in force during the first ten (10) years after an employee is so serving, he shall be entitled to use his Company seniority to return to bargaining unit work. In the event there is a reduction in force subsequent to ten (10) years after an employee is so serving, he shall not be entitled to return to bargaining unit work. 9.3 The Local Union President shall be excused from work without pay for the entire day on which the Union Local conducts its regular monthly meeting, provided he notifies his department superintendent at least one day in advance of the date of the meeting. A. When it is necessary for the Local Union President to be further absent from work without pay for Union business in addition to the day of the regular monthly meeting, the Local Union President shall obtain approval in advance from his department superintendent. ARTICLE 10 - MANAGEMENT 10.1 The management of the Company and the direction of the working force including the right to hire, suspend or discharge for cause, to transfer or lay off for lack of work or any other legitimate reason, to make and enforce reasonable rules and regulations and in general, all other functions of management unless limited by this Agreement, are reserved to and are vested exclusively in the Employer, including any of the rights, power or authority the Employer had prior to the signing of this Agreement. ARTICLE 11 - NO STRIKE - NO LOCKOUT 11.1 It is agreed that as a part of the consideration of this contract, any and all disputes and any and all claims or demands growing out of said contract or involved therein shall be settled and determined exclusively by the machinery provided herein through the grievance procedure and that during the term of this contract, there shall be no strike on the part of the Union nor lockout on the part of the Company. 11.2 It is specifically understood and agreed that the no strike clause in the preceding paragraph shall not be operative under the following circumstances: If at the expiration of this contract the parties are unable to agree upon the terms or conditions of a renewal or modification thereof. ARTICLE 12 - FUNERAL LEAVE 12.1 In the event of death of an employee's brother, sister, father, mother, step-father, stepmother, father-in-law, or mother-in-law, the employee may be absent from work and shall be paid a minimum of eight (8) hours of pay, per day, up to three (3) days for his scheduled time actually lost from the day of death to the day of the funeral, inclusive except, if the funeral is in excess of 200 23 25 miles from the City of Neenah, Wisconsin, then the day after the funeral shall be considered an additional day of paid funeral leave. 12.2 In the case of the employee's spouse or child or stepchild, paid funeral leave shall be up to five (5) scheduled days lost at a minimum of 8 hours pay, per day, from the day of death to the seventh day following the day of death. 12.3 In the event of the death of an employee's grandparent, grandchild, sister-in-law, brother-in-law, daughter-in-law, son-in-law, or of an employee's spouse's grandparent, the employee may be absent from work and shall be paid for scheduled time actually lost up to a minimum of eight (8) hours pay, per day, on the day of the funeral if it is a scheduled work day and the employee attends the funeral. 12.4 To qualify for paid funeral leave the employee must- A. have passed his probationary period prior to the death of the above mentioned family member. B. attend the funeral unless unable to do so because of illness, accident, or other just cause; and C. notify the Personnel Department as soon as possible that he will be absent because of the death. 12.5 Funeral leave pay will be computed at the employee's regular straight time base rate including any shift premium. No funeral leave pay will be paid for days on which Holiday or Vacation pay is paid, or when an employee is on any kind of leave of absence or Worker's Compensation. Scheduled time lost shall not be counted as hours worked for purposes of computing overtime pay. ARTICLE 13 - GENERAL 13.1 Space for bulletin boards shall be made available by the Company at convenient places as near as possible to the time clock for the posting of Union notices. 13.2 Duly accredited representatives of the Union, upon application for permission, shall have the right of access to the plant to interview any of the employees affected by this contract or to investigate any grievances. The Company will provide accommodations for such or on its premises. A. Upon proper notice to the Company from the Union requesting time off for representatives to perform Union business, the Company shall give written notice of work release to the affected employee, his immediate supervisor and/or department manager. 24 26 SICK PAY 13.3 Any employee covered by this Agreement who is absent because of a non-industrial accident or Illness long enough to collect benefits from the Neenah Foundry Company Sickness and Accident Insurance Program will be paid up to the first three (3) scheduled work days of such absence or absences not covered by the insurance program at the rate of eight (8) hours per day at the employee's straight time hourly base rate. It is understood that not more than a total of three (3) scheduled work days will be due an employee during any calendar year because of a non-industrial sickness or accident or combination thereof. A. Any employee who is absent due to an industrial injury incurred at Neenah Foundry Company will be paid, under this Agreement, for the first three (3) scheduled work days of absence or absences not covered by Worker's Compensation Insurance, for each such injury or illness, if, (1) the injury sustained was properly reported on the day of injury, and, (2) these same days are not later paid for by Worker's Compensation. B. In any event, no sick pay will be paid for any day not a scheduled work day, or on which holiday pay or vacation pay is paid. 13.4 The Company will continue to provide, and with the cooperation of its employees, maintain proper sanitary and safety conditions. A joint Company-Union Safety Committee shall function as outlined in the December 17, 1974 policy letter. 13.5 The Company agrees, within thirty (30) days from the execution of this contract, to furnish a current seniority list and to keep it current at such times as may be agreed upon between the Company and the Union. 13.6 The Union will, at the execution of this contract, furnish the Company with a list of the names of its Shop Stewards Committee or other committees designated to handle negotiations and grievances on behalf of the Union. 13.7 The Company will, at the execution of this contract, furnish the Union Business Committee with a list of the names of its Bargaining Group who will have authority to negotiate or adjust Grievances. 13.8 The Company shall furnish a meal at a cost not to exceed $4.00 for each employee who works more than two (2) hours beyond his scheduled shift. A paid twenty minute lunch period will be provided when meals are furnished; such period will not be included in the "more than two (2) hour" qualifying period, but will be counted as time worked for overtime purposes. 13.9 The Company and the Union will comply with all laws and regulations established by Federal and State Governments regarding their respective obligations under this Agreement. 25 27 A. Any Federal or State law which mandatorily changes any of the provisions of this Agreement shall govern. However, such required change shall not change any of the other provisions of the contract. 13.10 Non-bargaining unit personnel shall not perform work normally done by bargaining unit employees except for the purpose of instruction or in the case of emergency. (See policy dated December 9, 1974.) 13.11 Upon presentation of proper pay voucher, an employee required to serve jury duty shall be paid the difference between his jury duty pay and eight (8) hours of straight time pay at his base rate for each scheduled work day he lost as a result of the jury duty. 13.12 A tool allowance of $150.00 will be paid annually to each maintenance employee on the payroll as of January 1. 13.13 The Company will reimburse each employee $50.00 for one pair of approved safety shoes purchased by the employee for his personal wear, each year. For designated employees who have outside jobs, the Company will provide an additional $50.00 reimbursement for purchase of one pair of insulated safety boots per year. Employees regularly assigned to the following outside are eligible for the additional $50.00 reimbursement: Plant 2 Plant 3 ------- ------- Charge Yard Charge Yard Shipping Yard Paint Knockout Skid Repair Front End Loader Operator Inter Plant Truck Drivers Plus: Outside Distribution Yards To be eligible for any reimbursement allowance, the employee must have completed his probationary period at the time of purchase. 13.14 The Company will reimburse each employee for replacement of prescription safety glasses, or parts thereof, which are damaged at work at the actual cost to a maximum of $35.00 per year. ARTICLE 14 - PENSIONS 26 28 14.1 The Company agrees to continue its pension program started January 1, 1963, according to separate contract with Connecticut General Life Insurance Company. This plan is to be wholly financed and owned by the Company. A. Effective January 1, 1996, the formula for determining monthly pensions shall provide for $28.00 per month as pension base. B. Effective January 1, 1998, the formula for determining monthly pensions shall provide for $29.00 per month as pension base. C. Employees who retire during 1996 and 1997 will retire at the $28.00 per month pension base calculation. Effective January 1, 1998, those same employees will have their pension recalculated on the $29.00 per month pension base. 14.2 The plan contains a surviving spouse's benefit provision. To be eligible for such benefit, an employee shall have a minimum of five (5) years of vested Company service. 14.3 The normal retirement date is the first of the month following the employee's 65t[i birthday. Provisions for early retirement after age 60 are provided for in the plan. 14.4 The minimum pension disability benefit shall be $335.00 per month. To be eligible for such benefit, an employee shall have a minimum of five (5) years of vested Company service. A. Effective January 1, 1998, the minimum pension disability benefit shall be $350.00 per month. 14.5 None of the above increases in pension benefits shall apply to employees already on retirement. ARTICLE 15 - INSURANCE 15.1 A PPO Health Insurance Plan, administered by Employers Health Insurance, Network Health Plan (HMO) and United Health Plan (HMO) will be offered. A. Specific benefits offered by the plans listed in 15.1 are contained in the plan summaries which are available through the Personnel office. B. The employee monthly contribution for coverage effective January 1, 1996, is as follows: Network HMO PPO Plan United HMO 27 29 Single Coverage $27.95 $38.88 $32.92 Family Coverage $76.59 $105.89 $92.61 These employee contribution rates for health insurance will be in effect for calendar year 1996, and for any future premium changes, the employee will pay 20% of the gross premium during the life of this agreement. C. Effective January 1, 1988, employees with 15 or more years of service who retire between the ages of 60 and 65 will be eligible for continuing in one of the health insurance plans offered by Neenah Foundry Company to the regular hourly employees by paying 50% of the insurance premium costs, until the employee reaches age 65 or qualifies for medicare coverage earlier. Effective January 1, 1996, employees who elect to retire between the ages of 62-65 will be eligible to continue in one of the health insurance plans offered by Neenah Foundry Company to regular hourly employees, by paying 25% of the insurance premium cost, until the employee reaches age 65 or qualifies for medicare coverage earlier. It is further understood that if the employee elects family coverage, dependents as defined in the policy are also covered, and if the employee should die during this period of coverage, all coverage for dependents stops at the end of the month in which the employee dies. D. It is understood there will be no changes in the coverage or the carrier except by mutual agreement between the Company and the Union Business Committee. 15.2 For Life Insurance, Weekly Sickness and Accident Insurance, and Accidental Death and Dismemberment insurance, the Company will continue to pay 90% of the premiums and the employee will pay 10%. 15.3 The weekly Sickness and Accident benefit shall be $240.00 for a maximum of 26 weeks. A. Effective January 1, 1997, the weekly benefit shall be $250.00. B. Effective January 1, 1998, the weekly benefit shall be $260.00. 15.4 The Accidental Death and Dismemberment coverage is $18,000. 15.5 The Company will pay 65% of the cost and the employee will pay 35% of the cost of the Employers Insurance Dental Plan, now in effect. A. Eligibility for this coverage will begin the first day of the month following the employee's 12 month service anniversary. 28 30 15.6 In the case of a. work-connected death of an employee who carries family coverage under the Company's health insurance and/or dental insurance programs, the Company will continue such programs for a period of thirty-six (36) months for the surviving spouse and dependent children. The Company will pay the full premium for that coverage the employee had carried at the time of his death. 15.7 Life Insurance Coverage is $18,000. 15.8 In the event an employee is laid off the Company shall continue to pay its percentage share of the premium of the health and welfare plan (excluding sickness and accident benefits) for a period of three (3) months following the month in which the layoff became effective provided the employee arranges with the Personnel Office for payment of his percentage share of the premium. 15.9 Eligibility for coverage by the insurance programs, except Dental Coverage, shall commence on the first of the month following completion of thirty (30) days worked. 15.10 The insurance benefits outlined herein are subject to the express limitations, exclusions and all other terms and conditions as fully and completely set forth in the actual insurance policies in effect between the Company and the respective carriers. ARTICLE 16 -TRUCKING 16.1 An Over-the-Road Truck Driver is one who is classified as such and operates tractor-trailer type of equipment used generally for long hauling. 16.2 Rates and conditions applicable only to Over-the-Road Truck Drivers are set forth in Exhibit "D" which by this reference is made a part of this Agreement. ARTICLE 17 -TERMINATION CLAUSE THIS CONTRACT agreed upon the 29th Day of December, 1995, and signed this ___________ Day of _____________, 1996, shall be in full force and effect from January 1, 1996, until and including the 31st day of December, 1998. 29 31 NEENAH FOUNDRY COMPANY E. W. Aylward, President & CEO LOCAL NO. 121B GLASS, MOLDERS, POTTERY, PLASTICS AND ALLIED WORKERS INTERNATIONAL UNION, AFL-CIO-CLC Jerry L. Cotton John A. Mansfield Sr. Darrin Miracle Lynn C. Broege Tom Lorge Fred Clay Reuben H. Stoegbauer Mick Dietzen Jim Strompolis Donald Benotch, Executive Officer GMP, AFL-CIO-CLC EXHIBIT "A" MINIMUM RATES NON-INCENTIVE
EFFECTIVE DATES 12/31/95 12/29/96 12/28/97 -------- -------- -------- Janitor Labor $11.33 11.68 11.98 Yard and General Labor 11.33 11.68 11.98 Cleaning Room General 11.36 11.71 12.01 Truck Loader Helper - Plant 2 11.41 11.76 12.06 Gangway Man 11.41 11.76 12.06 Pattern Storage 11.41 11.76 12.06 Pattern Setup 11.46 11.81 12.11 Utility Man - Plant 2 11.49 11.84 12.14 Jeep Driver General 11.51 11.86 12.16 Sand Tester 11.51 11.86 12.16 Flask Welder 11.51 11.86 12.16 Shipping Clerk Helper 11.56 11.91 12.21 Pattern Storage Truck 11.56 11.91 12.21 Receiving Clerk 11.57 11.92 12.22 Inspector 11.59 11.94 12.24 Front End Loader Operator 11.59 11.94 12.24 Jeep Driver, Metal Delivery 11.59 11.94 12.24 Casting Processing - Plaint 3 11.60 11.95 12.25
30 32
12/31/95 12/29/96 12/28/97 -------- -------- -------- Core Support - Plant 3 11.60 11.95 12.25 Stock Room Clerk 11.61 11.96 12.26 Utility - Distribution Yards 11.61 11.96 12.26 Maintenance Helper, Mechanical $11.67 $12.02 $12.32 Salvage Welder 11.67 12.02 12.32 BMD Operator Assistant 11.82 12.17 12.47 BMD Finishing Operator Assistant 11.82 12.17 12.47 Truck Driver/Utility - Distribution Yards 11.82 12.17 12.47 Melt Systems Plant 2 11.90 12.25 12.55 BMD Iron Pourer 11.90 12.25 12.55 Melt System - Plant 3 11.90 12.25 12.55 Qaulity Assurance - Plant 3 12.10 12.45 12.75 Utility Truck Driver 12.12 12.47 12.77 Maintenance General, Mechanical 12.13 12.48 12.78 Core Operations - Plant 3 12.55 12.90 13.20 BMD Finishing Operator 12.90 13.25 13.55 BMD Pattern Change Operator 12.90 13.25 13.55 Disa System 12.90 13.25 13.55 BMD Maintenance Operator 14.38 14.83 15.23 Maintenance Mechanic 14.38 14.83 15.23 Journeyman Electrician 15.20 15.65 16.05
31 33 APPRENTICE PAY SCHEDULE (ELECTRICAL) Minimum Compensation to be paid: 1st period of 1,050 hours 75% of the skilled rate 2nd period of 1,050 hours 78% of the skilled rate 3rd period of 1,050 hours 81% of the skilled rate 4th period of 1,050 hours 84% of the skilled rate 5th period of 1,050 hours 87% of the skilled rate 6th period of 1,050 hours 90% of the skilled rate 7th period of 1,050 hours 93% of the skilled rate 8th period of 1,050 hours 96% of the skilled rate INCENTIVE
12/31/95 12/29/96 12/28/97 -------- -------- -------- Chipper 11.21 11.56 11.86 Grinder 11.21 11.56 11.86 Machine Shop Operator - Plant 2 11.21 11.56 11.86 Core Maker 11.21 11.56 11.86 Core Finisher 11.21 11.56 11.86 Shifter and Shakeout 11.21 11.56 11.86 Jeep Driver/Load Checker - Plant 2 11.30 11.65 11.95 Radial Drill Operator 11.31 11.66 11.96 Truck Loader/Order Picker - Plant 2 11.31 11.66 11.95 Iron Pourer 11.40 11.75 12.05 Slinger Molder 11.40 11.75 12.05 Slinger Operator, Hydro 11.54 11.89 12.19
Leadmen, when utilized, will be selected by the Company. Leadmen will receive a minimum of 15(cents) over the rate of the job led. 32 34 EXHIBIT "B" DRUG AND ALCOHOL ABUSE POLICY BETWEEN NEENAH FOUNDRY COMPANY AND LOCAL 121B, GLASS, MOLDERS, POTTERY, PLASTICS & ALLIED WORKERS INTERNATIONAL UNION, (AFL-CIO-CLC) POLICY FOR SCREENING FOR ABUSE OF ALCOHOL, MARIJUANA AND CHEMICAL SUBSTANCES Neenah Foundry Company and GMP Local 121B have a strong commitment to provide a safe and secure workplace for all employees and to promote high standards of employee health and productivity. Because of this commitment, both Neenah Foundry Company and GMP Local 121B agree to a program of screening for use and/or abuse of alcohol or chemical substances in the workplace. It is the purpose of this agreement to provide guidelines for addressing such substance use/abuse by employees. 1. There will be no random drug/alcohol testing except as mandated by law. 12. This agreement applies to employees in situations where the Company has determined the employee to be under the influence of drugs, marijuana, chemical or controlled sub stances, or alcohol while at work or on Company property. 23. If an employee appears to be under the influence of alcohol or drugs, the supervisor should, if possible, secure the assistance of another supervisor in observing the employee's action and in escorting the employee to an appropriate office or area for further investigation. A Union representative or designee shall be secured to be present during the investigation. 34. If, as a result of the investigation, the supervisor has reasonable cause to believe that the employee is in a condition that is jeopardizing workplace safety or cannot perform his or her job because of on-the-job intoxication or impairment, the employee will be suspended and will be required to submit to a screen for alcohol/drugs. The supervisor may and if requested by the employee, a Union representative may accompany the employee to the test site. However, neither shall be permitted to impede the testing process. The Union representative will continue to be paid during the time required to accompany the employee, wait at the test site, and return to work, if he would otherwise be scheduled to work during this time. 5. The initial screen for suspected drug, marijuana, and chemical substance use will be an enzyme multiplied immunoassay test. The confirmatory test will be a gas chromatography-mass spectrometry (GC-MS) test. A confirmatory will automatically be performed on any sample that is initially positive. However, the Company reserves the right to test directly by using the gas 33 35 chromatography-mass spectrometry (GC-MS) test rather than the initial enzyme multiplied immunoassay (EMIT) test. In those situations where there may be reason to believe that the sample may have been tampered with by the person giving the sample prior to the sealing and signing of the samples, the Company may authorize the laboratory to perform a Specific Gravity test prior to the EMIT/GC-MS test being performed. 6. If available, the appropriate test for suspected alcohol use will be a breathalyser test. A blood sample may also be utilized at the discretion of the Company to determine or verify the results of the test. 6A. State law standards as defined in the motor vehicle code in the state where the plant exists or incident occurs, will be utilized to determine if the employee is intoxicated. 47 The initial sample taken for screening for illegal chemical substance, drugs, marijuana and controlled substances will be split into three samples. They will be sealed and signed at the time of the taking of the sample by the person taking the sample and the person giving the sample. One sample will be used for the EMIT and/or the confirmatory (GC-MS) test. The remaining two (2) sealed and signed samples will be retained by the testing laboratory. If it is determined that the GC-MS screen is positive, the employee will have the right within two (2) weeks of notification of said positive screen test results, to have the second sample sent to a certified lab of their choice to be tested. The laboratory selected by the Company will transmit the sample directly to the laboratory selected by the employee, with the seal and signature intact to protect the chain of custody, where a GC-MS confirmatory screen test will be performed. The employee will be reimbursed for the cost of any screen performed at his discretion provided the laboratory selected is certified for testing by the National Institute of Drug Abuse (NIDA) (or a comparable independent state certified laboratory), and provided the results are negative. The employee will sign a consent agreement authorizing the release of the results of the screen to the Company. In situations where the results of the screen test from the two (2) labs reach opposite conclusions, then a third certified laboratory will be selected by the two (2) respective laboratories and the remaining sealed and signed sample of the original specimen will be sent to the third certified laboratory to perform a GC-MS screen test. The results of the third certified laboratory will be binding on all parties and if the tests are negative then the employee's record would be cleared of any suspension or reference to the incident. The Company will reimburse the employee for time lost at the applicable rate, as specified in the Union contract, from the date of suspension. 34 36 8. Any employee who is asked to submit to a screen for alcohol or drug use will sign a consent agreement authorizing the release of the results of the screen to the Company. 9 Refusal to submit to a screen for items covered under this Drug and Alcohol Abuse Policy or to sign a consent agreement or to take rehabilitation recommended by appropriate medical authorities will be considered insubordinations and the employee will be suspended pending termination. 10. If the employee is taking prescription or over-the-counter substances that might affect the results of the screen, the Company will be advised by the employee prior to the screen being administered. 11. The Company will select a properly licensed, accredited testing NIDA or comparable state approved/certified facility and follow testing procedures specified above to assure the most accurate results, maintain the most complete chain of custody and quality control procedures and assure the maximum of confidentiality. 11A. Outside of the Neenah/Menasha area, the Company and Union will accept reasonable facilities and the results of law enforcement agencies. 512. All screening as well as the results of any screen will be treated in a confidential manner. All employees who are tested will be given the results of their tests in writing. 613. Any employee found to be intoxicated (in accordance with 6A), under the influence of illegal chemical substance, marijuana or controlled substances, will be offered the opportunity for rehabilitation on the first incident only except as if specified in Item 15 below. The type of rehabilitation program available will be determined at the appropriate time after consultation with appropriate medical authorities. Any treatment must be provided by an approved rehabilitation facility in accordance with the insurance program specified in the respective Collective Bargaining Agreement. If the employee agrees to the rehabilitation program, then the employee will be required to satisfactorily complete such rehabilitation program. Failure to do so will result in their suspension pending termination. 14. An employee who has completed rehabilitation and is found to be under the influence of alcohol, (in accordance with 6A), illegal chemical substance, marijuana, or controlled substance a second time, the employee will be suspended pending termination. 15. Any employee who initially tests positive for use of alcohol (in accordance with 6A), illegal chemical substances, marijuana, or controlled substance and, the test is confirmed, will be subject to future tests upon reasonable cause as specified in (4) and (5) above. 35 37 In situations where an employee voluntarily comes forward prior to any Company inquiry and admits they have an alcohol or drug problem after having satisfactorily completed the counseling/rehabilitation program shall be given a second chance at rehabilitation. Any subsequent situations will result in the employee being suspended pending termination. 716. All new employees will be informed that the Company has an alcohol and substance abuse testing program. 17. This policy does not replace or interfere in any way with normal disciplinary procedures. 18. All specimens will be sent to a National Institute of Drug Abuse Laboratories (NIDA), and all test results will be forwarded to Neenah Foundry Company. 19. Any dispute with respect to this drug and alcohol policy shall be subject to the Grievance procedure. EXHIBIT "C" NEENAH FOUNDRY COMPANY SUPPLEMENTAL INCENTIVE AGREEMENT AGREED ON NOVEMBER 27, 1957, amended January 1, 1960, amended December 27, 1962, amended January 1, 1969, amended January 2, 1972, renewed January 1, 1975, renewed January 1, 1978, amended January 1, 1981, renewed January 1, 1984, renewed January 1, 1987, renewed January 1, 1990, renewed January 1, 1993 and renewed January 1, 1996. A. The Company agrees to study and install incentive rates for workers who are not now on any incentive plan, where such plans are practical. B. Incentive Plans established by the Company are to be set at a level which affords a normal competent operator working at incentive pace, producing a quality product, the opportunity to earn 33% over contract base rate, where performance is fully controlled by the operator's own effort. Where less than full opportunity for work exists, because performance is restricted by equipment, operating limitations, or availability of work, the total earnings opportunity shall be proportionately less by agreement with the Union. C. All incentive workers shall be guaranteed their base rate for each day worked. Core makers and core finishers will be guaranteed their incentive earnings for each division worked during a single day. Divisions are defined as follows: a) Bench and Bench Blower and CB-22 no-bake. D. Molders, Coremakers, Core Finishers, Chippers, Grinders, Machine Shop and Radial Drill Operators working on experimental work or samples will be paid on the basis of average 36 38 earnings. For this purpose, the following definitions will apply: (1) SAMPLES are jobs being run to prove a production process to satisfy customer or Company requirements, and may involve interruptions by Supervision and/or Quality Control; (2) EXPERIMENTAL WORK involves the research and/or development of new materials, processes, or equipment to evaluate the feasibility of incorporating them into the manufacturing operation. E. The Union shall be given a copy of all standard data used as basis for setting incentive rates including future additions or changes to such standard data. Each Plant Manager will have a copy of the standard data used in his plant, which will be made to duly appointed Union representatives upon request. Minor changes shall not cause an adjustment in standard data until the accumulated changes total at least plus or minus 5%. F. After incentive rates have been installed, such rates cannot be changed except as provided in paragraphs 1, 2 and 3 below or by mutual agreement between the Union and the Company. This does not preclude the Company from establishing new methods and procedures and assigning applicable rates. Incentive rates, once established, shall become permanent rates and shall be guaranteed against change except for the following: 1. Changes due to errors in job content analysis, clerical errors, managerial changes in material, method, equipment or process which definitely change the work elements of the job so that it shall require more or less time to perform. 2. Where changes affect the time required to perform an element or elements, only those elements which have changed will be adjusted. 3. Changes through grievance procedure. G. Notification of changes will be given to workers affected by the changed rate. Such notifications will include the reason(s) change was made. H. Incentive rates will be computed from Standard Data. If the incentive rate cannot be met by a normal competent operator working at an incentive pace, the Company agrees to review the elements making up the incentive rate. In accordance with results of the review, the incentive rate may be adjusted to provide normal incentive opportunity on the job. Incentive earnings shall not be averaged to determine whether individual values are fairly established. I. Any incentive employee or Committeeman shall have the right to grieve any new incentive rate which has been established by the Company. However, as a crude to determine whether an individual is justified in challenging a particular incentive rate, such individual's overall average incentive earnings shall be considered. If a rate is changed as a result of a grievance such rate shall be retroactive to the date on which the grievance was filed. 37 39 J. The Company shall endeavor to establish rates for unrated . obs before the job starts. If the rate is not established before the job starts, the rate shall be set and the employee notified within four hours from job start or by the end of the shift, whichever is sooner, or pay average earnings retroactive to job start. An unrated job is any job (excluding plus standard work) for which a rate is not at the job site when the job starts. K. If an incentive employee or leadman has a question concerning the work content of a job, he shall contact his supervisor. The supervisor shall check the job by observation, by review of the scheduling master, or other data. If the operator's question cannot be satisfactorily answered, then the supervisor shall request a copy of the factor sheet and will review the copy of the factor sheet with the employee. The supervisor may request the Standards Department to observe the job in question. L. A duty appointed Union representative, after contacting his supervisor, shall have the right to examine any incentive rate in effect during the life of this contract. The Union representative, in order to complete the examination of an incentive rate, may request the supervisor to get the factor sheet for said job. All such rates shall at all times remain in the possession of the Company, subject, however, to the right of inspection by the Union representative. M. The International Union Representative or Shop Steward Chairman Assistant shall have the right to call for a time study on any incentive rate which the Union feels is improperly established and on which a grievance has been filed. Such time study shall be made in accordance with accepted Industrial Engineering practice. N. When time studies are made as a result of a grievance, the Union Representative shall be furnished with a copy upon request. 40 EXHIBIT "D" TRUCKING 1. The following rates shall apply as indicated: a. Mileage Rate - The mileage rate for employees who are OTR Drivers or Relief Drivers on December 31, 1995 shall be 340 per mile from December 31, 1995, through December 28, 1996. This mileage rate will be increased to 34.50 per mile December 29, 1996. b. Hourly Rate - The hourly rate shall be $13.48 per hour from December 31, 1995, through December 28, 1996. Effective December 29, 1995, the hourly rate shall increase to $13.83, and effective December 28, 1997, it shall be $14.13. 2. The Over-the-Road Driver will be paid mileage on the basis of routings and mileage determined and assigned by Neenah Transport, Incorporated. Until mileage for a specific route has been determined, the route will be designated and odometer mileage will be paid. 3. It is understood that mileage compensation covers all time spent in the service of the Company, including but not limited to pickups, deliveries, line-haul operations, communications and reporting, exchange of equipment, waiting time, scaling, fueling, equipment checks, loading or unloading, verifying the accuracy of products loaded or unloaded, precautionary measures to protect the load, including tamping, ensuring the trailer is clean and safe for loading and compliance with all state and federal paperwork and inspection requirements of any kind whatsoever and any other functions required, assigned or performed as an Over-the-Road Driver except as provided in paragraphs 9, 10, 11, 12 and 13 of this Exhibit. 4. "Out-of area" shall be defined as any place in excess of 50 miles from the designated home terminal. "Area" shall be defined as any place within 50 miles from the home terminal. When assigned to area driving, the Over-the-Road Driver shall be paid the mileage rate provided in paragraph 1, in addition to any drop pay for which he qualifies. 5. On out-of-area trips the Company shall have the right to schedule and route Over-the-Road Drivers to fit its delivery and pickup requirements and to install and use any recording equipment on the vehicles. 6. Where overnight trips are scheduled, the Over-the-Road Driver shall be entitled to reasonable expense for lodging. a. Reasonable expense for lodging will be effective only at the end of the second consecutive work day, and every other second consecutive day following, when a driver is on an extended trip. When circumstances make such impractical, then the driver is to contact Neenah Transport supervision and obtain advance approval to stay in a motel. 39 41 b. The Company will reimburse each driver for reasonable expenses when charged for utilizing truck-stop showers, on each day he does not stay in a motel. c. The Company will reimburse each driver for parking fees required to be paid for parking the truck. d. Drivers must submit paid bills for all expenses. e. An employee eligible for a motel under 6a, above, may elect to accept a payment of $35.00 instead of sleeping in a motel. 7. Over-the-Road Drivers shall submit an immediate verbal report on all accidents, and follow with a written report on any accidents, defects in equipment or any emergencies as soon thereafter as possible. In case of illness which precludes the driver from proceeding further to his destination, such driver shall notify Neenah Transport supervision as soon as possible. 8. Over-the-Road Drivers shall familiarize themselves and comply with the Neenah Transport Truck Drivers' Manual, as well as all applicable rules and regulations of the DOT, Wisconsin Department of Transportation, and the various states in which our operations are conducted. 9. Minimum Daily Guarantee. When an Over-the-Road Driver reports to work and was not advised at the end of the previous day that there would be no work, he shall be paid a minimum of four (4) hours employment or a minimum of four (4) hours pay at the hourly rate provided in paragraph I before being dismissed for the day, provided, however, that the Company shall not be liable under this paragraph for unavoidable breakdowns of machinery, power failure, Acts of God, or conditions beyond the control of the Management. It is understood that this paragraph (9) applies only to drivers beginning their work schedule at the designated home terminal or maintenance point. 10. Lost time due to Over-the-Road Emergencies. When an Over-the-Road Driver on an out-of-area trip is unable to continue that trip because of accidents, impassable road conditions such as ice, snow, flood, fog, or other Acts of God for a period of twenty-four (24) consecutive hours or more, he will receive eight (8) hours pay at the hourly rate provided in paragraph I and a meal allowance of $15.00. An additional eight (8) hours of pay at the hourly rate provided in paragraph I and a meal allowance of $15.00 will be provided at the end of each consecutive twenty-four (24) hour delay period thereafter. When an Over-the-Road Driver on an out-of-area trip is unable to continue that trip because of a breakdown, the driver shall be paid the hourly rate provided in paragraph I when required to remain with his equipment, to a maximum of 10 hours total pay for that day. After eight (8) hours from the time he is no longer required to remain with his equipment, he will be paid up to an additional 10 hours at the rate provided in paragraph I if his equipment is not available within the 40 42 24 hour period beginning when he is no longer required to remain with his equipment, as well as a meal allowance of $15.00. Should his equipment not be available after that 24 hour period, he will again be paid up to an additional 10 hours at the rate provided in paragraph 1, and a meal allowance of $15.00. 11. Layover Pay. If an Over-the-Road Driver is directed by Neenah Transport supervision to lay over for a period exceeding twenty-four consecutive hours, the driver shall be paid eight (8) hours at the hourly rate provided in paragraph I and a meal allowance of $15.00. An additional eight (8) hours of pay at the hourly rate provided in paragraph I and a meal allowance of $15.00 will be provided at the end of each consecutive twenty-four (24) hour lay-over period thereafter. In the event a layover consists of 10 hours or more, then the company will reimburse the driver for reasonable expenses if they chose to stay in a motel. 12. Drop Pay. An Over-the-Road Driver on an area or out-of-area trip will be compensated according to the number of stops for loading and/or unloading purposes at customer and/or vendor locations for each trip by the following schedule: 1st Stop $20.00 2nd and subsequent stops $10.00
If a driver is delayed at any one stop for pickup and/or delivery for a period of more than two (22) hours, and he provides the Company with required documentation of necessary delay time, he will be paid at the hourly rate provided in paragraph I for the time that exceeds two (2) hours. However, it is understood that the driver will not be compensated at the hourly rate for time periods when the customer or vendor shipping or receiving facilities are closed. It is further understood that Switch & Go at Neenah Terminal is $ 1 0.00 drop pay with a maximum of one payment per day. 13. Lumber and Coke Tarping An Over-the-Road Driver will be paid a special tamping allowance of $10.00 for the initial tamping of a lumber load, in addition to any Drop Pay for which he is eligible. It is agreed that this special Tarping allowance is applicable to the initial loading of a lumber load only, and not applicable for re-Tarping following subsequent drops of the load. An Over-the-Road Driver will be paid a special Coke Tarping allowance of $10.00 for the initial Tarping of a coke load, in addition to any Drop Pay for which he is eligible, when he is required to tarp from the top of the load. It is agreed that this special coke tamping allowance is 41 43 applicable to the initial Tarping of a coke load only, and not applicable for re-Tarping following subsequent drops of the load. When equipment is furnished which will permit the Driver to tarp the coke load from the ground, then no special Coke Tarping Allowance will be paid. 14. Call-In Pay - If after returning to his home terminal and being informed that his dispatch is complete and being dismissed for the day (or some other specified time), a driver is notified he is to return to work before his next work day, he shall be paid two (2) hours straight time call-in pay at his regular base rate, in addition to pay at the appropriate rate for his actual time worked. A driver who requests or volunteers for an early dispatch will not qualify for call- in pay. 15. All other provisions of the current Labor Agreement except Article 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.8, 2.9, 7.2, 7.3, and 13.8 shall be applicable to Over-the-Road Drivers while on out-of-area trips. However, Over-the-Road Drivers will be paid one and one-half times their hourly base wage for attending scheduled Saturday meetings called by the Company, and shall be paid at the rate of double the regular rate for work performed on Sunday, except for Sundays when dispatched from the home terminal, or when paragraph 10 of this Exhibit applies. 42 44 NEENAH FOUNDRY COMPANY BASIC RULES In order to maintain the general welfare of the Company and its employees and to assure fair treatment for all, the following revised rules are effective immediately. Disciplinary action, whether it be in the form of a warning, suspension from work without pay, or discharge, will be based upon the circumstances surrounding the violation, together with the employee's general record of employment with the Company. 1. Violation of the contract between the Company and Local No. 121 B. 2. Dishonesty. 3. Insubordination. 4. Unsafe conduct. 5. Unauthorized absence from job for any length of time or unauthorized presence in the plant. 6. Failure to comply with job requirements and responsibilities. 7. Damage to property on Company premises. 8. Reporting for work while under the influence of intoxicants or use or possession of intoxicants on Company premises (includes-illegal controlled substances). 9. Conduct detrimental to the welfare of the Company or its employees. These basic rules are subject to change at any time. 43 45 NEENAH FOUNDRY COMPANY NEGOTIATED POLICIES 1. Molding job difficulty policy. If after a pattern change, a molder(s) is having difficulty through no fault of his own in making acceptable molds, then after one-half hour of such effort, excluding the time required in putting on a pattern, and following his notification to his supervisor of the difficulty, then: a. The job would be pulled and the employee would be paid base rate. b. If the employee continues the job beyond the half hour, and such is approved by his supervisor, then he will be paid his average earnings from the start of the job, including pattern change time, until he can make acceptable molds. 2. Maintenance uniforms. The Company will arrange to provide five sets of laundered coveralls per week to each maintenance employee. Ownership of the uniforms will be retained by the laundry service. 3. Core maker and finisher job difficulty policy. Core makers and finishers, after approval of the supervisor and for cause beyond control of the worker, may work all or part of a job on base hourly rate. Minimum time to be considered is 30 minutes. 4. Maintenance tools. Neenah Foundry Company will furnish necessary tools in 3/4" or above drive size. These tools will be stored and available to maintenance people as required for their use. They will be stored in Company approved locations. 5. Non-bargaining unit personnel performing bargaining unit work. Article 13. 10 reads, as follows: "Non-bargaining unit personnel shall not perform work normally done by bargaining unit employees except for the purpose of instruction or in the case of emergency." To aid in the interpretation of this paragraph, the following clarification is provided: 1. What is "for the purpose of instruction"? Any work performed by a supervisor or foreman for the express purpose of training the employee is 1 46 "instruction." Generally, a training method of showing and then having the employee try, making corrections, and then continuing that process until the employee has learned to do the particular work is followed. 2. What is "in the case of emergency"? A supervisor is required to work in an emergency. a. An "obvious" emergency exists when prompt and immediate action for protection of employees, property, equipment, or materials is required. This type of emergency is typified by being unplanned, or unforeseen and requires immediate action. b. A "less obvious" emergency can also exist. For example, due to short crewing, such as caused by absenteeism and tardiness of bargaining unit employees, an emergency can be created. An "emergency" is not automatically created, however. If the condition is so critical as to have to shut down any part of the operation, or to deprive those working of the opportunity to perform work, then an "emergency" condition exists. In order to make a valid determination as to whether or not an emergency exists, we have developed a procedure for the supervision to follow for the various shifts. The procedure does not have to be followed in the order it is presented; however, all the steps should be taken before a supervisor decides whether or not an emergency exists. (1) One shift operation. Step 1: Check with the labor pool. Leave word to send employee as soon as they are available. Step 2: Reassign people within your department to get necessary work done. Step 3: Ask yourself the question of any work that remains to be done, "Does it have to be done now?" Step 4: Can any work needing to be done be accomplished by further rearrangement of the work force? Step 5: Can any work needing to be done be performed on an intermittent basis by coordinating existing people? Step 6: If, after the above steps are exhausted and the condition becomes so critical as to have to shut down any part of the operation, or to deprive those working of their opportunity to perform work, then an emergency exists. 2 47 (2) Two or three shift operation. Step 1: Check with the labor pool. Leave word to send employee as soon as they are available. Step 2: Reassign people within your department to get necessary work done. Step 3: Ask yourself the question of any work that remains to be done, "Does it have to be done now?" Step 4: Can any work needing to be done be accomplished by further rearrangement of the work force? Step 5: Can any work needing to be done be performed on an intermittent basis by coordinating existing people? Step 6: Can you call employees in early, or hold employees over and do the job? Step 7: If, after the above steps are exhausted and the condition becomes so critical as to have to shut down any part of the operation, or to deprive those working of their opportunity to perform work, then an emergency exits. The steps listed above are designed to help when a "less obvious" emergency exists. These steps will help to establish that there is (or isn't) an emergency in fact, and not in name only. 6. Safety Committee operations. Article 13.4 of the Collective Bargaining Agreement provides for a joint Company-Union Safety Committee to function as outlined in the December 17, 1974, policy letter. Below is the content of the referred to letter: The following is an outline of the composition and function of the joint Company-Union Safety Committee to effectively improve the Neenah Foundry Company safety results. 1. Safety inspections. At least one safety inspection of each plant will be held quarterly. During such safety inspection, a (one) local plant Safety Committeeman would be included in the walk-around safety inspection. The Company representatives will include a member of the Safety Department, the Plant Manager, or his delegate, and the Maintenance Superintendent, or his delegate. Prior to the inspection of plant departments, the Department Superintendent and a Safety Committeeman designated by the Union for the area will hold a brief conference with the inspection team. The committee shall hold a post inspection conference to discuss and analyze the inspection. The Union Committeeman involved will be paid at his average earnings for all time spent in such activity. The Safety Committeeman so involved will be transferred to the shift of the inspection and paid accordingly. 3 48 2. OSHA inspections. In the event an OSHA or State of Wisconsin inspection is conducted, the Company will make available a Safety Committee person for each plant, and compensate him as outlined in L, above. 3. Safety Committee meetings. Safety Committee meetings will be held as often as necessary by mutual agreement, but at least once each quarter. The joint committee will be comprised of four Union representatives and four Management representatives. The Director of Personnel and Safety will serve as Chairman of the joint committee. The nature of these meetings will be to communicate what items are of joint interest in achieving the goals of the joint committee. They will include, but not be limited to, the following: (a) An updating of any equipment for technology adopted by the Company to improve safety performance. (b) An opportunity for two-way communication as to the effectiveness of the general safety program. (c) Response by the Union Committeemen of constructive ideas to improve the safety results. (d) Communication about the plans for the following quarter to achieve and improve safety records, better compliance with applicable regulations, etc. (e) Review OSHA Form 200 (Log of Industrial Accidents). (f) Discuss inspections conducted by the Safety Inspection Team. When such meetings are held, employees will be compensated as in I., above. 4. Company monitoring. The Company will, under its program of environmental auditing, housekeeping inspections, local departmental or plant safety inspections, etc. from time to time independently conduct audits and inspections. These may be for the purpose of determining the impact of changes, experimentation with noise reduction or dust suppression technology or methods, etc. 4 49 The position of the Company is that participation by hourly Safety Committee employees is not required, particularly in environmental auditing, and so Safety Committeemen will not be invited to participate in this type of activity. If, under law, employees or their representatives are authorized to participate in such, they will do so without pay. (The position of the Company is that on walk-around safety inspections, an employee representative may be able to make a positive contribution to either identification of unsafe conditions or acts; however, in environmental sampling, instrumentation and technology of environmental control employees is applied, and, therefore, no effective contribution is anticipated to be made by the hourly employees in this type activity.) 5. Serious accidents. In the event of a serious accident, requiring hospitalization of a bargaining unit employee, the Director of Personnel and Safety will promptly notify the President of Local 12113, or his delegate, and inform him of the incident, describe the circumstances, make available to him a report of the accident, and keep communications open. 7. Weekend overtime when more than a normal department crew is required. When a department needs more than the people assigned to that department to perform overtime work on Saturdays or Sundays, the following procedure should be followed if employees wish to be considered for such work: 1. Employees with good work records should notify their supervisors that they wish to be considered for extra overtime work on weekends. 2. Employees within that plant so notifying their supervisor will be scheduled for available work on the basis of qualifications. If two or more of these employees are equally qualified, the employee(s) who has the most company seniority within that plant will be scheduled. 8. Assignment of overtime. Where overtime is required for an entire department, the overtime will be worked by the department in the plant where the overtime is to occur. Where overtime is required by an entire work section, the overtime will be worked by the work section in that department of the plant where the overtime is to occur. Where overtime is required by less than a department or less than a work section in a plant, the overtime will be assigned the most senior qualified employees who normally perform the job in that department or work section. 5 50 Where overtime is required for work in process the employee(s) performing the work in process will work the overtime. If additional employees are needed, the overtime will be assigned to the most senior qualified additional employees who normally perform the work in that department of the plant where the overtime is to occur. On weekend overtime only where less than a full department or work section is scheduled, work performed by temporary student employees during the week will be assigned to the senior qualified employees in that department of the plant who were not otherwise scheduled to work overtime. 9. Transfers from and Cutbacks to Local 121B Jurisdiction Involving Pattern maker Jurisdictional Jobs 1. When an employee represented by Local 121B is selected by the Company for a job represented by the Patternmakers Union, that employee shall retain his or her departmental seniority in his or her Local 121B department until he or she has worked thirty (30) days, beginning with the first day of work in the patternmaker jurisdiction job. During this time, if for any reason the employee is returned to his or her former job, he or she will do so with continued accumulated departmental seniority. The employee shall lose all seniority in his former department beginning with the day after he or she completes thirty (30) days worked in the pattern maker jurisdiction job. 2. If any employee of the Company who has previously occupied a job represented by Local 121B is cut back or laid off from the pattern shop jurisdiction, and any employees represented by Local 121B are on layoff at that time, the employee cut back from the pattern shop shall go to the end of the Local 121B represented employee layoff list. Should subsequent layoffs occur in jobs represented by Local 121B, then all employees on layoff from Local 121B represented jobs will be recalled prior to any pattern shop employee being recalled to a Local 121B represented job. 3. If any employee of the Company who has previously occupied a job represented by Local 121B is cut back or laid off from the pattern shop and no one is on layoff from Local 121B at the time, then that employee will have rights to a job within Local 121B jurisdiction, provided there are any openings as determined by the Company. It is agreed that such cut-back employee brings no departmental seniority to his job in Local 121B jurisdiction. After six months, that employee may utilize all of the Company seniority he has for purposes of any other layoff or for seniority determination in job posting. During his first six months, his seniority will be counted from the day he transferred to Local 121B jurisdiction from the pattern shop jurisdiction as though he were a new employee. This same seniority treatment will be applicable to the employee for purposes of layoff and job posting seniority until six months are completed. For purposes of pension plan, vacation eligibility, and all other provisions except job posting or layoff as outlined above for the first six months of service in a local 121B represented job which immediately follows a cutback 6 51 or layoff from the pattern shop jurisdiction, the employee will have retained his total Company seniority. 4. The parties agree that the transfer and job posting provisions of ARTICLE 8 of the Collective Bargaining Agreement do not apply to transfers from Local 121B to patternmaker jurisdiction. MANAGEMENT POLICIES 1. Average earnings for periods of one week or less. A. Definition: Average earnings shall be the hourly rate determined by dividing the sum of money paid for all hours worked (excluding overtime premium and pay received for time not worked) by the total hours worked in the last computed four-work-week period, but excluding any week when a shutdown occurs or partial operation is necessary due to holidays. B. This average rate will be used whenever it is necessary to pay an employee at the average earnings rate as specified in the Union Contract, for periods not to exceed one week. C. No adjustment will be made for shift premium. D. An employee permanently transferred to a higher rated job in a week in which a holiday occurs will be paid Holiday Pay at such higher rate, if more than the average earnings rate. E. When a holiday occurs in a week in which a general wage increase becomes effective, an adjustment in average rates will be made. 2. Pay procedure for employees transferred due to temporary disability. An employee unable to perform his regular job because of accident or illness, may be temporarily transferred for the period of disability or until a determination is made that the disability is permanent and he will be unable to return to his regular job. Industrial accident or industrial - The employee will receive his regular base rate, or the base rate of the temporary job, whichever is higher, plus incentive if any. During the time of transfer, the employee's average will be frozen. Non-industrial accidents or non-industrial illness - The employee will receive the base rate of the temporary job, plus incentive, if any. 7 52 3. Attendance policy - hourly employees. The purpose of this policy Is to minimize absenteeism. It Is the general policy of the Company to uniformly administer the attendance rules and related procedures listed herein. A. Definitions: 1. Absence - not being at assigned work station during a scheduled shift. 2. Excused absence - being away from assigned work station with proper notification to an approval of supervision and/or the Personnel Department. 3. Unexcused absence - being away from assigned work station without permission of supervision and/or the Personnel Department. B. Responsibility: 1. It shall be the responsibility of plant supervision with counsel from the Manager of Employee Relations to administer the provisions of this policy in a uniform and consistent manner. C. Procedures: 1. Any absence which is known in advance and able to be scheduled, such as an appointment, must be reported to and approved by supervision and/or the Plant Office at least one day prior to the absence. 2. Any absence which is not known in advance, such as an emergency arising during off duty hours, must be reported on the Company's "call-in" telephone line (7257049) prior to the start of the employee's scheduled shift. Employees whose shift starts after 4:00 P.M. are requested to report in an unscheduled absence no later than 4:00 P.M. to enable supervision to schedule their operations. 3. Any absence to be classified as excused must be reported within the limits set in the above two paragraphs of this policy and have approval of supervision and/or the Personnel Department. 4. Any absence which is unexcused will result in a disciplinary action as described under Article 6 of the Collective Bargaining Agreement. 4. Normal pay procedure for incentive jobs without incentive system. 8 53 A. Purpose: 1. To set forth the method of compensating employees assigned to incentive jobs which are temporarily without an incentive system, due to an incentive system change or installation of a new incentive system. 2. This procedure replaces all procedures which have been used in the past. 3. This procedure is intended to cover normal situations. If unusual conditions arise, deviations from this procedure must be approved by the Vice President of Manufacturing and Engineering. B. Definitions: 1. Incentive job - for the purpose of this procedure, an incentive job is defined as: a. A job which formerly had incentive and is temporarily without an incentive system. b. A job which the Company has determined will be assigned an incentive system in the near future. C. Responsibility: 1. It shall be the responsibility of the Plant Manager to administer this procedure in a uniform and consistent manner. D. Procedures: 1. When the Company determines it is necessary to change an existing incentive system, or determines an existing or new job is going to be assigned an incentive system, the following pay procedures will be followed: a. Pay the employee assigned to these jobs, except those employees who have a current production average in that skill, or temporary base rate of 5% over the current incentive base rate for that job (105%). b. Each employee who has a current production average in that skill will be paid at 90% of his individual four (4) week average or the temporary rate outlined in D-1.a above, whichever is higher. 9 54 c. The employee's average will be frozen while being paid under this procedure. 5. Payment for time missed from work on day of lost time accident. An employee who is injured during the course of his employment and who in the opinion of a medical doctor, is unable to complete his shift, will be paid at average earnings from the time of the injury to the scheduled end of his shift. An employee who, because of an injury sustained during a particular shift is unable to complete his regular job on that shift, may be assigned to other work for the balance of the shift and will be paid his own base rate, or the rate of the job, whichever is higher, together with any incentive earned. When it is necessary for an employee to see a doctor because of an industrial injury sustained at Neenah Foundry Company, the Company will make an appointment for him with the doctor. If it is necessary to schedule the appointment during working hours, the employee will be paid at average earnings for all time lost in keeping such appointment. Appointments scheduled outside regular working hours will not be covered under this provision. Appointments not scheduled by the Company, whether scheduled during working hours or after regular working hours, will not be covered under this provision. 10 EX-10.6 21 1995-1997 COLLECTIVE BARGAINING AGREEMENT 1 EXHIBIT 10.6 NEENAH FOUNDRY COMPANY 1995-1997 COLLECTIVE BARGAINING AGREEMENT WITH THE INDEPENDENT PATTERNMAKERS UNION OF NEENAH WISCONSIN 2 TABLE OF CONTENTS Page ARTICLE 1 - RECOGNITION.................................................... 1 ARTICLE 2 - HOURS OF WORK.................................................. 2 ARTICLE 3 - VACATIONS...................................................... 3 ARTICLE 4 - SENIORITY...................................................... 5 ARTICLE 5 - GRIEVANCES..................................................... 6 ARTICLE 6 - DISCHARGE AND DISCIPLINE....................................... 8 ARTICLE 7 - WAGES.......................................................... 9 ARTICLE 8 - TRANSFERS AND PROMOTIONS....................................... 10 ARTICLE 9 - LEAVES OF ABSENCE.............................................. 12 ARTICLE 10 - MANAGEMENT.................................................... 12 ARTICLE 11 - NO STRIKE - NO LOCKOUT........................................ 12 ARTICLE 12 - FUNERAL LEAVE................................................. 13 ARTICLE 13 - GENERAL....................................................... 13 ARTICLE 14 - PENSIONS...................................................... 15 ARTICLE 15 - INSURANCE..................................................... 16 ARTICLE 16 - TERMINATION CLAUSE............................................ 16 -iii- 3 1995-1997 AGREEMENT This AGREEMENT made and entered into between the NEENAH FOUNDRY COMPANY, Neenah, Wisconsin, and its successors, party of the first part, and Independent Pattern Makers Union of Neenah, Wisconsin and its successors, party of the second part. ARTICLE 1 - RECOGNITION 1.1 The Company recognizes the Independent Pattern Makers Union of Neenah, Wisconsin as the sole bargaining agency for all pattern makers, pattern maker apprentices, and pattern maintenance employees of the Company's pattern shops located at Plants 1, 2 and 3, and the Neenah Foundry Pattern Shop, Neenah, Wisconsin, relative to wages, hours, and working conditions as provided by the National Labor Relations Act. The above employees shall be considered as a single bargaining unit for purposes of this agreement. 1.2 The Company and the Union will comply with all applicable Federal and State Statutes concerning discrimination in employment. Wherever the words he, him, his or other such male gender references appear in this Agreement, such references shall include and will apply equally to the female gender. 1.3 All employees who as of the effective date of this Agreement are members of the Union in accordance with its constitution and by-laws and all employees who become members after that date, shell, as a condition of Employment, maintain their membership in the Union for the duration of this contract. A. All employees hired on or after the effective date of this Agreement shall join and become members of' the Union no later than their 31st day of employment or no later than 31 days after the execution of this Agreement, whichever is later, and shall, as a condition of employment, maintain their membership in the Union for the duration of this contract. 1.4 The Company agrees to check off the Union dues of such employees who authorize the same, in writing, in the manner and form set forth in Exhibit "B" which is attached hereto and made a part hereof. The Company will remit such dues so collected to the person or persons designated by the Union by the 12th day of each month, for all dues collected the first payday of each month. The written authorization for check-off of dues by any employee will not be effective for any dues or fees owing by such employee prior to the date of the signed authorization executed by him and delivered to the Company and will be effective the first payday of the month following the delivery of such signed authorization to the Company. The Company also agrees to check off fees or special assessments similarly upon proper presentation of individual signed authorization forms directing the Company to withhold from wages and pay to the Independent Pattern Makers Union of Neenah, Wisconsin. 4 1.5 All new employees shall serve a probationary period of thirty (30) days worked. Probationary employees shall have no seniority rights and may be released at any time prior to the expiration of the probationary period. If they are retained at the expiration of the probationary period, their seniority shall be from the date of hire. ARTICLE 2 - HOURS OF WORK 2.1 Eight (8) hours shall constitute a day's work and there shall be a recognized starting and quitting time which shall determine the overtime, if any. 2.2 Except as hereinafter provided, all time in excess of eight (8) hours in any one day or forty (40) hours in any one week, shall be paid for at the rate of one and one-half times the regular hourly earnings computed on the basis of the average straight time weekly earnings excluding overtime premium of any kind and pay received for hours not worked. Such overtime shall be paid for time in excess of eight (8) hours in any one day or forty (40) hours in any one week, whichever is greater, but not for both, so that payment of overtime rates shall not be duplicated for the sane hours worked. 2.3 Saturday Work - is to be paid at the rate of one and one-half times the regular rate. However, if the third shift begins on Friday and extends into Saturday, the regular rate shall be paid. 2.4 Sunday Work - is to be paid at the rate of double time. However, if the third shift begins on Sunday and extends into Monday, the regular rate shall be paid. 2.5 Sixth Day of Work - Third shift employees who start their work week on Sunday and are scheduled to work on a sixth consecutive work day, will be paid at the rate of one and one half times the regular rate for all hours worked on the sixth consecutive shift. 2.6 All employees will be allowed a ten (10) minute lunch period at an established time during the first half of each shift. The dinner period shall be a minimum of one-half (1/2) hour. 2.7 Any employee who is required to start work before his scheduled starting time shall be permitted to work until his scheduled quitting time, until he is assigned a new work schedule. 2.8 It is mutually agreed that the working hours and overtime schedule provided for in this Agreement shall be governed by all applicable Federal Laws. 2.9 Reporting Pay - When employees are required to report to work or have not been advised at the end of the previous day that there will be no work, they shall be given a minimum of four (4) hours employment or a minimum of four (4) hours pay at their regular straight time hourly earnings, before being dismissed for the day, provided however, that the Company shall not be liable under this section for unavoidable breakdowns of machinery, power failure, acts of God or conditions beyond the control of the Management. -2- 5 2.10 Call-In Pay. Employees called in for work before the regular shift begins or after it ends on an emergency basis shall receive two (2) hours straight time pay plus pay at the appropriate rate for time worked. 2.11 Overtime Notification - Notice of scheduled Saturday or Sunday overtime will given to the employee(s) affected by no later than the end of his (their) scheduled shift on Thursday preceding the weekend. A. When the scheduled of a shop is to be changed, the Company shall notify the shop employee(s) affected prior to the end of his (their) shift on the preceding day. B. Employees may be notified by bulletin board notice and/or personal communication. Employees so scheduled to work will be expected to work as scheduled unless excused in advance by their supervisor. Should the Company fail to provide such advance notice of weekend or shop schedule changes, the employee or employees affected are free to reject the opportunity to work at the time it is offered. C. It is understood that the preceding paragraphs are not applicable 'to casual or emergency overtime on a daily basis. ARTICLE 3 - VACATIONS 3.1 The Company will grant paid vacations to employees covered by this contract during each year as follows: A. Except as hereinafter provided, each employee on the active payroll on June 1 in any year who has completed one (1) year or more of continuous service shall be granted a paid vacation. 1. Employees with one year but less than three years of service on June 1 will be entitled to one week of vacation. 2. Employees with three years but less than eight years of service on June 1 will be entitled to two weeks of vacation. 3. Employees with eight years but less than fourteen years of service on June 1 will be entitled to three weeks of vacation. 4. Employees with fourteen years but less than twenty years of service on June 1 will be entitled to four weeks of vacation. -3- 6 5. Employees with twenty years but less than twenty-eight years of service on June 1 will be entitled to five weeks of vacation. 6. Employees with twenty-eight years or more of service on June 1 will be entitled to six weeks of vacation. 3.2 June 1 shall be the anniversary date for all employees for the purpose of determining vacation eligibility. Employees hired on or after June 1 and before November 1 shall have June 1 as an anniversary date for purposes of becoming eligible for more than one week of vacation. 3.3 The vacation pay basis period shall be the last fifty-two (52) week period ending before May 25. 3.4 Each week of vacation shall be one calendar week. Each week of vacation pay shall be two percent (2%) of the employee's gross earnings in the basis period. However, employees who have worked 1500 hours or more during the basis period shall have the option of receiving forty (40) hours of straight time pay for each week of vacation. Time lost as a result of compensable injury incurred while on duty at Neenah Foundry Company shall be counted as hours worked, at the rate of eight (8) hours per work day, for purposes of determining vacation pay eligibility. 3.5 The vacation year shall be June 1 through May 31. The Company reserves the right to establish vacation shutdown period(s) of up to two weeks in any vacation year for any or all of its operations. The Company shall notify the Union of its selection(s) prior to April 1 of each year. All employees affected must schedule vacation during the shutdown period(s). A. It is understood that if the plant closes, a certain amount of maintenance and/or production work may be carried on during the shutdown. The Company will arrange with employees who are to work during the shutdown period. B. If a vacation shutdown(s) is/are not scheduled, then all employees eligible for vacation must schedule at least one week of vacation in a weekly increment. Any vacation remaining may be scheduled in either weekly increments (one week of vacation eligibility is five work days) or in single or multiple days. All vacation requests must be approved by the Manager, Pattern Operations. C. Should a paid holiday occur during the period an employee is on vacation, he may take an additional day of vacation either prior to or immediately after the vacation period, or at some other time mutually agreeable to the supervisor and the employee, prior to the end of the vacation year. 3.6 Vacation requests shall be considered on the basis of Company seniority, providing normal operations of the Company are not impaired. There will be a vacation sign-up period each year April 1 through April 15 for the vacation year commencing the next June 1. Vacation requests received during this sign-up period, after approval, are not subject to change through -4- 7 exercise of seniority by other employees. Vacation requests made after the sign-up period shall be submitted to the Company in writing at least 30 days prior to the requested vacation period. To insure normal operations, the Company shall have the right to limit the number of employees taking vacation simultaneously. It is understood that the Company may extend the vacation sign-up period by up to one additional week, following April 15, if it is deemed necessary to finalize vacation scheduling. 3.7 For purposes of vacations, seniority of employees shall be on the basis of total length of employment with the Company since the date of last hire. 3.8 Employees with less than one year's service: Any employee who has been continuously employed for three months or more and who is on the active payroll on June 1 shall be granted vacation pay, which shall be two percent (2%) of his gross earnings as vacation pay for such period, as computed above. 3.9 Layoff, Military Leave, Retirement, Death: In the event an employee who was eligible for vacation pay on June 1 is laid off, enters military service, retires, or dies during the vacation year, he shall receive his unused vacation plus pro-rata vacation pay in the amount of two percent (2%) of his gross earnings up to and including the date of termination, for each week of vacation for which he would otherwise have qualified. 3.10 Employees returning from military leave or layoff: Any employee who returns from Military Leave or layoff and who is on the active payroll June 1 shall be entitled to a vacation computed the same as any other employee on the active payroll June 1. 3.11 Cash In: Employees are not allowed to cash in vacation without approval of the Company and three members of the Union Negotiating Committee. ARTICLE 4 - SENIORITY 4.1 The President will have super-seniority over all employees for layoffs only. 4.2 Pattern makers and apprentices employed as of January 1, 1977, shall have super-seniority for the duration of their employment for purposes of layoff over pattern makers, apprentices and pattern maintenance employees hired after January 1, 1977. -5- 8 4.3 For all employees hired after January 1, 1977, for purpose of layoff, seniority of employment will be on the basis of length of employment in the pattern shop and such employees shall be recalled in reverse order of layoff. 4.4 In the event a reduction in force requires layoffs among the super-senior employees, then the following shall apply: A. For purpose of layoffs and all other provisions-of this contract, except as provided in Article 3.7, seniority of employees will be on the basis of length of employment in the pattern shop. In the event of scarcity of work necessitating reduction in the size of the crew, the last man hired shall be the first laid off, provided however, the Company may deviate from straight seniority if by following the rule of straight seniority the efficient operation of the pattern shop would be impaired. If the Company proposes to deviate, it will discuss all such deviations with the Union Committee and if agreement is reached deviations will be as agreed upon. If no agreement is reached, the Company will be at liberty to make such deviations and in any event all employees affected by such deviations shall have the right of grievance pursuant to the grievance procedure outlined in the contract. In the event hours of work are reduced below 40 per week, the Company will discuss this with the President and a member of the Union Committee. 4.5 Student workers hired on a temporary or part-time basis will not accumulate seniority until they are on a permanent full-time basis. 4.6 On recall to work the last man laid off will be the first man called to work and the remainder of the employees will be recalled to work in the same order. 4.7 In the event of layoff or layoffs due to lack of work, the employees affected and the Union shall be given written notice of at least two (2) days prior to such layoffs. 4.8 Loss of Seniority - an employee shall lose his seniority for the following reasons only: A. If he shall quit. B. If he shall have been discharged for just cause. C. If a laid-off employee or employee on leave of absence shall fail to report for work within five (5) working days after notice was sent by the Company to his last known address, unless a satisfactory reason for failure to report is given. A copy of such notice to report is to be given to the Union Committee. D. If an employee has been laid off for a period equal to his length of service with the Company. However, the minimum shall be one (1) year and the maximum three (3) years. -6- 9 ARTICLE 5 - GRIEVANCES 5.1 It is recognized from time to time, incidents may occur or events may take place which question the interpretation of the provisions of this Agreement. It is the intent of the parties to this Agreement to promptly investigate and resolve differences of opinion or job-related problems. Accordingly, each employee is encouraged to discuss with his supervisor any problem that may arise in connection with his work. The Company will not discriminate against any employee for thereafter referring the problem as a grievance through the grievance procedure. 5.2 Should differences arise between the Company and its employees, either individually or collectively, as to the meaning and application of this Agreement, an earnest effort shall be made to settle any such differences at the earliest possible time by use of the following grievance procedure: Step 1 A. As soon as possible but not more than ten (10) working days of the occurrence of the incident or condition giving rise to any grievance, an aggrieved employee shall present his grievance to his supervisor, accompanied by his Committeeman or Steward. If a settlement is not reached within two (2) working days from the time the grievance is presented, then: B. It shall be reduced to writing within two (2) working days, signed by the aggrieved employee or his representative, and presented to the supervisor, who will provide a written answer within three (3) working days of the receipt of the written grievance. Should this procedure not result in settlement, then: Step 2 Within two (2) working days of receipt of the Supervisor's Step 1 written answer, the grievance shall be presented by a member of the Bargaining Committee to the Manager of Pattern Operations or his representative, who will schedule a grievance hearing to be held within three (3) working days following receipt of the Step 2 grievance, and who will within three (3) working days of such meeting, provide his written answer to the grievance. If such answer does not result in settlement of the grievance, then: Step 3 Within two (2) working days of the receipt of the Step 2 written answer, the grievance shall be referred to the Union Bargaining Committee and the Company Committee, who will meet on a date satisfactory to both parties, within ten (10) working days following receipt of the Step 3 grievance to resolve the issue. Either or both parties may be represented at this meeting by outside representatives of their own choosing. Within three (3) working days of such meeting, the Company will provide a written answer to the grievance. Within the times outlined above, the meetings will be scheduled on a date satisfactory to both parties. In the event that this procedure does not result in settlement of the grievance, then; Step 4 Within forty (40) days from the date of the Step 3 answer, the grievance may be referred by either party to arbitration by serving written notice on the other. The serving of -7- 10 written notice also includes notifying the Federal Mediation and Conciliation Service of either parties intent to arbitrate the grievance. If either party fails to refer an unresolved grievance to arbitration within the forty (40) day period, the grievance shall be considered withdrawn and not arbitrable. 5.3 The Union Bargaining Committee and the Company Committee shall consist of a maximum of five (5) employees each, designated respectively by the Union and the Company. 5.4 The time limits referred to above may be accelerated, or extended, or any step of the procedure may be continued upon mutual agreement of the parties to this Agreement. If the Union fails to comply with the time requirements in Steps lb, 2, or 3, the grievance shall be automatically dropped. If the Company fails to comply with the time requirements in Steps lb, 2, or 3, the grievance is automatically granted. 5.5 An agreement reached between the committees shall be final and binding on the Company, the Union and the employees involved. SELECTION OF ARBITRATOR 5.6 The Arbitrator for the purpose of this contract, shall be selected in the following manner, to wit: A. In the event a grievance has not been resolved under Step 3 of this Article, either party may notify the Federal Mediation and Conciliation Service of the dispute and request a panel of seven arbitrators. If the panel is not acceptable to either party, then either party shall request a second panel, prior to striking any names from the first panel. The parties will select one arbitrator, by alternately striking from the panel a total of six arbitrators. The Arbitrator chosen by this procedure will then arbitrated the grievance. More than one grievance, may by mutual agreement, be submitted simultaneously to the same Arbitrator. 5.7 The Arbitrator shall have no authority to change or modify the terms of this Agreement, but he shall have authority to apply or interpret the meaning of the terms of this Agreement, and resolve all grievances referred to him under the terms of this Agreement. 5.8 Within a reasonable time after the hearing the Arbitrator shall tender to the parties his disposition of the grievances involved. Such disposition shall be final and binding upon both parties. 5.9 The Arbitrator's charge and expense in connection with any grievance submitted to arbitration shall be borne equally by the Company and the Union. 5.10 The Company shall compensate Union officers and members of bargaining and Grievance committees and individual aggrieved employees, at the straight time hourly rates at which they are then employed for all time actually spent with representatives of the Company in collective bargaining negotiations and grievance adjustment pursuant to this Agreement, when -8- 11 the officers, committeemen and employees so engaged otherwise would be at work. Time spent in negotiations and grievance adjustments handled outside of the normal working day will not be paid for by the Company. Negotiations and grievance adjustment meetings will be scheduled by the Company and may be held during regular working hours. ARTICLE 6 - DISCHARGE AND DISCIPLINE 6.1 The Company agrees not to discharge or suspend any of its employees except for just cause. In the event of discharge or suspension, the Company agrees to give the Union Committee written notice of such discharge or discipline, stating the reason therefor. Such notice shall be delivered to the Union within 24 hours of the occurrence of such event. Any employee who is discharged or suspended under the provisions of this contract shall have the right to grievance as provided herein. 6.2 Absence without notice for three or more consecutive working days shall be considered grounds for summary discharge or suspension. 6.3 More than three (3) warning notices on unreported or unauthorized absenteeism less than indicated above within any consecutive twelve (12) month period shall be considered just cause for discharge or suspension. If the warning notice is issued, one copy shall be delivered to the employee, and one to the Union within twenty-four (24) hours of the time such warning notice is issued. 6.4 It is further agreed that in all cases of discharge or suspension, if the employee (or employees) affected desires to file a grievance, he must file a written grievance immediately or at least within ten (10) days of such discharge or discipline. In the event it is decided that an employee was unjustly discharged or suspended, he shall be reinstated to his former position without loss of seniority and reimbursed for all time lost while under discharge or suspension, unless some other agreement is reached between the Company and the Union. 6.5 Warning notices shall expire twelve (12) months from the date of issue. Written warning notices more than twelve (12) months old shall not be used against the employee in future progressive discipline. ARTICLE 7 - WAGES 7.1 The Company and the Union hereby agree that the minimum wage rates as agreed will be effective during the term of this Agreement. Cost of Living Allowance A. A cost of living allowance, effective in l988, is agreed as follows: -9- 12 1. The base for calculation purposes will be the October, 1987, All Urban Consumer Price Index (All cities, 1967 = 100). 2. The cost of living allowance will be computed on the basis of $.01 per hour for each 0.4 change in the CPI, rounded to the nearest cent with a maximum payment of 10 cents. 3. The adjustment will reflect the change in the CPI for the six-month period from October, 1967, through April 1988. The adjustment will be effective July 1, 1988. 4. The contract rates shown in Exhibit "A" are minimum rates, and are guaranteed. Any increase due to the Cost of Living formula will be in addition to the contract rates shown in Exhibit "A". 5. All of Article 7.1(A), including 7.1(A) 1, 2, 3 and 4 except 'he first sentence of Article 7.1(A) 4, shall be inoperative during the life of this Agreement. 7.2 All employees shall be paid weekly on Thursday during their regular shift. If a Holiday occurs, the payday may be advanced or delayed within the same work week, Saturday excluded. 7.3 For shift premium pay purposes only, the hours of the first shift will be 6:00 A.M. to 2:00 P.M.; the second shift will be from 2:00 P.M. to 10:00 P.M. ; and the third shift will be from 10:00 P.M. to 6:00 A.M. The employee will be paid the shift premium applicable to the shift on which he works the majority of hours. Shift premiums will be $.25 per hour for the second shift and $.35 per hour for the third shift. 7.4 Effective during the life of this contract the Company will pay holiday pay for the following holidays: New Year's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Day following Thanksgiving Day, Christmas Eve Day, Christmas Day, New Year's Eve Day, and a "floating holiday" to be scheduled by the Company annually. Such pay is to be eight (8) hours at the average straight time hourly earnings, and all employees covered by this Agreement, performing service, except those who have not completed their probationary period, will be entitled to paid holidays. A. All work performed on any of the holidays recognized in 7.4 or on the day celebrated in lieu thereof, such as when a holiday falls on Sunday and is celebrated on Monday, shall be paid for at the rate of double (2) time, except for those hours whereby a shift beginning before the holidays extends into the holiday period. If a shift starts during a holiday and extends into a non-holiday period, all hours worked on such shift shall be paid for at double time. The above premium pay for time worked shall be in addition to holiday pay. 7.5 To qualify for holiday pay, an employee who is scheduled to work must have worked his last scheduled work shift prior to and his first scheduled work shift after such holiday unless -10- 13 excused by the Manager, Pattern Operations for personal compelling reasons. Employees who have been laid off because of lack of work within fifteen (15) days immediately prior to the date of the holiday, or who after having been laid off are recalled to work within fifteen (15) days after date of holiday shall be eligible for holiday pay. ARTICLE 8 - TRANSFERS AND PROMOTIONS 8.1 Transfers Out of the Bargaining Unit - Both parties agree to the principle of advancing employees to positions outside the bargaining unit. In the event an employee so advanced is demoted or requests demotion during the first year, he shall be promptly returned to his former job at the going rate of pay with credited pattern shop and Company seniority. A. Employees advanced to positions outside the bargaining unit shall retain all seniority that they have accrued at the time of such advancement and shall continue to accrue a maximum of one additional year of pattern shop seniority after the date of transfer. B. In the event there is a reduction in force, the employee shall be entitled to use his pattern shop seniority he had at the expiration of the accrual period in order to return to the bargaining unit. C. The employee's Company seniority shall continue to accrue during the employee's entire period of employment with the Company. D. The selection of employees for transfer to non-bargaining unit work shall be solely within the discretion of the Company. Apprentices 8.2 Apprentices may be employed in the ratio of one apprentice for each shop, regardless of the number of journeymen, plus one additional apprentice for each four (4) journeymen in the total group; this ratio to be computed on the average number of journeymen employed during the previous six months. For the purpose of determining the maximum number of apprentices only, each of the Company's pattern shops located at the Company's Plants 1, 2 and 3, and the Neenah Foundry Pattern Shop, Neenah, Wisconsin, will be counted as one shop, thus allowing four apprentices for the shops. The last six months of apprenticeship constitutes completion of the program for the purpose of replacing an apprentice. 8.3 Apprentices shall be indentured under the rules and supervision of the Division of Apprenticeship & Training, Department of Industry, Labor and Human Relations of the State of Wisconsin for ten (10) periods of 1040 hours. The schedule of periods and percentages of the combined Journeyman rate and cost-of-living allowance are follows:
1st period of 1040 hours-- 60% of combined journeyman rate and COLA 2nd period of 1040 hours-- 64% of combined journeyman rate and COLA
-11- 14
3rd period of 1040 hours-- 68% of combined journeyman rate and COLA 4th period of 1040 hours-- 72% of combined journeyman rate and COLA 5th period of 1040 hours-- 76% of combined journeyman rate and COLA 6th period of 1040 hours-- 80% of combined journeyman rate and COLA 7th period of 1040 hours-- 84% of combined journeyman rate and COLA 8th period of 1040 hours-- 88% of combined journeyman rate and COLA 9th period of 1040 hours-- 92% of combined journeyman rate and COLA 10th period of 1040 hours-- 96% of combined journeyman rate and COLA
8.4 Apprentices who are pattern maintenance employees when they start their apprenticeship will be paid at 70% of the pattern maker rate. 8.5 In the event a elections is made for an apprenticeship, employees who have not been selected and are interested, as to the reason why, can contact the Manager of Pattern Operations or his designate for an explanation. Pattern Maintenance 8.6 Pattern Maintenance employees may be employed in the ratio of one pattern maintenance employee for each journeyman and apprentice; this ratio to be computed on the average number of journeymen and apprentices employed during the previous six months. 8.7 The rate of pay for the Pattern Maintenance employees will be 70% of the combined journeyman rate and cost-of-living allowance plus 30 cents. ARTICLE 9 - LEAVES OF ABSENCE 9.1 Employees desiring a leave of absence shall be required to make written request for said leave of absence, outlining the reason for such request. The granting of such request shall be by mutual written consent of the Company and the Union, in triplicate, the original to be retained by the employee, the duplicate by the Company and the triplicate by the Union. 9.2 Members of the Bargaining Unit designated by the Union to attend conventions and union conferences will be granted time off without pay, and such absence will be treated as an excused absence. No more than two (2) members of the Bargaining Unit may be absent for this purpose at any one time. ARTICLE 10 - MANAGEMENT 10.1 Management of the pattern shop and the direction of the working force, including the right to hire, discharge, or suspend for proper cause, or transfer, and the right to relieve employees from duty because of lack of work or for any other legitimate reasons is vested exclusively in the Company. This will not be used to violate previous paragraphs, nor to -12- 15 discriminate against any member of the Union. Any dispute arising hereunder shall be subject to the grievance procedure. ARTICLE 11 - NO STRIKE - NO LOCKOUT 11.1 It is agreed that as a part of the consideration of this contract, any and all disputes and any and all claims or demands growing out of said contract or involved therein shall be settled and determined exclusively by the machinery provided herein through the grievance procedure and that during the term of this contract there shall be no strike on the part of the Union nor lockout on the part of the Company. 11.2 It is specifically understood and agreed that paragraph 11.1 of this Article shall not be operative under the following circumstances: If at the expiration of this contract the parties are unable to agree upon the terms or conditions of a renewal or modification thereof. ARTICLE 12 - FUNERAL LEAVE 12.1 In the event of the death of an employee's brother, sister, father, mother, stepfather, stepmother, father-in-law, or mother-in-law, the employee may be absent from work and shall be paid a minimum of eight (8) hours of pay, per day, up to three (3) days for his scheduled time actually lost from the day of death to the day of the funeral, inclusive except, if the funeral is in excess of 200 miles from the City of Neenah, Wisconsin, then the day after the funeral shall be considered an additional day of funeral leave. 12.2 In the event of the death of the employee's spouse, son, daughter, or step-child, however, paid funeral leave shall be up to five scheduled days lost from the day of death to the seventh day following the day of death. 12.3 In the event of the death of an employee's grandparent, grandchild, sister-in-law, brother-in-law, daughter-in-law, son-in-law, or of an employee's spouse's grandparent, the employee may be absent from work and shall be paid for scheduled time actually lost up to eight (8) hours on the day of the funeral if it is a scheduled work day and the employee attends the funeral. 12.4 To qualify for paid funeral leave the employee must: A. have passed his probationary period prior to the death of the above mentioned family member, B. attend the funeral unless unable to do so because of illness, accident, or other just cause, and C. notify the Personnel Department as soon as possible that he will be absent because of the death. -13- 16 12.5 Funeral leave pay will be computed at the employee's regular straight time base rate including any shift premium. No funeral leave pay will be paid for days on which holiday or vacation pay is paid, or when an employee is on any kind of leave of absence or Worker's Compensation. Scheduled time lost shall not be counted as hours worked for purposes of computing overtime pay. ARTICLE 13 - GENERAL 13.1 Space for bulletin board shall be made available by the Company at a convenient place in the pattern shop for the posting of Union notices. 13.2 Duly accredited representatives of the Union, upon application for permission, shall have the right of access to the shop and to interview any of the employees affected by this contract and the Company will provide accommodations for such interview or interviews on its premises outside of the pattern shop proper. SICK PAY 13.3 Any employee covered by this Agreement who is absent because of a non-industrial accident or illness long enough to collect benefits from the Neenah Foundry Company Sickness and Accident Insurance Program will be paid up to the first three (3) scheduled work days of such absence or absences not covered by the insurance program at the rate of eight (8) hours per day at the employee's straight time hourly base rate. It is understood that not more than a total of three (3) scheduled work days will be due an employee during any calendar year because of a non-industrial sickness or accident or combination thereof. A. Any employee who is absent due to an industrial injury or illness incurred at Neenah Foundry Company will be paid, under this Agreement, for the first three scheduled work days of absence or absences not covered by Worker's Compensation Insurance for each such injury or illness, if, (1) the injury sustained was properly reported on the day of injury, and, (2) these same days are not later paid for by Worker's Compensation. B. In any event, no sick pay will be paid for any day not a scheduled work day, or on which holiday pay or vacation pay is paid. 13.4 The Company will continue to provide, and with the cooperation of its employees, maintain proper sanitary and safety conditions. A member of the Union shall be a member of the Safety Committee. 13.5 The Company agrees, within thirty (30) days from the execution of this contract, to furnish a current seniority list and to keep it current at such times as may be agreed upon between the Company and the Union. -14- 17 13.6 The Union will, at the execution of this contract, furnish the Company with a list of the names of its Union Committee or other committees designated to handle negotiations and grievances on behalf of the Union. 13.7 The Company will, at the execution of this contract, furnish the Union with a list of the names of its Bargaining Group who will have authority to negotiate or adjust grievances. 13.8 In the event the Company negotiates contract changes in benefits, other than pensions, for the production employees, during the term of this Agreement, such changes shall automatically be made with respect to employees covered by this Agreement. These pass along benefits include insurance, sick pay, safety shoes, prescription safety glasses, meal allowance, and shift premium. 13.9 Upon presentation of proper pay voucher, an employee required to serve jury duty shall be paid the difference between his jury duty pay and eight hours of straight time pay at his base rate for each scheduled work day he lost as a result of the jury duty. 13.10 The Company shall furnish a meal at a cost not to exceed $4.00 for each employee who works more than two (2) hours beyond his scheduled shift. A paid twenty-minute lunch period will be provided when meals are furnished; such period will not be included in the "more than 2 hours" qualifying period, but will be counted as time worked for overtime purposes. 13.11 The Company and the Union will comply with all laws and regulations established by Federal and State Governments with regard to military service of employees. A. Any Federal or State law which mandatorily changes any of the provisions of the Agreement shall govern. However, such required changes shall not change any of the other provisions of the contract. 13.12 A tool allowance of $125.00 will be paid each January to each pattern maker, pattern maker apprentice, and pattern maker leadman on the payroll as of January 1 of each year. Similarly, a $125.00 tool allowance will be paid to each pattern maintenance employee. 13.13 The Company will reimburse each employee $50.00 for one pair of approved safety shoes purchased by the employee for his personal wear each year. 13.14 The Company will reimburse each employee for replacement of prescription glasses, or parts thereof, which are damaged at work at the actual cost to a maximum of $35.00 per year. ARTICLE 14 - PENSIONS 14.1 The Company agrees to continue its pension program started January 1, l982, according to separate contract with Connecticut General Life Insurance Company. This plan is to be wholly financed and owned by the Company. -15- 18 14.2 The basic coverage of the program provides a normal retirement benefit based on the years of credited service in the Neenah Foundry Company Pattern Shops to age 65, with offsets for those years of service which are vested pension credits earned under the Pattern Makers' Pension Trust Fund as a Neenah Foundry Company employee through December 31, 1981. The plan provides for vesting after 5 years of service for pension benefits, and vesting after 10 years of service for disability benefits. 14.3 Effective January 1, 1995, the formula for determining monthly pension benefits under this plan provides for $23.00 per month as pension base. 14.4 The plan provides a surviving spouse's benefit provision. 14.5 The minimum disability benefit shall be $275.00 per month. A. Any disability benefits accruing to the employee as a result of credits earned in the Pattern Makers' Pension Trust Fund as a Neenah Foundry Company employee will be offset against the above amounts. 14.6 The normal retirement date is the first of the month following the employee's 65th birthday. Provisions for early retirement after age 60 are provided for in the plan. 14.7 A 401-K Savings Plan will be implemented by July 1, 1989. (See letter from Roger Hathaway to Tom Kufahl dated December 22, 1988.) Effective January 1, 1992, employees may elect to place up to 15% of their earnings in the 401-K savings plan. ARTICLE 15 - INSURANCE 15.1 The insurance benefits in effect at the signing of this Agreement include: Medical Insurance (Choice of Co-Pay plan or an HMO) Accidental Death and Dismemberment ($15,000) Sickness and Accident Coverage ($230.00/week) Life Insurance ($15,000) Dental Insurance 15.2 All insurance plans are funded on a cost-sharing basis between the Company and the employee, and any changes in these plans or in the cost-sharing formulas will be as provided by Article 13.8. 15.3 In case of a work-connected death of an employee, the Company will continue the medical and dental insurance coverage in effect for the employee at the time of his death for a period of thirty-six (36) months for the surviving spouse and dependent children. The Company will pay the full premium. -16- 19 15.4 In the event an employee is laid off, the Company shall continue to pay its percentage share of the premiums of the insurance plans (excluding sickness and accident benefits) for a period of three months following the month in which the layoff became effective, provided the employee arranges with the Personnel Office for payment of his percentage share of the premiums. ARTICLE 16 - TERMINATION CLAUSE 16.1 This Agreement signed this _____ day of ________, 1995, shall become effective as of the 1st day of January, 1995, and shall continue until December 31, 1997, and thereafter shall be automatically renewed from year to year unless at least sixty (60) days prior to the termination of any yearly period either party shall serve on the other written notice that it desires to modify or terminate this Agreement. A. In the event this contract has been reopened pursuant to the sixty-day notice and no agreement has been reached as of the expiration day, the contract shall be automatically extended until either party gives a written notice to the other party, terminating the contract at the end of five days from receipt of such notice. Dated this ________ day of ________, 1995 INDEPENDENT PATTERN MAKERS NEENAH FOUNDRY COMPANY UNION OF NEENAH, WISCONSIN _________________________________ ____________________________________ _________________________________ _________________________________ -17- 20 EXHIBIT "A" The minimum base wage rates shall be effective as follows: Pattern Makers
January 1, 1995 $17.13 per hour December 31, 1995 $17.68 per hour January 5, 1997 $18.1e per hour
Pattern Maintenance
January 1, 1995 $12.33 per hour December 31, 1995 $12.6e per hour January 52, 1997 $13.03 per hour
Minimum premium for pattern shop employees assigned to leadman duties is $.!@@D - ---@er hour. 21 EXHIBIT "B" Employee Automatic Renewal Authorization Form Date_______________ TO: Neenah Foundry Company You are hereby authorized and directed to check off from my wages my membership dues in the Independent Pattern Makers Union of Neenah, Wisconsin. The dues deduction shall be remitted by you to the Union no later than the 12th of each month, for dues collected the first payday of each month. This authorization shall remain in effect until revoked by me in writing and shall be irrevocable for a period of one year from the date appearing above (or until the expiration of the present Agreement between the Company and the Union, whichever is sooner), at which time it may be revoked by written notice given by me to the Company and the Union at any time during a period of ten days prior to the expiration of the one-year period (or ten days prior to the expiration of the present Agreement -- whichever is sooner). If no such notice is given, this authorization shall be irrevocable for successive periods of one year thereafter, with the same privilege of revocation at the end of each such period set forth above. ________________________________________________________ _____________________ Committeeman Employee Dues to be deducted according to the following schedule: Journeyman Per Month Apprentice first through fifth period Per Month Apprentice sixth through tenth period Per Month Pattern Maintenance Per Month 22 January 1, 1995 MEMO OF UNDERSTANDING It is understood that the weekly vacation period is from Sunday through the following Saturday. The Union has requested that when employees request to be off from work on Saturday preceding their vacation week, that they will be granted the time off . Also, when employees take vacation by single days and their request includes a Friday or Monday as vacation days, again, the request will be to have Saturday off. The Company agrees to make every effort to provide employees with the time off when requested. In the event unusual or emergency situations occur, the Company rely require the employees to work. 23 January 1, 1989 POLICY LETTERS Subcontracting - The Company agrees not to subcontract pattern making work where Such subcontracting would immediately deprive a pattern maker of work in the shops at Neenah Foundry when the pattern maker is available to do the work. However, where it is not appropriate to meet customer demands for delivery because of the schedule of work in the department, this work may be subcontracted, even though there might be a temporary shortage of work in Pattern Shops. Medical Leave Upon satisfactory medical proof that an employee is required to leave the employ of the Company because of his own ill health or that of a member of his family, shall be given pro-rata vacation pay or partial vacation pay in the same manner and to the same extent that other employees are entitled thereto. NEENAH FOUNDRY COMPANY R. G. Hathaway Vice President 24 January 1, 1989 Addendum to Agreement The Company agrees that all employees in the bargaining unit on January 1, 1977, will be rate-protected on the base wage of Pattern Makers as listed in Exhibit "A", for the duration of their employment. This means that no pattern maker employed on January 1, 1977, will be demoted to pattern maintenance rates as the result of creation of the pattern maintenance classification, unless by mutual agreement between the employee and the Company. All employees covered by this agreement may be required to perform any of the job duties performed by Pattern Maintenance employees. No pattern maintenance employee in any shop will be given preference for scheduled overtime in that shop. Unscheduled overtime will be assigned to the employees in that shop performing the specific work to be done in that shop. INDEPENDENT PATTERN MAKERS NEENAH FOUNDRY COMPANY UNION OF NEENAH, WISCONSIN _________________________________________ _______________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ 25 December 16, 1991 DUTIES OF PATTERN MAINTENANCE 1. Make and install bottom boards for self-set cores. 2. Build and install gating systems on patterns and in core boxes. 3. Patch or repair patterns and core boxes using appropriate materials to restore original contours without use of blueprints and without establishing new center lines. Install fillets and remove obsolete patterns from boards. 4. Program CNC machines to produce and repair bolster frames, pattern plates, copes and drag boards, core masks, core fixtures, checking fixtures. 5. Set up patterns for jobbing and construction castings. 6. Perform or assist with basic shop duties such as load and unload trucks, changing saw and jointer blades, basic shop and machine maintenance, drill hold down end irons and sprue buttons. 7. Follow patterns and core boxes in foundry and core room, make molds for checking cores. 8. Build cope and drag boards, omitting center lines; build insert boards, and match boards; install core hook plugs; add venting; build squeeze boards and install pin or bushing holes with use of fixtures or machines. 9. Clean and polish pattern equipment. 10. Mount flat back and chill patterns (where no critical alignment dimension need be determined). 11. Reproduce existing or master pattern or core equipment with the use of synthetic materials. 12. Put center lines on insert boards by using a fixture. 13. It is understood that Pattern Maintenance employees may perform any work within the skill level of the job, as represented by the above duties, and that Pattern-Maintenance employees will not be used to perform duties requiring Pattern make-skills. 26 NEENAH FOUNDRY COMPANY BASIC RULES In order to maintain the general welfare of the Company and its employees and to assure fair treatment for all, the following revised rules are effective immediately. Disciplinary action, whether it be in the form of a warning, suspension from work without pay, or discharge, will be based upon the circumstances surrounding the violation, together with the employee's general record of employment with the Company. 1. Violation of the contract between the Company and the Independent Pattern Makers Union of Neenah, Wisconsin. 2. Dishonesty. 3. Insubordination. 4. Unsafe conduct. 5. Unauthorized absence from job for any length of time or unauthorized presence, in the plant. 6. Failure to comply with job requirements and responsibilities. 7. Damage to property on Company premises. 8. Reporting for work while under the influence of intoxicants or use or possession of intoxicants on Company premises. 9. Conduct detrimental to the welfare of the Company or its employees. These basic rules are subject to change at any time. NEENAH FOUNDRY COMPANY EX-10.7 22 CREDIT AGREEMENT, DATED AS OF APRIL 30, 1997 1 Exhibit 10.7 NC MERGER COMPANY (TO BE MERGED WITH AND INTO NEENAH CORPORATION) NFC CASTINGS, INC. $75,000,000 CREDIT AGREEMENT April 30, 1997 CHASE SECURITIES INC. AS ARRANGER THE CHASE MANHATTAN BANK AS ADMINISTRATIVE AGENT [CHASE LOGO] 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions SECTION 1.01. Definitions........................................................... 1 SECTION 1.02. Terms Generally....................................................... 23 ARTICLE II The Credits SECTION 2.01. Commitments........................................................... 23 SECTION 2.02. Loans................................................................. 24 SECTION 2.03. Borrowing Procedure................................................... 25 SECTION 2.04. Evidence of Debt; Repayment of Loans.................................. 26 SECTION 2.05. Fees.................................................................. 26 SECTION 2.06. Interest of Loans..................................................... 27 SECTION 2.07. Default Interest...................................................... 27 SECTION 2.08. Alternate Rate of Interest............................................ 27 SECTION 2.09. Termination and Reduction of Commitments.............................. 28 SECTION 2.10. Conversion and Continuation of Borrowings............................. 28 SECTION 2.11. Repayment of Term Borrowings.......................................... 29 SECTION 2.12. Optional Prepayment................................................... 30 SECTION 2.13. Mandatory Prepayments................................................. 30 SECTION 2.14. Reserve Requirements; Change in Circumstances......................... 32 SECTION 2.15. Change in Legality.................................................... 33 SECTION 2.16. Indemnity............................................................. 34 SECTION 2.17. Pro Rata Treatment.................................................... 34 SECTION 2.18. Sharing of Setoffs.................................................... 34 SECTION 2.19. Payments.............................................................. 35 SECTION 2.20. Taxes................................................................. 35 SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate.................................................... 36 SECTION 2.22. Letters of Credit..................................................... 37
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ARTICLE III Representations and Warranties SECTION 3.01. Organization; Powers.................................................. 40 SECTION 3.02. Authorization......................................................... 40 SECTION 3.03. Enforceability........................................................ 41 SECTION 3.04. Governmental Approvals................................................ 41 SECTION 3.05. Financial Statements.................................................. 41 SECTION 3.06. No Material Adverse Change............................................ 41 SECTION 3.07. Title to Properties; Possession Under Leases.......................... 41 SECTION 3.08. Subsidiaries.......................................................... 42 SECTION 3.09. Litigation; Compliance with Laws...................................... 42 SECTION 3.10. Agreements............................................................ 42 SECTION 3.11. Federal Reserve Regulations........................................... 42 SECTION 3.12. Investment Company Act; Public Utility Holding Company Act............ 43 SECTION 3.13. Use of Proceeds....................................................... 43 SECTION 3.14. Tax Returns........................................................... 43 SECTION 3.15. No Material Misstatements............................................. 43 SECTION 3.16. ERISA................................................................. 43 SECTION 3.17. Environmental Matters................................................. 43 SECTION 3.18. Insurance............................................................. 44 SECTION 3.19. Security Documents.................................................... 44 SECTION 3.20. Location of Real Property and Leased Premises......................... 45 SECTION 3.21. Labor Matters......................................................... 45 SECTION 3.22. Solvency.............................................................. 45 ARTICLE IV Conditions of Lending SECTION 4.01. All Credit Events..................................................... 46 SECTION 4.02. First Credit Event.................................................... 46 ARTICLE V Affirmative Covenants SECTION 5.01. Existence; Business and Properties.................................... 50 SECTION 5.02. Insurance............................................................. 51 SECTION 5.03. Obligations and Taxes................................................. 52 SECTION 5.04 Financial Statements, Reports, etc.................................... 52 SECTION 5.05. Litigation and Other Notices.......................................... 53
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SECTION 5.06. Maintaining Records; Access to Properties and Inspections............. 53 SECTION 5.07. Use of Proceeds....................................................... 53 SECTION 5.08. Compliance with Environmental Laws.................................... 53 SECTION 5.09. Preparation of Environmental Reports.................................. 54 SECTION 5.10. Audits................................................................ 54 SECTION 5.11. Further Assurances.................................................... 54 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness.......................................................... 55 SECTION 6.02. Liens................................................................. 55 SECTION 6.03. Sale and Lease-Back Transactions...................................... 57 SECTION 6.04. Investments, Loans and Advances....................................... 57 SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions............. 58 SECTION 6.06. Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends....................................... 59 SECTION 6.07. Transactions with Affiliates.......................................... 60 SECTION 6.08. Business of Borrower and Subsidiaries................................. 60 SECTION 6.09. Other Indebtedness and Agreements..................................... 60 SECTION 6.10. Capital Expenditures.................................................. 60 SECTION 6.11. Consolidated Leverage Ratio........................................... 61 SECTION 6.12. Consolidated Net Worth................................................ 61 SECTION 6.13. Consolidated Interest Coverage Ratio.................................. 61 SECTION 6.14. Fiscal Year........................................................... 61 ARTICLE VII Events of Default..................................................... 61 ARTICLE VIII The Administrative Agent and the Collateral Agent..................... 63
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ARTICLE IX Miscellaneous SECTION 9.01. Notices............................................................... 65 SECTION 9.02. Survival of Agreement................................................. 66 SECTION 9.03. Binding Effect........................................................ 66 SECTION 9.04. Successors and Assigns................................................ 66 SECTION 9.05. Expenses; Indemnity................................................... 69 SECTION 9.06. Right of Setoff....................................................... 70 SECTION 9.07. Applicable Law........................................................ 70 SECTION 9.08. Waivers; Amendment.................................................... 70 SECTION 9.09. Interest Rate Limitation.............................................. 71 SECTION 9.10. Entire Agreement...................................................... 71 SECTION 9.11. WAIVER OF JURY TRIAL.................................................. 71 SECTION 9.12. Severability.......................................................... 71 SECTION 9.13. Counterparts.......................................................... 72 SECTION 9.14. Headings.............................................................. 72 SECTION 9.15. Jurisdiction; Consent to Service of Process........................... 72 SECTION 9.16. Confidentiality....................................................... 72 SECTION 9.17. Termination........................................................... 73 SCHEDULES: Schedule 1.01(a) -- Subsidiary Guarantors Schedule 1.01(b) -- Stockroom Items Schedule 2.01 -- Lenders and Commitments Schedule 3.07(d) -- Contractual Rights Regarding Mortgaged Property Schedule 3.08 -- Subsidiaries Schedule 3.09(a) -- Litigation Schedule 3.09(c) -- Certificates of Occupancy Schedule 3.10 -- Agreements and Instruments Schedule 3.17 -- Environmental Matters Schedule 3.18 -- Insurance Schedule 3.19(d) -- Filing Offices-- Mortgages Schedule 3.20(a) -- Mortgaged Properties Schedule 3.20(b) -- Leased Properties Schedule 4.02(a) -- Local Counsel Schedule 6.01 -- Existing Indebtedness Schedule 6.02 -- Existing Liens Schedule 6.07 -- Transactions with Affiliates
6 5 EXHIBITS:
Exhibit A -- Form of Administrative Questionnaire Exhibit B -- Form of Assignment and Acceptance Exhibit C -- Form of Borrowing Request Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement Exhibit E -- Form of Mortgages Exhibit F -- Form of Parent Guarantee Agreement Exhibit G -- Form of Pledge Agreement Exhibit H -- Form of Security Agreement Exhibit I -- Form of Subsidiary Guarantee Agreement Exhibit J-1 -- Form of Opinion of Kirkland & Ellis Exhibit J-2 -- Form of Opinion of Local Counsel Exhibit K -- Form of Borrowing Base Certificate Exhibit L -- Form of Tax Sharing Agreement
7 CREDIT AGREEMENT dated as of April 30, 1997, among NC MERGER COMPANY, a Wisconsin corporation (the "Borrower"), NFC CASTINGS, INC., a Delaware corporation ("Holdings"), the Lenders (as defined in Article I), and THE CHASE MANHATTAN BANK, a New York banking corporation, as issuing bank (in such capacity, the "Issuing Bank"), as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders. Pursuant to the Merger Agreement (such term and each other capitalized term used but not defined herein having the meaning given it in Article I), (a) the Borrower will merge (the "Merger") with and into Neenah Corporation, a Wisconsin corporation ("Neenah"), with Neenah being the surviving corporation in the Merger, and (b) the then-outstanding capital stock of Neenah will be converted into the right to receive aggregate consideration of $240,000,000 in cash (the "Merger Consideration"), subject to adjustment as set forth in the Merger Agreement. From and after the Merger, all references herein to the Borrower shall mean and refer to Neenah, as the surviving corporation in the Merger. Holdings and the Borrower have requested the Lenders to extend credit to the Borrower in the form of (a) Tranche A Term Loans on the Closing Date, in an aggregate principal amount not in excess of $20,000,000, (b) Tranche B Term Loans on the Closing Date, in an aggregate principal amount not in excess of $25,000,000, and (c) Revolving Loans at any time and from time to time prior to the Revolving Credit Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $30,000,000. Holdings and the Borrower have requested the Issuing Bank to issue letters of credit, in an aggregate face amount at any time outstanding not in excess of $15,000,000, to support payment obligations incurred in the ordinary course of business by the Borrower and its Subsidiaries. The proceeds of the Term Loans are to be used, together with the proceeds of the Equity Contribution, the Senior Subordinated Notes and Revolving Loans to be made to the Borrower on the Closing Date, solely to pay the Merger Consideration and related fees, costs and expenses in connection with the Transactions. The proceeds of the Revolving Loans (other than those used as described in the immediately preceding sentence) are to be used solely for general corporate purposes in the ordinary course of the Borrower's business. 8 2 The Lenders are willing to extend such credit to the Borrower and the Issuing Bank is willing to issue letters of credit for the account of the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. "ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan. "ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ABR Term Borrowing" shall mean a Borrowing comprised of ABR Term Loans. "ABR Term Loan" shall mean any Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "Account" shall mean any right to payment for goods sold or for services rendered, whether or not it has been earned by performance. "Account Debtor" shall mean, with respect to any Account, the obligor with respect to such Account. "ACP Holdings" shall mean ACP Holding Company, a Delaware corporation. "ACP Merger" shall have the meaning assigned to such term in the definition of the term "Change in Control". "ACP Products" shall mean ACP Products, L.L.C., a Delaware limited liability company. "Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. "Administrative Agent Fees" shall have the meaning assigned to such term in Section 2.05(b). 9 3 "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit A. "Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified. "Aggregate Revolving Credit Exposure" shall mean the aggregate amount of the Lenders' Revolving Credit Exposures. "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the preceding sentence, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. The term "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. The term "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate. "Applicable Percentage" shall mean, for any day, with respect to any Loan, or with respect to the Commitment Fees, as the case may be, the applicable percentage set forth below under the caption "Eurodollar Spread--Tranche A Term Loans and Revolving Loans", "Eurodollar Spread--Tranche B Term Loans", "ABR Spread--Tranche A Term Loans and Revolving Loans", 10 4 "ABR Spread--Tranche B Term Loans" or "Fee Percentage", as the case may be, based upon the Consolidated Leverage Ratio as of the relevant date of determination:
Eurodollar Spread-- Tranche A Term Eurodollar ABR Spread-- ABR Consolidated Loans Spread-- Tranche A Term Spread-- Leverage and Revolving Tranche B Loans and Tranche B Fee Ratio Loans Term Loans Revolving Loans Term Loans Percentage - ---------------------------------------------------------------------------------------------------------------------------- Category 1 2.50% 3.00% 1.50% 2.00% .50% Equal to or greater than 4.00 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- Category 2 2.25% 3.00% 1.25% 2.00% .50% Equal to or greater than 3.75 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- Category 3 2.00% 3.00% 1.00% 2.00% .50% Equal to or greater than 3.50 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- Category 4 1.75% 3.00% .75% 2.00% .375% Equal to or greater than 3.00 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- Category 5 1.50% 3.00% .50% 2.00% .375% Less than 3.00 to 1.00 - ----------------------------------------------------------------------------------------------------------------------------
Each change in the Applicable Percentage resulting from a change in the Consolidated Leverage Ratio shall be effective with respect to all Loans, Commitments and Letters of Credit outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.04(a) or (b) indicating such change until the date immediately 11 5 preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing, (a) at any time during which the Borrower has failed to deliver the financial statements and certificates required by Section 5.04(a) or (b), or (b) at any time after the occurrence and during the continuance of an Event of Default, the Consolidated Leverage Ratio shall be deemed to be in Category 1 for purposes of determining the Applicable Percentage. "Approved Fund" shall mean, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Assessment Rate" shall mean for any date the annual rate (rounded upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the Administrative Agent as the then current net annual assessment rate that will be employed in determining amounts payable by the Administrative Agent to the Federal Deposit Insurance Corporation (or any successor thereto) for insurance by such Corporation (or such successor) of time deposits made in dollars at the Administrative Agent's domestic offices. "Asset Sale" shall mean the sale, transfer or other disposition (by way of merger or otherwise) by the Borrower or any of the Subsidiaries to any person other than the Borrower or any Subsidiary Guarantor of (a) any capital stock of any of the Subsidiaries (other than directors' qualifying shares) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (i) inventory, excess, damaged, obsolete or worn out assets, scrap, Permitted Investments and licenses of patterns developed for customers of the Borrower or any Subsidiary, in each case disposed of in the ordinary course of business, (ii) assets transferred for an aggregate purchase price not exceeding $3,000,000 in any fiscal year of the Borrower in connection with the replacement or upgrade of a tangible asset of the Borrower or any Subsidiary Guarantor within 180 days of such transfer, (iii) dispositions resulting in Casualty Proceeds or Condemnation Proceeds or (iv) dispositions resulting in other insurance settlements or condemnation awards not exceeding $100,000 in any fiscal year of the Borrower), provided that neither (x) any asset sale or series of related asset sales described in clause (b) above having a value not in excess of $100,000 nor (y) any Equity Issuance shall be deemed an "Asset Sale" for purposes of this Agreement. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America. "Borrower Tax Amount" shall mean, with respect to any fiscal quarter, the amount paid by Holdings, the Borrower and the Subsidiaries to ACP Holdings pursuant to the Tax Sharing Agreement, which amount shall not be greater than the amount of taxes that would be required to be paid in cash by Holdings, the Borrower and the Subsidiaries on a consolidated basis if Holdings, the Borrower and the Subsidiaries were not consolidated with ACP Holdings and its other subsidiaries for tax purposes. 12 6 "Borrowing" shall mean a group of Loans of a single Type made by the Lenders on a single date and as to which a single Interest Period is in effect. "Borrowing Base" shall mean, with respect to the Borrower, at any date of determination thereof, an amount equal to the sum, without duplication, of (a) 85% of Eligible Accounts Receivable (or the lesser of (i) $500,000 or (ii) 50% of "Eligible Accounts Receivable" described in each of clause (e) and (i)(i)(B) of the definition of the term "Eligible Accounts Receivable") at such date, (b) 55% of the Eligible Inventory Value (or (i) the lesser of (A) $250,000 or (B) 25% of the Eligible Inventory Value of Eligible Inventory described in the second proviso of clause (c) of the definition of the term "Eligible Inventory" or (ii) the lesser of (A) $500,000 or (B) 25% of the Eligible Inventory Value of Eligible Inventory consisting of stockroom items listed on Schedule 1.01(b)) at such date, provided that the amount determined pursuant to clause (b) shall at no time exceed 50% of the Borrowing Base and (c) during the period from the Closing Date through the day following the Closing Date only, $25,000,000. The Borrowing Base shall be computed monthly upon the delivery of a Borrowing Base Certificate in accordance with Section 5.04(d). The Borrowing Base at any time in effect shall be determined as set forth in the Borrowing Base Certificate most recently delivered hereunder; provided that the information contained in such Borrowing Base Certificate shall not be conclusive in calculating the Borrowing Base and, after consultation with the Borrower, the Administrative Agent shall be entitled to adjust the amounts and other information contained therein to the extent that it believes in its reasonable judgment that such adjustment is necessary and appropriate to cause the Borrowing Base (as so adjusted) to reflect the standards set forth in the definitions of the terms "Eligible Accounts Receivable" and "Eligible Inventory" (determined as of the last day of the calendar month as to which such Borrowing Base Certificate relates) and the Borrowing Base (as so adjusted) shall be the Borrowing Base in effect from the date the Administrative Agent notifies the Borrower that it has made any such adjustment until the next Borrowing Base Certificate is delivered. "Borrowing Base Certificate" shall have the meaning assigned to such term in Section 5.04(d). "Borrowing Request" shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C. "Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Lease Obligations" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" of any Person shall mean any and all shares, interests (including membership and economic interests in a limited liability company), rights to purchase, warrants, 13 7 options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity prior to such conversion. "Casualty" shall have the meaning set forth in each of the Mortgages. "Casualty Proceeds" shall have the meaning set forth in each of the Mortgages. A "Change in Control" shall be deemed to have occurred if (a) prior to the earlier to occur of the first fully distributed public offering of Voting Stock of Holdings (or, in the event (i) Holdings shall merge with and into ACP Holdings or the Borrower in a transaction permitted by Section 6.05 (a "Holdings Merger"), ACP Holdings, or (ii) following a Holdings Merger, ACP Holdings shall merge with and into ACP Products or the Borrower in a transaction permitted by Section 6.05 (an "ACP Holdings Merger"), ACP Products), the Permitted Holders shall cease to own directly or indirectly (including by way of direct or indirect ownership of economic interests in ACP Products), beneficially or of record, shares representing at least 51% on a fully diluted, as if converted, basis of the aggregate ordinary voting power represented by the issued and outstanding Voting Stock of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products), (b) after the first fully distributed public offering of Voting Stock of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products), the Permitted Holders shall cease to own directly or indirectly (including by way of direct or indirect ownership of economic interests in ACP Products), beneficially or of record, shares representing at least 25% on a fully diluted, as if converted, basis of the aggregate ordinary voting power represented by the issued and outstanding Voting Stock of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products), (c) after the first fully distributed public offering of Voting Stock of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products), any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof) other than the Permitted Holders shall own directly or indirectly, beneficially or of record, a percentage of the issued and outstanding Voting Stock of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products) on a fully diluted, as if converted, basis having ordinary voting power in excess of the percentage then owned, directly or indirectly (including by way of direct or indirect ownership of economic interests in ACP Products), beneficially and of record, on a fully diluted, as if converted, basis, by the Permitted Holders; (d) a majority of the seats (except in the case of any vacancy for 30 days or less resulting from the death or resignation of any director of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products)) on the board of directors of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products) shall at any time be occupied by persons who were neither (i) nominated by the board of directors of Holdings, ACP Holdings or ACP Products, as the case may be, nor (ii) appointed by directors so nominated; (e) any change in control (or similar event, however denominated) with respect to Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products) or the Borrower shall occur under and as defined in any indenture or agreement in respect of Indebtedness to which any such person or any Subsidiary is a party; or (f) Holdings (or in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings 14 8 Merger, ACP Products) shall cease to own, beneficially and of record, 100% of the issued and outstanding Capital Stock of the Borrower. "Citicorp" shall mean Citicorp, a Delaware corporation. "Closing Date" shall mean the date of the first Credit Event. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean all the "Collateral" as defined in any Security Document and shall also include the Mortgaged Properties. "Commitment" shall mean, with respect to any Lender, such Lender's Revolving Credit Commitment and Term Loan Commitments. "Commitment Fee" shall have the meaning assigned to such term in Section 2.05(a). "Condemnation" shall have the meaning set forth in each of the Mortgages. "Condemnation Proceeds" shall have the meaning set forth in each of the Mortgages. "Confidential Information Memorandum" shall mean the Confidential Information Memorandum of the Borrower dated January 1997. "Consolidated Capital Expenditures" shall mean, for any period, the sum of (a) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability) by the Borrower or any of the Subsidiaries during such period that, in accordance with GAAP, are or should be included in "additions to property, plant and equipment" or similar items reflected in the consolidated statement of cash flows of the Borrower and the Subsidiaries for such period (including the amount of assets leased in connection with any Capital Lease Obligation), and (b) to the extent not included pursuant to clause (a) above, the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability) by the Borrower or any Subsidiary to acquire, by purchase or otherwise, the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any person (other than expenditures for Permitted Acquisitions); provided, however, that, for purposes of Section 6.10 only, to the extent the Borrower or a Subsidiary uses, within 180 days of the receipt thereof, (i) the proceeds of the disposition of assets described in clause (b)(i), (ii) or (iv) of the definition of the term "Asset Sale" or (ii) Casualty Proceeds or Condemnation Proceeds to purchase, construct, repair, lease or replace any property, plant or equipment, the amount of the related Consolidated Capital Expenditure shall be reduced by the amount of such proceeds. "Consolidated Current Assets" shall mean, as of any date of determination, the total assets that would properly be classified as current assets (other than cash and cash equivalents) of the Borrower and the Subsidiaries as of such date, determined on a consolidated basis in accordance with GAAP. 15 9 "Consolidated Current Liabilities" shall mean, as of any date of determination, the total liabilities (other than, without duplication, (a) the current portion of long-term Indebtedness and (b) outstanding Revolving Loans) that would properly be classified as current liabilities of the Borrower and the Subsidiaries as of such date, determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" shall mean, for any period, Consolidated Net Income for such period, plus, to the extent deducted in computing such Consolidated Net Income, (a) the sum of (i) all Federal, state, local and foreign taxes, (ii) total interest expense and (iii) depreciation, depletion, amortization of intangibles and other non-cash charges or non-cash losses (including non-cash transaction expenses and the amortization of debt discounts), minus, to the extent added in computing such Consolidated Net Income, (b) the sum of (i) any interest income and (ii) any non-cash income or non-cash gains, all as determined on a consolidated basis with respect to the Borrower and the Subsidiaries in accordance with GAAP. "Consolidated Interest Coverage Ratio" shall mean, for any period, the ratio for such period of (a) Consolidated EBITDA to (b) Consolidated Interest Expense; provided, however, that for purposes of determining the Consolidated Interest Coverage Ratio for the four-fiscal-quarter periods ending on the last day of the first, second and third quarters of the fiscal year ending March 31, 1998 (the "1998 Fiscal Year"), Consolidated EBITDA and Consolidated Interest Expense shall be deemed to be (i) in the case of the four-fiscal-quarter period ending on the last day of the first quarter of the 1998 Fiscal Year, Consolidated EBITDA and Consolidated Interest Expense for the fiscal quarter ending on such date, multiplied by 4, (ii) in the case of the four-fiscal-quarter period ending on the last day of the second quarter of the 1998 Fiscal Year, Consolidated EBITDA and Consolidated Interest Expense for the two-fiscal-quarter period ending on such date, multiplied by 2 and (iii) in the case of the four-fiscal-quarter period ending on the last day of the third quarter of the 1998 Fiscal Year, Consolidated EBITDA and Consolidated Interest Expense for the three-fiscal-quarter period ending on such date, multiplied by 1-1/3. "Consolidated Interest Expense" shall mean, for any period, the gross interest expense of the Borrower and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including the portion of any payments or accruals with respect to Capital Lease Obligations that are allocable to interest expense in accordance with GAAP, but excluding (a) the amortization of debt discounts and (b) the amortization of all fees (including fees with respect to Interest Rate Protection Agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense in accordance with GAAP (including fees and expenses in connection with the Transactions not exceeding $10,000,000 in the aggregate). For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received by the Borrower or any Subsidiary with respect to Interest Rate Protection Agreements. "Consolidated Leverage Ratio" shall mean, as of any date of determination, the ratio of (a) Total Debt on such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters ending on such date (including the Consolidated EBITDA for such four fiscal quarters of any Subsidiary acquired during such four fiscal quarters constituting a Permitted Acquisition pursuant to Section 6.04(g)); provided, however, that for purposes of determining the Consolidated 16 10 Leverage Ratio for the four-fiscal-quarter periods ending on the last day of the first, second and third quarters of the fiscal year ending March 31, 1998 (the "1998 Fiscal Year"), Consolidated EBITDA shall be deemed to be (i) in the case of the four-fiscal-quarter period ending on the last day of the first quarter of the 1998 Fiscal Year, Consolidated EBITDA for the fiscal quarter ending on such date, multiplied by 4, (ii) in the case of the four-fiscal-quarter period ending on the last day of the second quarter of the 1998 Fiscal Year, Consolidated EBITDA for the two-fiscal-quarter period ending on such date, multiplied by 2 and (iii) in the case of the four-fiscal-quarter period ending on the last day of the third quarter of the 1998 Fiscal Year, Consolidated EBITDA for the three-fiscal-quarter period ending on such date, multiplied by 1-1/3. "Consolidated Net Income" shall mean, for any period, net income or loss of the Borrower and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any person in which any other person (other than the Borrower or any of the Subsidiaries or any director holding qualifying shares in accordance with applicable law) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any wholly owned Subsidiary by such person during such period, (b) the income (or loss) of any person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of the Subsidiaries or the date that person's assets are acquired by the Borrower or any of the Subsidiaries (except, in the case of any Subsidiary acquired during such period constituting a Permitted Acquisition pursuant to Section 6.04(g), which shall not be excluded for purposes of determining Consolidated EBITDA for purposes of the Consolidated Leverage Ratio only), (c) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by the Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after tax gains or losses attributable to sales of assets out of the ordinary course of business and (e) (to the extent not included in clauses (a) through (d) above) any non-cash extraordinary gains or non-cash extraordinary losses. "Consolidated Net Worth" shall mean, as of any date of determination, the consolidated stockholder's equity of the Borrower and the Subsidiaries at such date, as determined on a consolidated basis in accordance with GAAP; provided, however, that common stock or preferred stock (a) with respect to which no payments that would violate Section 6.06 are required to be made and (b) that is redeemable not earlier than April 30, 2009 shall be included regardless of its classification under GAAP. "Control" shall mean 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, and the terms "Controlling" and "Controlled" shall have meanings correlative thereto. "Credit Event" shall have the meaning assigned to such term in Section 4.01. "CVC" shall mean Citicorp Venture Capital, Ltd., a New York corporation. 17 11 "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "dollars" or "$" shall mean lawful money of the United States of America. "Domestic Subsidiaries" shall mean all Subsidiaries incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia. "Eligible Accounts Receivable" shall mean at the time of any determination thereof, an amount equal to the aggregate outstanding balance of all Accounts of the Borrower as set forth in the aging reports of billed Accounts for the Borrower that satisfy the following criteria at the time of creation and continue to meet the same at the time of such determination: (a) all payments on such Account are by the terms of such Account due not later than 60 days after the original invoice date; (b) such Account has been invoiced and is not, and not more than 50% of the aggregate amount of Accounts from the same Account Debtor and any Affiliates thereof are, unpaid for more than 90 days (or, in the case of Account Debtors that are state or local municipalities, 120 days) after the original invoice date as issued; provided that the aggregate Accounts of any Account Debtor with original invoice dates more recent than 90 days (or, in the case of Account Debtors that are state or local municipalities, 120 days) prior to the date of determination shall be reduced by the amount of net credit balances of such Account Debtor the dates of which are earlier than 90 days (or, in the case of Account Debtors that are state or local municipalities, 120 days) prior to such date of determination; (c) such Account is denominated in dollars; (d) such Account arose from a completed, outright and lawful sale and delivery of goods or from the completed performance and acceptance of services by the Borrower or a Subsidiary Guarantor and such Account did not arise from a progress billing or percentage of completion invoice; (e) such Account arose from a pattern (tooling) billing; (f) such Account is owned solely by the Borrower or a Subsidiary Guarantor, is subject to a valid and perfected first priority security interest in favor of the Collateral Agent for the benefit of Secured Parties pursuant to the Security Documents and is not subject to any other Lien; (g) such Account arose in the ordinary course of business of the Borrower or a Subsidiary Guarantor and, to the best knowledge of the Borrower and its Subsidiaries, no event of death, bankruptcy, insolvency or inability to pay creditors generally of the Account Debtor thereunder has occurred, and no notice thereof has been received; 18 12 (h) such Account complies in all material respects with the requirements of all applicable laws and regulations, whether Federal, state or local, including the Federal Truth in Lending Act and Regulation Z of the Board; (i) with respect to such Account, the Account Debtor (i) is a United States person (or, if such person is not a United States person, either (A) such Account is supported by a letter of credit approved by the Administrative Agent in favor of the Borrower or a Subsidiary Guarantor or (B) such person is a subsidiary of Dana Corporation, Eaton Corporation or Rockwell International), (ii) is not an Affiliate of the Borrower or an Affiliate of any of the Borrower's Subsidiaries or any employee, officer, sales representative, agent, director or stockholder of the Borrower or a Subsidiary Guarantor and (iii) is not the United States of America or any department, agency or instrumentality thereof, unless the Borrower or Subsidiary Guarantor duly assigns its rights to payment of such Account to the Collateral Agent pursuant to the Assignment of Claims Act of 1940, as amended, which assignment and related documents and filings shall be in form and substance reasonably satisfactory to the Collateral Agent; (j) such Account constitutes an "account" or "chattel paper" within the meaning of the Uniform Commercial Code of the state in which the Account is located; (k) such Account is in full force and effect and constitutes a legal, valid and binding obligation of the Account Debtor enforceable in accordance with its terms; (l) the Account Debtor with respect to such Account has not asserted that such Account is, and neither the Borrower nor any of its Subsidiaries is aware of any basis upon which such Account could be, subject to any claim or defense, deduction, credit or dispute. Notwithstanding the foregoing, all Accounts of any single Account Debtor (unless otherwise agreed to by the Required Lenders) and its Affiliates which, in the aggregate, exceed 5% in the case of Accounts arising from construction product line sales and 20% in the case of Accounts arising from industrial product line sales of the total amount of all Eligible Accounts Receivable at the time of any determination, shall be deemed not to be Eligible Accounts Receivable to the extent of such excess. The percentage limitation set forth in the preceding sentence must be satisfied when applied to the amount of Eligible Accounts Receivable after excluding all Accounts required to be excluded by such percentage limitation; (m) such Account does not arise from (i) the sale to the obligor on a bill-and-hold, guaranteed sales, sale-or-return, sale on approval, consignment, sample or trial basis, (ii) a sale subject to any retainages or holdbacks of any type or (iii) any other sale made pursuant to any other written agreement providing for repurchase or return; provided that no amount owing in respect of such Account shall be excluded pursuant to this clause solely as a result of customary quality warranties or the general right to return goods provided by the Borrower or a Subsidiary Guarantor; (n) such Account is not the result of a chargeback, debit memo or a reinvoice of a disputed Account; 19 13 (o) such Account has not been adjusted to reflect the return or rejection of, or any loss of or damage to, any of the inventory giving rise to such Account; provided that amounts owing in respect of such Account shall only be excluded to the extent of such adjustment; (p) such Account (other than Accounts owed to Neenah Transport, Inc.) does not include any material delivery, freight or financing charges, late or other fees; provided that amounts owing in respect of such Account shall only be excluded to the extent of such charges or fees; and (q) such Account may not be set off or charged against (i) any adverse security deposit or other similar deposit made by or for the benefit of the Account Debtor or (ii) any trade payable or similar liability owing to the Account Debtor; provided that amounts owing in respect of such Account shall only be excluded to the extent of such set-off or charge against such adverse security deposit, trade payable or other similar deposit or liability. "Eligible Inventory" shall mean at the time of determination thereof, without duplication, all inventory owned by the Borrower or a Subsidiary Guarantor, to the extent that (a) the Borrower or a Subsidiary Guarantor has good and unencumbered title thereto (subject to the Lien of the Security Documents); (b) the Collateral Agent on behalf of the Secured Parties possesses a valid first priority perfected security interest therein pursuant to the Security Documents; (c) such inventory is located at a storage or manufacturing facility owned or leased by the Borrower or a Subsidiary Guarantor in the United States; provided, however, that no inventory which is stored at a facility leased by the Borrower or any Subsidiary Guarantor shall be considered "Eligible Inventory" unless the Borrower or such Subsidiary Guarantor, as the case may be, shall have obtained a waiver, in form and substance satisfactory to the Administrative Agent, from the lessor of such property of any statutory, contractual or common law landlord's lien with respect to such leased property; provided further, that no inventory which is located at a warehouse owned by an independent sales representative will be considered "Eligible Inventory" unless the Collateral Agent shall have obtained a written agreement of such independent sales representative, in form and substance satisfactory to the Administrative Agent, acknowledging the Collateral Agent's rights and access to such inventory; (d) such inventory consists of raw materials, work-in-process, stockroom items listed on Schedule 1.01(b) and finished goods and is not pattern, plant core, stockroom (except as set forth on Schedule 1.01(b)), in-plant core and supplies or packing materials used or consumed in the business of the Borrower; (e) such inventory is merchantable and is currently salable in the normal course of the Borrower's business; 20 14 (f) such inventory has not been consigned and does not represent any goods sold pursuant to a "bill and hold" or "sale or return" arrangement, or is otherwise in-transit to third parties; and (g) such inventory does not represent discontinued, obsolete, slow moving (aged more than 52 weeks) or defective stock. "Eligible Inventory Value" shall mean at the time of any determination thereof the lower of cost or market value determined on a first-in, first-out basis (less any appropriate reserve for obsolete inventory so long as such reserve is for inventory which is otherwise eligible) of the Eligible Inventory at such time, in dollars, determined on a basis consistent with the current and historical accounting practice of the Borrower. "environment" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, the workplace or as otherwise defined in any Environmental Law. "Environmental Claim" shall mean any written accusation, allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or non-accidental Releases), (b) exposure to any Hazardous Material, (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material or (d) the violation or alleged violation of any Environmental Law or Environmental Permit. "Environmental Law" shall mean any and all applicable present and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections 9601 et seq. (collectively "CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sections 6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251 et seq., the Clean Air Act of 1970, as amended 42 U.S.C. Sections 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. Sections 2601 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Sections 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Sections 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Sections 5101 et seq., and any similar or implementing state or local law, and all amendments or regulations promulgated under any of the foregoing. 21 15 "Environmental Permit" shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law. "Equity Contribution" shall mean (a) the cash equity contribution in an aggregate amount of not less than $45,000,000 made indirectly by the Investors to Holdings and (b) the cash common equity contribution in an equal amount made by Holdings to the Borrower. "Equity Issuance" shall mean any issuance or sale by Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products), the Borrower or any Subsidiary of any shares of capital stock or other equity securities of any such person or any obligations convertible into or exchangeable for, or giving any person a right, option or warrant to acquire such securities or such convertible or exchangeable obligations, except in each case for (a) any issuance or sale to Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products), the Borrower or any Subsidiary, (b) any issuance of directors' qualifying shares, (c) sales or issuances of common stock to management or key employees of Holdings (or, in the event of (i) a Holdings Merger, ACP Holdings, or (ii) an ACP Holdings Merger, ACP Products), the Borrower or any Subsidiary under any employee stock option or stock purchase plan in existence from time to time to the extent that the proceeds from all sales and issuances described in this clause (c) shall not exceed in the aggregate $1,000,000 in any fiscal year, (d) any issuance of Capital Stock the proceeds of which are substantially concurrently used to make Permitted Acquisitions pursuant to Section 6.04(g) and (e) any issuance of Capital Stock the proceeds of which are substantially concurrently used to make Consolidated Capital Expenditures pursuant to Section 6.10. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any 22 16 notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans. "Eurodollar Loan" shall mean any Eurodollar Revolving Loan or Eurodollar Term Loan. "Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "Eurodollar Term Borrowing" shall mean a Borrowing comprised of Eurodollar Term Loans. "Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "Event of Default" shall have the meaning assigned to such term in Article VII. "Excess Cash Flow" shall mean, for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year, (ii) extraordinary cash income of the Borrower and its consolidated Subsidiaries, if any, during such fiscal year and not included in Consolidated EBITDA and (iii) reductions to non-cash working capital of the Borrower and its consolidated Subsidiaries for such fiscal year (i.e., the decrease, if any, in Consolidated Current Assets minus Consolidated Current Liabilities from the beginning to the end of such fiscal year); provided that such working capital as of the first day of such fiscal year shall be determined on a pro forma basis adjusted to give effect (as if such event had occurred on the first day of such fiscal year) to each Permitted Acquisition made pursuant to Section 6.04(g) during such fiscal year over (b) the sum, without duplication, of (i) the amount of any cash income taxes payable by the Borrower and its consolidated Subsidiaries with respect to such fiscal year, (ii) cash interest paid by the Borrower and its consolidated Subsidiaries during such fiscal year, (iii) Consolidated Capital Expenditures made in cash in accordance with Section 6.10 during such fiscal year, (iv) scheduled principal repayments of Indebtedness made by the Borrower and its consolidated Subsidiaries during such fiscal year, (v) optional and mandatory prepayments of the principal of Loans during such fiscal year, but only to the extent that such prepayments by their terms cannot be reborrowed or redrawn and do not occur in connection with a refinancing of all or any portion of the Loans, (vi) extraordinary cash expenses paid by the Borrower and its consolidated Subsidiaries, if any, during such fiscal year and not included in Consolidated EBITDA and (vii) additions to non-cash working capital for such fiscal year (i.e., the increase, if any, in Consolidated Current Assets minus Consolidated Current Liabilities from the beginning to the end of such fiscal year);provided that such working capital as of the first day of such fiscal year shall be determined on a pro forma basis adjusted to give effect (as if such event had occurred on the first day of such fiscal year) to each Permitted Acquisition made pursuant to Section 6.04(g) during such fiscal year provided, further, that, to the extent otherwise included therein, the Net Cash Proceeds of Asset Sales, Equity Issuances and dispositions resulting in Casualty Proceeds or Condemnation Proceeds shall be excluded from the calculation of Excess Cash Flow. 23 17 "Excluded Taxes" shall mean, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.21(a)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.20(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.20(a). "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" shall mean the Fee Letter dated January 6, 1997, among Holdings, 399 Venture Partners Inc. and The Chase Manhattan Bank. "Fees" shall mean the Commitment Fees, the Administrative Agent's Fees, the L/C Participation Fees and the Issuing Bank Fees. "Financial Officer" of any corporation shall mean the chief financial officer, principal accounting officer, Treasurer or Controller of such corporation. "Foreign Lender" shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic Subsidiary. "GAAP" shall mean generally accepted accounting principles applied on a consistent basis. "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other person (the "primary obligor") in any manner, whether directly or indirectly, and including 24 18 any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness; provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. "Guarantee Agreements" shall mean the Parent Guarantee Agreement and the Subsidiary Guarantee Agreement. "Guarantors" shall mean Holdings and the Subsidiary Guarantors. "Hazardous Materials" shall mean all explosive or radioactive substances or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBs") or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Holdings Merger" shall have the meaning assigned to such term in the definition of the term "Change in Control". "Indebtedness" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all Indebtedness of others of the type described in clauses (a) through (e) and (g) through (j) of this definition secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i) all obligations of such person in respect of interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements and (j) all obligations of such person as an account party in respect of letters of credit and bankers' acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner. "Indemnified Taxes" shall mean Taxes other than Excluded Taxes. 25 19 "Indemnity, Subrogation and Contribution Agreement" shall mean the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit D, among the Borrower, the Subsidiary Guarantors and the Collateral Agent. "Interest Payment Date" shall mean, with respect to any Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing, and, in addition, the date of any prepayment of such Borrowing or conversion of such Borrowing to a Borrowing of a different Type. "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect and (b) as to any ABR Borrowing, the period commencing on the date of such Borrowing and ending on the earliest of (i) the next succeeding March 31, June 30, September 30 or December 31, (ii) the Revolving Credit Maturity Date, the Tranche A Maturity Date or the Tranche B Maturity Date, as applicable, and (iii) the date such Borrowing is converted to a Borrowing of a different Type in accordance with Section 2.10 or repaid or prepaid in accordance with Section 2.11 or 2.12; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or similar agreement or arrangement designed to protect the Borrower or any Subsidiary against fluctuations in interest rates, and not entered into for speculation. "Investors" shall mean CVC and certain other investors. "Issuing Bank Fees" shall have the meaning assigned to such term in Section 2.05(c). "L/C Commitment" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.22. "L/C Disbursement" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit. "L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at any time shall mean its Pro Rata Percentage of the aggregate L/C Exposure at such time. 26 20 "L/C Participation Fee" shall have the meaning assigned to such term in Section 2.05(c). "Lenders" shall mean (a) the financial institutions listed on Schedule 2.01 (other than any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance. "Letter of Credit" shall mean any letter of credit issued pursuant to Section 2.22. "LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of the Telerate Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not so available at such time for any reason, the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits approximately equal in principal amount to the Administrative Agent's portion of such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" shall mean this Agreement, the Letters of Credit, the Guarantee Agreements, the Security Documents and the Indemnity, Subrogation and Contribution Agreement. "Loan Parties" shall mean the Borrower and the Guarantors. "Loans" shall mean the Revolving Loans and the Term Loans. "Management Investors" shall mean the officers, directors and employees of ACP Holdings, ACP Products, Holdings, the Borrower or a Subsidiary of the Borrower who acquire Voting Stock of ACP Holdings, ACP Products, Holdings or the Borrower on or after the Closing Date. "Margin Stock" shall have the meaning assigned to such term in Regulation U. 27 21 "Material Adverse Effect" shall mean (a) a materially adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) material impairment of the ability of the Borrower or any other Loan Party to perform any of its obligations under any Loan Document to which it is or will be a party or (c) material impairment of the rights of or benefits available to the Lenders under any Loan Document. "Merger" shall have the meaning given such term in the preamble. "Merger Agreement" shall mean the Agreement and Plan of Reorganization dated as of November 20, 1996, by and among Holdings, the Borrower and Neenah, as the same may be amended, restated, modified or supplemented from time to time prior to the date hereof or in accordance with Section 6.09(a). "Merger Consideration" shall have the meaning set forth in the Preamble. "Mortgaged Properties" shall mean the owned real properties of the Loan Parties specified on Schedule 3.20(a). "Mortgages" shall mean the mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, modifications and other security documents delivered pursuant to clause (i) of Section 4.02(j) or pursuant to Section 5.11, each substantially in the form of Exhibit E. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the cash proceeds (including cash proceeds subsequently received (as and when received) in respect of non-cash consideration initially received and including all insurance settlements and condemnation awards in any fiscal year of the Borrower in excess of $100,000), net of (i) selling expenses (including reasonable broker's fees or commissions, legal fees, transfer and similar taxes and the Borrower's good faith estimate of income taxes paid or payable in connection with the receipt of such cash proceeds), (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations associated with such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money which is secured by the asset sold in such Asset Sale and which is repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset) and (b) with respect to any Equity Issuance or any other issuance or disposition of Indebtedness, the cash proceeds thereof, net of all taxes and customary fees, commissions, costs and other expenses incurred in connection therewith. "Obligations" shall mean all obligations defined as "Obligations" in the Guarantee Agreements and the Security Documents. 28 22 "Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Parent Guarantee Agreement" shall mean the Parent Guarantee Agreement, substantially in the form of Exhibit F, made by Holdings in favor of the Collateral Agent for the benefit of the Secured Parties. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Perfection Certificate" shall mean the Perfection Certificate substantially in the form of Annex 2 to the Security Agreement. "Permitted Acquisitions" shall mean acquisitions of not less than 100% of the outstanding capital stock of any corporation, a division of any corporation or any similar business unit (or of substantially all the assets and business of any of the foregoing) engaged in a Related Business (each, an "Acquisition") so long as (i) in the case of each such Acquisition of capital stock, such Acquisition was not preceded by an unsolicited tender offer for such capital stock by Holdings or any of its Affiliates and (ii) in the case of all Acquisitions, the aggregate principal amount of the Revolving Loans at any time outstanding used to finance the cash consideration paid in connection with all such Acquisitions, to refinance Indebtedness in connection with all such Acquisitions and to pay related fees and expenses, taken as a whole, does not exceed the excess of (a) $20,000,000 over (b) the aggregate principal amount of outstanding Revolving Loans used to finance Consolidated Capital Expenditures pursuant to Section 6.10(d). "Permitted Holders" shall mean (i) CVC and its Affiliates and Permitted Transferees and (ii) the Management Investors and their Permitted Transferees. "Permitted Investments" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's Ratings Service or from Moody's Investors Service, Inc.; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any 29 23 State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000; (d) other investment instruments approved in writing by the Required Lenders and offered by financial institutions which have a combined capital and surplus and undivided profits of not less than $250,000,000; and (e) shares of funds registered under the Investment Company Act of 1940, as amended, that have assets of at least $100,000,000 and invest only in obligations described in clauses (a) through (d) above, to the extent that such shares are rated by Moody's Investors Service, Inc. or Standard & Poor's Ratings Service in one of the two highest rating categories assigned by such agency for shares of such nature. "Permitted Transferee" shall mean (a) with respect to CVC (i) Citicorp, any direct or indirect wholly owned subsidiary of Citicorp, and any officer, director or employee of CVC, Citicorp or any wholly owned subsidiary of Citicorp, (ii) any spouse or lineal descendant (including by adoption and stepchildren) of the officers, directors and employees referred to in clause (a)(i) above or (iii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of one or more of the persons described in clause (a)(i) or (ii) above and (b) with respect to any officer or employee of ACP Products, ACP Holdings, Holdings, the Borrower or a Subsidiary, (i) any spouse or lineal descendant (including by adoption and stepchildren) of such officer or employee and (ii) any trust, corporation or partnership 100% in interest of the beneficiaries, stockholders or partners of which consists of such officer or employee, any of the persons described in clause (b)(i) above or any combination thereof. "person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" shall mean the Pledge Agreement, substantially in the form of Exhibit G, among the Borrower, Holdings, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties. "Preferred Stock" as applied to the Capital Stock of any corporation, shall mean Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. 30 24 "Pro Rata Percentage" of any Revolving Credit Lender at any time shall mean the percentage of the Total Revolving Credit Commitment represented by such Lender's Revolving Credit Commitment. "Register" shall have the meaning given such term in Section 9.04(d). "Regulation G" shall mean Regulation G of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Related Business" shall mean any business of the Borrower and its Subsidiaries as conducted on the Closing Date and any business related, ancillary or complementary thereto. "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the environment. "Remedial Action" shall mean (a) "remedial action" as such term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat, abate or in any other way address any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health, welfare or the environment; or (iii) perform studies and investigations in connection with, or as a precondition to, (i) or (ii) above. "Required Lenders" shall mean, at any time, Lenders having Loans, L/C Exposure and unused Revolving Credit and Term Loan Commitments representing at least a majority of the sum of all Loans outstanding, L/C Exposure and unused Revolving Credit and Term Loan Commitments at such time. "Responsible Officer" of any corporation shall mean any executive officer or Financial Officer of such corporation and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. "Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving Loans. "Revolving Credit Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Revolving Credit Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to 31 25 Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. "Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender's L/C Exposure. "Revolving Credit Lender" shall mean a Lender with a Revolving Credit Commitment. "Revolving Credit Maturity Date" shall mean the fifth anniversary of the Closing Date. "Revolving Loans" shall mean the revolving loans made by the Lenders to the Borrower pursuant to clause (c) of Section 2.01. Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan. "Secured Parties" shall have the meaning assigned to such term in the Security Agreement. "Security Agreement" shall mean the Security Agreement, substantially in the form of Exhibit H, between the Borrower, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties. "Security Documents" shall mean the Mortgages, the Security Agreement, the Pledge Agreement and each of the security agreements, mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.12. "Senior Subordinated Notes" shall mean the 11.125% Senior Subordinated Notes due 2007 of the Borrower, issued on the Closing Date in an aggregate principal amount of $150,000,000. "Statutory Reserves" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate, or other fronting office making or holding a Loan) is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months, and (b) with respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as defined in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" shall mean, with respect to any person (herein referred to as the "parent"), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary 32 26 voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" shall mean any subsidiary of the Borrower. "Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee Agreement, substantially in the form of Exhibit I, made by the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the Secured Parties. "Subsidiary Guarantor" shall mean each Subsidiary listed on Schedule 1.01(a), and each other Subsidiary that is or becomes a party to a Subsidiary Guarantee Agreement. "Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Tax Sharing Agreement" shall mean the Tax Sharing Agreement, substantially in the form of Exhibit L, among ACP Holdings, Holdings and ACP Holdings' other direct and indirect subsidiaries. "Term Borrowing" shall mean a Borrowing comprised of Tranche A Term Loans or Tranche B Term Loans. "Term Loan Commitments" shall mean the Tranche A Commitments and the Tranche B Commitments. "Term Loan Repayment Dates" shall mean the Tranche A Term Loan Repayment Dates and the Tranche B Term Loan Repayment Dates. "Term Loans" shall mean the Tranche A Term Loans and the Tranche B Term Loans. "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. 33 27 "Total Debt" shall mean, at any date and without duplication, the aggregate amount of all Indebtedness of the Borrower and the Subsidiaries on a consolidated basis at such date (other than any Indebtedness described in clause (i) or (j) of the definition of the term "Indebtedness"). "Total Revolving Credit Commitment" shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time. "Tranche A Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Tranche A Term Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Tranche A Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. "Tranche A Maturity Date" shall mean the fifth anniversary of the Closing Date. "Tranche A Term Borrowing" shall mean a Borrowing comprised of Tranche A Term Loans. "Tranche A Term Loan Repayment Date" shall have the meaning assigned to such term in Section 2.11(a)(i). "Tranche A Term Loans" shall mean the term loans made by the Lenders to the Borrower pursuant to clause (a) of Section 2.01. Each Tranche A Term Loan shall be either a Eurodollar Term Loan or an ABR Term Loan. "Tranche B Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Tranche B Term Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Tranche B Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. "Tranche B Maturity Date" shall mean the seventh anniversary of the Closing Date. "Tranche B Term Borrowing" shall mean a Borrowing comprised of Tranche B Term Loans. "Tranche B Term Loan Repayment Date" shall have the meaning assigned to such term in Section 2.11(a)(ii). "Tranche B Term Loans" shall mean the term loans made by the Lenders to the Borrower pursuant to clause (b) of Section 2.01. Each Tranche B Term Loan shall be either a Eurodollar Term Loan or an ABR Term Loan. "Transactions" shall have the meaning assigned to such term in Section 3.02. 34 28 "Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "Rate" shall include the Adjusted LIBO Rate and the Alternate Base Rate. "Voting Stock" of a corporation shall mean all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "wholly owned Subsidiary" of any person shall mean a subsidiary of such person of which securities (except for directors' qualifying shares) or other ownership interests representing 100% of the equity or 100% of the ordinary voting power or 100% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by such person or one or more wholly owned subsidiaries of such person or by such person and one or more wholly owned subsidiaries of such person. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with the covenants contained in Article VI, except as otherwise provided herein, all accounting terms herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP as in effect on the date of this Agreement and applied on a basis consistent with the application used in the financial statements referred to in Section 3.05(a) (except to the extent that such financial statements accounted for inventory on a last-in-first-out basis). ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, (a) to make a Tranche A Term Loan to the Borrower on the Closing Date in a principal amount not to exceed its Tranche A Commitment, (b) to make a Tranche B Term Loan to the Borrower on the 35 29 Closing Date in a principal amount not to exceed its Tranche B Commitment, and (c) to make Revolving Loans to the Borrower, at any time and from time to time on or after the date hereof, and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Credit Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in (i) such Lender's Revolving Credit Exposure exceeding (ii) the lesser of (x) such Lender's Revolving Credit Commitment and (y) such Lender's Pro Rata Percentage of the Borrowing Base in effect at such time. Within the limits set forth in clause (c) of the preceding sentence and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term Loans may not be reborrowed. SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to Section 2.02(f), the Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $500,000 and not less than $1,000,000 in the case of Eurodollar Loans, (ii) an integral multiple of $100,000 and not less than $500,000 in the case of ABR Loans or (iii) in the case of ABR Loans, equal to the remaining available balance of the applicable Commitments. (b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than seven Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Except with respect to Loans made pursuant to Section 2.02(f), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 11:00 a.m., New York City time, and the Administrative Agent shall by 12:00 (noon), New York City time, credit the amounts so received to an account in the name of the Borrower, maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has 36 30 made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing (in lieu of interest which would otherwise become due to such Lender pursuant to Section 2.06) and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request a Borrowing pursuant to which the Interest Period requested with respect thereto would end after the Revolving Credit Maturity Date. (f) If the Issuing Bank shall not have received from the Borrower the payment required to be made by Section 2.22(e) within the time specified in such Section, the Issuing Bank will promptly notify the Administrative Agent of the L/C Disbursement and the Administrative Agent will promptly notify each Revolving Credit Lender of such L/C Disbursement and its Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit Lender shall have received such notice later than 12:00 (noon), New York City time, on any day, not later than 10:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Lender's Pro Rata Percentage of such L/C Disbursement (it being understood that such amount shall be deemed to constitute an ABR Revolving Loan of such Lender and such payment shall be deemed to have reduced the L/C Exposure), and the Administrative Agent will promptly pay to the Issuing Bank amounts so received by it from the Revolving Credit Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from the Borrower pursuant to Section 2.22(e) prior to the time that any Revolving Credit Lender makes any payment pursuant to this paragraph (f); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made such payments and to the Issuing Bank, as their interests may appear. If any Revolving Credit Lender shall not have made its Pro Rata Percentage of such L/C Disbursement available to the Administrative Agent as provided above, such Lender and the Borrower severally agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this paragraph to but excluding the date such amount is paid, to the Administrative Agent for the account of the Issuing Bank at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable to Revolving Loans pursuant to Section 2.06(a) (in lieu of interest which would otherwise become due to such Lender pursuant to Section 2.06), and (ii) in the case of such 37 31 Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate. SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other than a deemed Borrowing pursuant to Section 2.02(f), as to which this Section 2.03 shall not apply), the Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Borrowing Request (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the Business Day of a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall be signed by or on behalf of the Borrower and shall specify the following information: (i) whether the Borrowing then being requested is to be a Term Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day), (iii) the number and location of the account to which funds are to be disbursed (which shall be an account that complies with the requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.03 (and the contents thereof), and of each Lender's portion of the requested Borrowing. SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the principal amount of each Term Loan of such Lender as provided in Section 2.11 and the then unpaid principal amount of each Revolving Loan on the Revolving Credit Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms. 38 32 (e) Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive a promissory note payable to such Lender and its registered assigns, the interests represented by such note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns. SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the Closing Date and on the last day of March, June, September and December in each year and on each date on which any Commitment of such Lender shall expire or be terminated as provided herein, a commitment fee (a "Commitment Fee") equal to the Applicable Percentage set forth under the heading "Fee Percentage" in the definition of the term "Applicable Percentage" per annum in effect from time to time on the average daily unused amount of the Commitments of such Lender during the preceding quarter (or other period commencing with the date of acceptance by the Borrower of the Commitment of such Lender or ending with the Revolving Credit Maturity Date or the date on which the Commitments of such Lender shall expire or be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fee due to each Lender shall commence to accrue on the date of acceptance by the Borrower of the Commitment of such Lender and shall cease to accrue on the date on which the Commitment of such Lender shall expire or be terminated as provided herein. For purposes of this Section 2.05, the unused amount of any Lender's Revolving Credit Commitment on any date shall equal such Lender's Revolving Credit Commitment on such date minus such Lender's outstanding Revolving Loans and L/C Exposure on such date. (b) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Fee Letter at the times and in the amounts specified therein (the "Administrative Agent Fees"). (c) The Borrower agrees to pay (i) to each Revolving Credit Lender, through the Administrative Agent, on the last day of March, June, September and December of each year and on the date on which the Revolving Credit Commitment of such Lender shall be terminated as provided herein, a fee (an "L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of the average daily aggregate L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which all Letters of Credit have been canceled or have expired and the Revolving Credit Commitments of all Lenders shall have been terminated) at a rate equal to the Applicable Percentage from time to time used to determine the interest rate on Revolving Credit Borrowings comprised of Eurodollar Loans pursuant to Section 2.06, and (ii) to the Issuing Bank with respect to each Letter of Credit the standard fronting, issuance and drawing fees specified from time to time by the Issuing Bank (the "Issuing Bank Fees"). All L/C Participation Fees and Issuing Bank Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the 39 33 Issuing Bank Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage in effect from time to time. (b) Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage in effect from time to time. (c) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.07. Default Interest. If the Borrower shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, by acceleration or otherwise, or under any other Loan Document, the Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount to but excluding the date of actual payment (after as well as before judgment) (a) in the case of overdue principal, at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) equal to the sum of the Alternate Base Rate plus 2.00%. SECTION 2.08. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined in good faith that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to any Lender of making or maintaining its Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, but, in any event, prior to the commencement of any Interest Period, give written or telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent hereunder shall be conclusive absent manifest error. 40 34 SECTION 2.09. Termination and Reduction of Commitments. (a) The Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City time, on the Closing Date. The Revolving Credit Commitments and the L/C Commitment shall automatically terminate on the Revolving Credit Maturity Date. Notwithstanding the foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New York City time, on April 30, 1997, if the initial Credit Event shall not have occurred by such time. (b) Upon at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, in each case, without premium or penalty, the Term Loan Commitments or the Revolving Credit Commitments; provided, however, that (i) each partial reduction of the Term Loan Commitments or the Revolving Credit Commitments shall be in an integral multiple of $500,000 and in a minimum amount of $1,000,000 and (ii) the Total Revolving Credit Commitment shall not be reduced to an amount that is less than the Aggregate Revolving Credit Exposure at the time. (c) Each reduction in the Term Loan Commitments or the Revolving Credit Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the unpaid Commitment Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction. SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 11:00 a.m., New York City time, on the Business Day of conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 10:00 a.m., New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 10:00 a.m., New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following: (i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing; (ii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type; (iii) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued and unpaid interest on any 41 35 Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion; (iv) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16; (v) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing; (vi) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; (vii) no Interest Period may be selected for any Eurodollar Term Borrowing that would end later than a Term Loan Repayment Date occurring on or after the first day of such Interest Period if, after giving effect to such selection, the aggregate outstanding amount of the sum of (A) the Eurodollar Term Borrowings with Interest Periods ending on or prior to such Term Loan Repayment Date and (B) the ABR Term Borrowings would not be at least equal to the principal amount of Term Borrowings to be paid on such Term Loan Repayment Date; and (viii) upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the continuance of a Default or Event of Default, no outstanding Loan may be converted into, or continued as, a Eurodollar Loan. Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.10 and of each Lender's portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.10 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into a new Interest Period as an ABR Borrowing. SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Borrower shall pay to the Administrative Agent, for the account of the Lenders, on each March 31, June 30, September 30 42 36 and December 31 and on the Tranche A Maturity Date, or if any such date is not a Business Day, on the next succeeding Business Day (each such date being a "Tranche A Term Loan Repayment Date"), commencing September 30, 1997, a principal amount of the Tranche A Term Loans (as adjusted from time to time pursuant to Sections 2.11(b), 2.12 and 2.13(h)) equal to $1,000,000, together in each case with accrued and unpaid interest on the principal amount thereof to be paid to but excluding the date of such payment. (ii) The Borrower shall pay to the Administrative Agent, for the account of the Lenders, on each March 31, June 30, September 30 and December 31 and on the Tranche B Maturity Date or, if any such date is not a Business Day, on the next succeeding Business Day (each such date being a "Tranche B Term Loan Repayment Date"), commencing September 30, 1997, a principal amount of the Tranche B Term Loans (as adjusted from time to time pursuant to Sections 2.11(b), 2.12 and 2.13(h)) equal to (A) $250,000 on each Tranche B Term Loan Repayment Date on or prior to June 30, 2002 and (B) $2,500,000 on each Tranche B Term Loan Repayment Date thereafter, together in each case with accrued and unpaid interest on the principal amount thereof to be paid to but excluding the date of such payment. (b) In the event and on each occasion that any Term Loan Commitments shall be reduced or shall expire or terminate other than as a result of the making of a Term Loan, the installments payable on each Term Loan Repayment Date shall be reduced pro rata by an aggregate amount equal to the amount of such reduction, expiration or termination. (c) To the extent not previously paid, all Tranche A Term Loans and Tranche B Term Loans shall be due and payable on the Tranche A Maturity Date and Tranche B Maturity Date, respectively, together with accrued and unpaid interest on the principal amount to be paid to but excluding the date of payment. (d) All repayments pursuant to this Section 2.11 shall be subject to Section 2.16, but shall otherwise be without premium or penalty. SECTION 2.12. Optional Prepayment. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) in the case of Eurodollar Loans, or prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) on or prior to the date of prepayment in the case of ABR Loans, to the Administrative Agent before 11:00 a.m., New York City time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000. (b) Optional prepayments of Term Loans shall be allocated pro rata between the then-outstanding Tranche A Term Loans and Tranche B Term Loans and applied pro rata against the remaining scheduled installments of principal due in respect of the Tranche A Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and (ii), respectively. (c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the 43 37 Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.16 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued but unpaid interest on the principal amount being prepaid to the date of payment. SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination of all the Revolving Credit Commitments, the Borrower shall repay or prepay all its outstanding Revolving Credit Borrowings on the date of such termination. In the event of any partial reduction of the Revolving Credit Commitments, then (i) at or prior to the effective date of such reduction, the Administrative Agent shall notify the Borrower and the Revolving Credit Lenders of the Aggregate Revolving Credit Exposure after giving effect thereto and (ii) if the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment after giving effect to such reduction or termination, then the Borrower shall, on the date of such reduction or termination, repay or prepay Revolving Credit Borrowings in an amount sufficient to eliminate such excess. (b) If on any date the Aggregate Revolving Credit Exposure shall exceed the Borrowing Base in effect at such time, the Borrower shall on such date apply an amount equal to such excess first, to prepay the then outstanding Revolving Loans (if any) and second, to the extent of any remaining excess (after the prepayment of Revolving Loans), to replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Collateral Agent for the benefit of the Secured Parties. (c) Not later than the third Business Day following the completion of any Asset Sale, the Borrower shall apply 100% of the Net Cash Proceeds received with respect thereto to prepay outstanding Term Loans in accordance with Section 2.13(h). (d) In the event and on each occasion that an Equity Issuance occurs, the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the occurrence of such Equity Issuance, apply 100% of the Net Cash Proceeds therefrom to prepay outstanding Term Loans in accordance with Section 2.13(h). (e) No later than the earlier of (i) 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending on March 31, 1998, and (ii) the date on which the financial statements with respect to such period are delivered pursuant to Section 5.04(a), the Borrower shall prepay outstanding Term Loans in accordance with Section 2.13(h) in an aggregate principal amount equal to 50% of Excess Cash Flow for the fiscal year then ended. (f) In the event that any Loan Party or any subsidiary of a Loan Party shall receive Net Cash Proceeds from the issuance or other disposition of Indebtedness for money borrowed of any Loan Party or any subsidiary of a Loan Party (other than Indebtedness for money borrowed permitted pursuant to Section 6.01), the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the receipt of such Net Cash Proceeds by such Loan Party or such subsidiary, apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Term Loans in accordance with Section 2.13(h). 44 38 (g) In the event that there shall occur any Casualty or Condemnation and, pursuant to the applicable Mortgage, the Casualty Proceeds or Condemnation Proceeds, as the case may be, are required to be used to prepay the Term Loans, then the Borrower shall apply an amount equal to 100% of such Casualty Proceeds or Condemnation Proceeds, as the case may be, to prepay outstanding Term Loans in accordance with Section 2.13(h). (h) Mandatory prepayments of outstanding Term Loans under this Agreement shall be allocated pro rata between the then-outstanding Tranche A Term Loans and Tranche B Term Loans, and, subject to paragraph (k) below, applied pro rata against the remaining scheduled installments of principal due in respect of Tranche A Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and (ii), respectively. (i) The Borrower shall deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.13, (i) a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (ii) to the extent practicable, at least three days prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid. All prepayments of Borrowings under this Section 2.13 shall be subject to Section 2.16, but shall otherwise be without premium or penalty. (j) Amounts to be applied pursuant to this Section 2.13 to the prepayment of Term Loans and Revolving Loans shall be applied, as applicable, first to reduce outstanding ABR Term Loans and ABR Revolving Loans. Any amounts remaining after each such application shall, at the option of the Borrower, be applied to prepay Eurodollar Term Loans or Eurodollar Revolving Loans, as the case may be, immediately and/or shall be deposited in the Prepayment Account (as defined below). The Administrative Agent shall apply any cash deposited in the Prepayment Account (i) allocable to Term Loans to prepay Eurodollar Term Loans and (ii) allocable to Revolving Loans to prepay Eurodollar Revolving Loans, in each case on the last day of their respective Interest Periods (or, at the direction of the Borrower, on any earlier date) until all outstanding Term Loans or Revolving Loans, as the case may be, have been prepaid or until all the allocable cash on deposit with respect to such Loans has been exhausted. For purposes of this Agreement, the term "Prepayment Account" shall mean an account established by the Borrower with the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal for application in accordance with this paragraph (j). The Administrative Agent will, at the request of the Borrower, invest amounts on deposit in the Prepayment Account in Permitted Investments that mature prior to the last day of the applicable Interest Periods of the Eurodollar Term Borrowings or Euro dollar Revolving Borrowings to be prepaid, as the case may be; provided, however, that (i) the Administrative Agent shall not be required to make any investment that, in its sole judgment, would require or cause the Administrative Agent to be in, or would result in any, violation of any law, statute, rule or regulation and (ii) the Administrative Agent shall have no obligation to invest amounts on deposit in the Prepayment Account if an Event of Default shall have occurred and be continuing. The Borrower shall indemnify the Administrative Agent for any losses relating to the investments so that the amount available to prepay Eurodollar Borrowings on the last day of the applicable Interest Period is not less than the amount that would have been available had no investments been made pursuant thereto. Other than any interest earned on such investments, the Prepayment Account shall not bear interest. 45 39 Interest or profits, if any, on such investments shall be deposited in the Prepayment Account and reinvested and disbursed as specified above. If the maturity of the Loans has been accelerated pursuant to Article VII, the Administrative Agent may, in its sole discretion, apply all amounts on deposit in the Prepayment Account to satisfy any of the Obligations. The Borrower hereby grants to the Administrative Agent, for its benefit and the benefit of the Issuing Bank and the Lenders, a security interest in the Prepayment Account to secure the Obligations. (k) Any Tranche B Lender may elect, by notice to the Administrative Agent in writing (or by telephone or telecopy promptly confirmed in writing) at least one Business Day prior to any prepayment of Tranche B Term Loans required to be made by the Borrower for the account of such Lender pursuant to Section 2.13(c), (d), (e), (f) or (g), to cause all or a portion of such prepayment to be applied instead to prepay Tranche A Term Loans in accordance with paragraph (h) above. SECTION 2.14. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Lender or the Issuing Bank of the principal of or interest on any Eurodollar Loan made by such Lender or any Fees or other amounts payable hereunder (other than changes in respect of taxes imposed on the overall net income of such Lender or the Issuing Bank by the jurisdiction in which such Lender or the Issuing Bank has its principal office or lending office or by any political subdivision or taxing authority therein), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender or the Issuing Bank (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender or the Issuing Bank of making or maintaining any Eurodollar Loan or increase the cost to any Lender of issuing or maintaining any Letter of Credit or purchasing or maintaining a participation therein or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise) by an amount reasonably deemed by such Lender or the Issuing Bank to be material, then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon demand such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank shall have determined that the adoption after the date hereof of any law, rule, regulation, agreement or guideline regarding capital adequacy, or any change after the date hereof in any such law, rule, regulation, agreement or guideline (whether such law, rule, regulation, agreement or guideline has been adopted) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or the Issuing Bank or any Lender's or the Issuing Bank's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any Governmental 46 40 Authority has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made or participations in Letters of Credit purchased by such Lender pursuant hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy) by an amount reasonably deemed by such Lender or the Issuing Bank to be material, then from time to time the Borrower shall pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts reasonably determined by such Lender or Issuing Bank to be necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation. The protection of this Section shall be available to each Lender and the Issuing Bank regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, agreement, guideline or other change or condition that shall have occurred or been imposed. SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision of this Agreement, if, after the date hereof, any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent: (i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans), whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and 47 41 (ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.15, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower. SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events referred to in this clause (a) being called a "Breakage Event") or (b) any default in the making of any payment or prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error. SECTION 2.17. Pro Rata Treatment. Except as required under Sections 2.13(j), 2.14, 2.15 or 2.20, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Commitment Fees, each reduction of the Term Loan Commitments or the Revolving Credit Commitments and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans). Each Lender agrees that in computing such Lender's portion 48 42 of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing to the next higher or lower whole dollar amount. SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result of which the unpaid principal portion of its Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or participations in L/C Disbursements shall be proportionately less than the unpaid principal portion of the Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or participations in L/C Disbursements of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or L/C Exposure, as the case may be of such other Lender, so that the aggregate unpaid principal amount of the Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and L/C Exposure and participations in Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and L/C Exposure held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and L/C Exposure then outstanding as the principal amount of its Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and L/C Exposure prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and L/C Exposure outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower and Holdings expressly consent to the foregoing arrangements and agree that any Lender holding a participation in a Term Loan, Revolving Loan or L/C Disbursement deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower and Holdings to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation. SECTION 2.19. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder and under any other Loan Document not later than 1:00 p.m., New York City time, on the date when due in immediately available dollars, without setoff, defense or counterclaim. Each such payment (other than Issuing Bank Fees, which shall be paid directly to the Issuing Bank) shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York by wire transfer. (b) Whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the 49 43 next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.20. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that, if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the Code and the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any additional amount to any 50 44 Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank pursuant to Section 2.20, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender or the Issuing Bank and the Administrative Agent, require such Lender or the Issuing Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, of the Issuing Bank), which consent shall not unreasonably be withheld, and (z) the Borrower or such assignee shall have paid to the affected Lender or the Issuing Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans or L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all Fees and other amounts accrued for the account of such Lender or the Issuing Bank hereunder (including any amounts under Section 2.14 and Section 2.16); provided further that, if prior to any such transfer and assignment the circumstances or event that resulted in such Lender's or the Issuing Bank's claim for compensation under Section 2.14 or notice under Section 2.15 or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause such Lender or the Issuing Bank to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.15, or cease to result in amounts being payable under Section 2.20, as the case may be (including as a result of any action taken by such Lender or the Issuing Bank pursuant to paragraph (b) below), or if such Lender or the Issuing Bank shall waive its right to claim further compensation under Section 2.14 in respect of such circumstances or event or shall withdraw its notice under Section 2.15 or shall waive its right to further payments under Section 2.20 in respect of such circumstances or event, as the case may be, then such Lender or the Issuing Bank shall not thereafter be required to make any such transfer and assignment hereunder. (b) If (i) any Lender or the Issuing Bank shall request compensation under Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank, pursuant to Section 2.20, then such Lender or the Issuing Bank shall use reasonable efforts (which shall not require such Lender or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would reduce amounts payable pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the Issuing Bank in connection with any such filing or assignment, delegation and transfer. 51 45 SECTION 2.22. Letters of Credit. (a) General. The Borrower may request the issuance of a Letter of Credit for its own account or the account of any Subsidiary Guarantor, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time while the Revolving Credit Commitments remain in effect. This Section shall not be construed to impose an obligation upon the Issuing Bank to issue any Letter of Credit that is inconsistent with the terms and conditions of this Agreement. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrower shall hand deliver or telecopy to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not exceed $15,000,000 and (B) the Aggregate Revolving Credit Exposure shall not exceed the lesser of (x) the Total Revolving Credit Commitment and (y) the Borrowing Base in effect at such time. (c) Expiration Date. Each Letter of Credit shall expire at the close of business on the earlier of the date one year after the date of the issuance of such Letter of Credit and the date that is five Business Days prior to the Revolving Credit Maturity Date, unless such Letter of Credit expires by its terms on an earlier date. (d) Participations. By the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Credit Lender, and each such Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not reimbursed by the Borrower (or, if applicable, another party pursuant to its obligations under any other Loan Document) forthwith on the date due as provided in Section 2.02(f). Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall pay or cause to be paid to the Administrative Agent an 52 46 amount equal to such L/C Disbursement not later than 2:00 p.m. on the Business Day the Borrower shall have received notice from the Issuing Bank that payment of such draft will be made, or, if the Borrower shall have received such notice later than 10:00 a.m., New York City time, on any Business Day, not later than 10:00 a.m., New York City time, on the immediately following Business Day. (f) Obligations Absolute. The Borrower's obligations to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document; (iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower's obligations hereunder. Without limiting the generality of the foregoing, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrower hereunder to reimburse L/C Disbursements will not be excused by the gross negligence or wilful misconduct of the Issuing Bank. However, the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's gross negligence or wilful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof; it is understood that the Issuing Bank may accept documents that 53 47 appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit (i) the Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute wilful misconduct or gross negligence of the Issuing Bank. (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall as promptly as possible give telephonic notification, confirmed by telecopy, to the Administrative Agent and the Borrower of such demand for payment and whether the Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Credit Lenders with respect to any such L/C Disbursement. The Administrative Agent shall promptly give each Revolving Credit Lender notice thereof. (h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of the Issuing Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment by the Borrower or the date on which interest shall commence to accrue thereon as provided in Section 2.02(f), at the rate per annum that would apply to such amount if such amount were an ABR Loan. (i) Resignation or Removal of the Issuing Bank. The Issuing Bank may resign at any time by giving 180 days' prior written notice to the Administrative Agent, the Lenders and the Borrower, and may be removed at any time by the Borrower by notice to the Issuing Bank, the Administrative Agent and the Lenders. Subject to the next succeeding paragraph, upon the acceptance of any appointment as the Issuing Bank hereunder by a Lender that shall agree to serve as successor Issuing Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Bank and the retiring Issuing Bank shall be discharged from its obligations to issue additional Letters of Credit hereunder, without affecting its rights and obligations with respect to Letters of Credit previously issued by it. At the time such removal or resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment as the Issuing Bank hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Lender shall have all the rights and obligations of the previous Issuing Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term "Issuing Bank" shall be deemed to refer to 54 48 such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation or removal of the Issuing Bank hereunder, the retiring Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, the Borrower shall, on the Business Day it receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit) thereof and of the amount to be deposited, deposit in an account with the Collateral Agent, for the benefit of the Revolving Credit Lenders, an amount in cash equal to the L/C Exposure as of such date. Such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits in Permitted Investments, which investments shall be made at the option and sole discretion of the Collateral Agent, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Administrative Agent to reimburse the Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be held for the satisfaction of the reimbursement obligations of the Borrower for the L/C Exposure at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit), be applied to satisfy the Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. ARTICLE III Representations and Warranties Each of Holdings and the Borrower represents and warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders that: SECTION 3.01. Organization; Powers. Each of Holdings, the Borrower and each of the Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the corporate power and authority to execute, 55 49 deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated hereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder. SECTION 3.02. Authorization. The execution, delivery and performance by each Loan Party of each of the Loan Documents and the borrowings hereunder and the consummation of the Merger, the financing therefor, the payment by the Borrower to former shareholders of Neenah of an aggregate amount not exceeding $11,400,000 and the other transactions contemplated hereby and by the Merger Agreement (collectively, the "Transactions") (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of Holdings, the Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any material indenture, agreement or other instrument to which Holdings, the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by Holdings, the Borrower or any Subsidiary (other than any Lien created hereunder or under the Security Documents). SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by Holdings and the Borrower and constitutes, and each other Loan Document when executed and delivered by the each Loan party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and equitable principles of general applicability (regardless of whether such enforceability is considered in a proceeding at law or in equity). SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office, (b) recordation of the Mortgages and (c) such as have been made or obtained and are in full force and effect. SECTION 3.05. Financial Statements. (a) The Borrower has heretofore furnished to the Lenders the consolidated balance sheets and statements of income and cash flows of Neenah (i) as of and for the fiscal year ended March 31, 1996, audited by and accompanied by the opinion of Ernst & Young LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended December 31, 1996, certified by its chief financial officer. Such financial statements present fairly the financial condition and results of operations and cash flows of Neenah and its consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of Neenah 56 50 and its consolidated Subsidiaries as of the dates thereof. Such financial statements were prepared in accordance with GAAP applied on a consistent basis. (b) The Borrower has heretofore delivered to the Lenders its unaudited pro forma consolidated balance sheet and statements of income and changes in financial condition as of March 31, 1997, prepared giving effect to the Transactions as if they had occurred on such date. Such pro forma balance sheet and other financial statements have been prepared in good faith by the Borrower, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Borrower on the date hereof and on the Closing Date to be reasonable), is based on the best information available to the Borrower as of the date of delivery thereof, accurately reflects all adjustments required to be made to give effect to the Transactions and presents fairly on a pro forma basis the estimated consolidated financial position of the Borrower and its consolidated Subsidiaries as of such date, assuming that the Transactions had actually occurred at such date. SECTION 3.06. No Material Adverse Change. There has been no material adverse change in the business, assets, operations, prospects, condition, financial or otherwise, or material agreements of the Borrower and the Subsidiaries, taken as a whole, since March 31, 1996. SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of Holdings, the Borrower and the Subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and assets (including all Mortgaged Property), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02. (b) Each of Holdings, the Borrower and the Subsidiaries has complied with all obligations under all material leases to which it is a party and all such leases are in full force and effect. Each of Holdings, the Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under all such material leases. (c) Neither Holdings nor the Borrower has received any notice of, nor has any knowledge of, any pending or contemplated condemnation proceeding materially and adversely affecting the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation. (d) Except as set forth on Schedule 3.07(d), none of Holdings, the Borrower or any of the Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein. SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing Date a list of all Subsidiaries and the percentage ownership interest of the Borrower therein. The shares of capital stock or other ownership interests so indicated on Schedule 3.08 are fully paid and non-assessable and are owned by the Borrower, directly or indirectly, free and clear of all Liens (other than Liens in favor of the Collateral Agent, created under the Security Documents). Holdings owns 100% of the issued and outstanding capital stock of the Borrower, free and clear of all Liens (other than Liens in favor of the Collateral Agent, created under the Security Documents). 57 51 SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.09, there are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of Holdings or the Borrower, threatened against or affecting Holdings or the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) None of Holdings, the Borrower or any of the Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect. (c) Except as set forth on Schedule 3.09(c), certificates of occupancy and permits to the extent required by law are in effect for each Mortgaged Property as currently constructed, and true and complete copies of such certificates of occupancy have been delivered to the Collateral Agent as mortgagee with respect to each Mortgaged Property. SECTION 3.10. Agreements. (a) Except as set forth on Schedule 3.10, none of Holdings, the Borrower or any of the Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. (b) None of Holdings, the Borrower or any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.11. Federal Reserve Regulations. (a) None of Holdings, the Borrower or any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation G, U or X. SECTION 3.12. Investment Company Act; Public Utility Holding Company Act. None of Holdings, the Borrower or any Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. 58 52 SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans and will request the issuance of Letters of Credit only for the purposes specified in the preamble to this Agreement. SECTION 3.14. Tax Returns. Each of the Holdings, the Borrower and the Subsidiaries has filed or caused to be filed all Federal, material state, material local and material foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all taxes shown on such returns to be due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves. SECTION 3.15. No Material Misstatements. None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of Holdings or the Borrower to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, each of Holdings and the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. SECTION 3.16. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under all Plans in the aggregate (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $2,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $4,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17: (a) The properties owned or operated by Holdings, the Borrower and the Subsidiaries (the "Properties") do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted a violation of, (ii) require Remedial Action under, or (iii) could give rise to liability under, Environmental Laws, which violations, Remedial Actions and liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (b) The Properties and all operations of the Borrower and the Subsidiaries are in compliance, and in the last seven years have been in compliance, with all Environmental Laws and all necessary Environmental Permits have been obtained and are in effect, except to the extent that 59 53 such non-compliance or failure to obtain any necessary permits, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; (c) There have been no Releases or threatened Releases at, from, under or proximate to the Properties or otherwise in connection with the operations of the Borrower or the Subsidiaries, which Releases or threatened Releases, in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (d) None of Holdings, the Borrower or any of the Subsidiaries has received any notice of an Environmental Claim in connection with the Properties or the operations of the Borrower or the Subsidiaries or with regard to any person whose liabilities for environmental matters Holdings, the Borrower or the Subsidiaries has retained or assumed, in whole or in part, contractually, by operation of law or otherwise, which, in the aggregate, could reasonably be expected to result in a Material Adverse Effect, nor do Holdings, the Borrower or the Subsidiaries have reason to believe that any such notice will be received or is being threatened; and (e) Hazardous Materials have not been transported from the Properties, nor have Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Properties in a manner that could reasonably be expected to give rise to liability under any Environmental Law, nor have the Borrower or the Subsidiaries retained or assumed any liability, contractually, by operation of law or otherwise, with respect to the generation, treatment, storage or disposal of Hazardous Materials, which transportation, generation, treatment, storage or disposal, or retained or assumed liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect. SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct description of all insurance maintained by the Borrower or by the Borrower for its Subsidiaries as of the date hereof and the Closing Date. As of each such date, such insurance is in full force and effect and all premiums have been duly paid. The Borrower and its Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice. SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement) and, when the Collateral is delivered to the Collateral Agent and for so long as the Collateral Agent continues to hold such Collateral, the Pledge Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the pledgors thereunder in such Collateral, in each case prior and superior in right to any other person. (b) The Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than the Intellectual Property, as 60 54 defined in the Security Agreement), in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02. (c) When the Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in the Intellectual Property (as defined in the Security Agreement), in each case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the grantors after the date hereof). (d) The Mortgages are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties' right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.19(d), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02. SECTION 3.20. Location of Real Property and Leased Premises. (a) Schedule 3.20(a) lists completely and correctly as of the Closing Date all real property owned by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries own in fee all the real property set forth on Schedule 3.20(a). (b) Schedule 3.20(b) lists completely and correctly as of the Closing Date all real property leased by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and such Subsidiaries have valid leasehold interests in all the real property set forth on Schedule 3.20(b) SECTION 3.21. Labor Matters. As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary pending or, to the knowledge of Holdings or the Borrower, threatened. The hours worked by and payments made to employees of Holdings, the Borrower and the Subsidiaries have not been in material violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters. All payments due from Holdings, the Borrower or any Subsidiary, or for which any claim may be made against Holdings, the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Holdings, the Borrower or such Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Borrower or any Subsidiary is bound. SECTION 3.22. Solvency. (a) Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan made on the Closing Date and after giving effect to the application of the proceeds of such Loans, (i) the fair 61 55 value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date. ARTICLE IV Conditions of Lending The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions: SECTION 4.01. All Credit Events. On the date of each Borrowing, including on the date of each issuance of a Letter of Credit (each such event being called a "Credit Event"): (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.03) or, in the case of the issuance of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance of such Letter of Credit as required by Section 2.22(b). (b) Except in the case of a Borrowing that does not increase the aggregate principal amount of Loans outstanding of any Lender, the representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) No Event of Default or Default shall have occurred and be continuing. Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower and Holdings on the date of such Credit Event as to the matters specified in paragraphs (b) (except as aforesaid) and (c) of this Section 4.01. SECTION 4.02. First Credit Event. On the Closing Date: (a) The Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Bank, a favorable written opinion of (i) Kirkland & Ellis, counsel for Holdings and the Borrower, substantially to the effect set forth in Exhibit J-1, and (ii) each local counsel listed on Schedule 4.02(a), substantially to the effect set forth in Exhibit J-2, 62 56 in each case (A) dated the Closing Date, (B) addressed to the Issuing Bank, the Administrative Agent and the Lenders, and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request, and Holdings and the Borrower hereby request such counsel to deliver such opinions. (b) All legal matters incident to this Agreement, the Borrowings and extensions of credit hereunder and the other Loan Documents shall be satisfactory to the Lenders, to the Issuing Bank and to Cravath, Swaine & Moore, counsel for the Administrative Agent. (c) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State (or, in lieu of such certificate as to good standing for each Loan Party incorporated in the State of Wisconsin, a certificate of status from the Wisconsin Department of Financial Institutions as to such Loan Party's existence); (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (ii) above; and (iv) such other documents as the Lenders, the Issuing Bank or Cravath, Swaine & Moore, counsel for the Administrative Agent, may reasonably request. (d) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01. (e) The Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document. (f) The Pledge Agreement shall have been duly executed by the parties thereto and delivered to the Collateral Agent and shall be in full force and effect, and all the 63 57 outstanding Capital Stock of the Borrower and the Subsidiaries shall have been duly and validly pledged thereunder to the Collateral Agent for the ratable benefit of the Secured Parties and certificates representing such shares, accompanied by instruments of transfer and stock powers endorsed in blank, shall be in the actual possession of the Collateral Agent; provided that, to the extent to do so would cause adverse tax consequence to the Borrower, (i) neither the Borrower nor any Domestic Subsidiary shall be required to pledge more than 65% of the capital stock of any Foreign Subsidiary and (ii) no Foreign Subsidiary shall be required to pledge the capital stock of any of its Foreign Subsidiaries. (g) The Security Agreement shall have been duly executed by the Loan Parties party thereto and shall have been delivered to the Collateral Agent and shall be in full force and effect on such date and each document (including each Uniform Commercial Code financing statement) required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Collateral Agent for the benefit of the Secured Parties a valid, legal and perfected first-priority security interest in and lien on the Collateral (subject to any Lien expressly permitted by Section 6.02) described in such agreement shall have been delivered to the Collateral Agent. (h) The Collateral Agent shall have received the results of a search of the Uniform Commercial Code (or equivalent filings) filings made with respect to the Loan Parties in the states (or other jurisdictions) in which the chief executive office of each such person is located, any offices of such persons in which records have been kept relating to Accounts and the other jurisdictions in which Uniform Commercial Code filings (or equivalent filings) are to be made pursuant to the preceding paragraph, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.02 or have been released. (i) The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the Closing Date and duly executed by a Responsible Officer of the Borrower. (j) Each of the Security Documents, in form and substance satisfactory to the Lenders, relating to each of the Mortgaged Properties shall have been duly executed by the parties thereto and delivered to the Collateral Agent and shall be in full force and effect, (ii) each of such Mortgaged Properties shall not be subject to any Lien other than those permitted under Section 6.02, (iii) each of such Security Documents shall have been filed and recorded in the recording office as specified on Schedule 3.19(d) (or a lender's marked and redated title commitment for title insurance, in form and substance acceptable to the Collateral Agent, insuring such Security Document as a first lien on such Mortgaged Property (subject to any Lien permitted by Section 6.02) shall have been received by the Collateral Agent) and, in connection therewith, the Collateral Agent shall have received evidence satisfactory to it of the title company's agreement to record or file such Security Documents, as applicable, and (iv) the Collateral Agent shall have received such other 64 58 documents, including a policy or policies of title insurance issued by a nationally recognized title insurance company, together with such endorsements, coinsurance and reinsurance as may be requested by the Collateral Agent and the Lenders, insuring the Mortgages as valid first liens on the Mortgaged Properties, free of Liens other than those permitted under Section 6.02, together with such surveys, abstracts, appraisals and legal opinions required to be furnished pursuant to the terms of the Mortgages or as reasonably requested by the Collateral Agent or the Lenders. (k) Each of the Parent Guarantee Agreement, the Subsidiary Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement and the Tax Sharing Agreement shall have been duly executed by the parties thereto, shall have been delivered to the Collateral Agent and shall be in full force and effect. (l) The Administrative Agent shall have received a Borrowing Base Certificate dated the Closing Date and executed by a Financial Officer of the Borrower. (m) The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.02 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement and to name the Collateral Agent as additional insured, in form and substance satisfactory to the Administrative Agent. (n) The Lenders shall be reasonably satisfied as to the amount and nature of any environmental and employee health and safety exposures to which the Borrower and the Subsidiaries may be subject and the plans of the Borrower with respect thereto, after giving effect to the Transactions and the consummation of the other transactions contemplated hereby. (o) The Lenders shall have received (i) appraisals, satisfactory in form and substance to the Lenders, from MB Valuation Services, Inc. or another firm acceptable to the Lenders, of the real property, personal property and other assets of the Borrower, and (ii) an audit, reasonably satisfactory in form and substance to the Lenders, of the Accounts and inventory of the Borrower and the Subsidiaries, in each case after giving effect to the Transactions and the consummation of the other transactions contemplated hereby. (p) The Administrative Agent shall have received an environmental assessment report in form, scope and substance reasonably satisfactory to the Lenders, from Strata Environmental, as to any environmental hazards, liabilities or Remedial Action to which the Borrower or any of the Subsidiaries may be subject and the Lenders shall be reasonably satisfied with the nature and cost of any such hazards, liabilities or Remedial Action and with the Borrower's plans with respect thereto. (q) The Equity Contribution shall have been made or shall be made simultaneously with the making of the initial Credit Event, and the Administrative Agent 65 59 shall be satisfied with the portion of the Equity Contribution contributed by each of the Investors. (r) The Borrower shall have received gross proceeds from the issuance of the Senior Subordinated Notes in the aggregate amount of not less than $150,000,000, and the terms and conditions of the Senior Subordinated Notes (including, without limitation, the interest rate, maturity, covenants, subordination provisions and events of default) shall be satisfactory in all respects to the Lenders. (s) (i) The Merger shall have been consummated, or shall be consummated simultaneously with the initial Credit Event, in accordance with applicable law and the Merger Agreement, without giving effect to any material waiver or amendment of the Merger Agreement not approved in writing by the Lenders, and (ii) the Lenders shall (A) be reasonably satisfied with the capitalization, structure and equity ownership of the Borrower and its Subsidiaries and (B) be reasonably satisfied that the aggregate level of fees and expenses to be paid in connection with the Merger, the financing therefor and the other transactions contemplated hereby shall not exceed $10,000,000. (t) (i) After giving effect to the Merger and the other transactions contemplated hereby, the Borrower and its Subsidiaries shall have outstanding no Indebtedness or preferred stock other than (A) the extensions of credit under this Agreement, (B) the Senior Subordinated Notes and (C) the Indebtedness listed on Schedule 6.01 and (ii) the Administrative Agent shall have received evidence satisfactory to it that all Indebtedness pursuant to (A) the Credit Agreement dated as of December 31, 1994, as amended, between Bank One, Milwaukee, N.A. and Neenah, Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. shall have been repaid in full, any commitments thereunder shall have been terminated and all Liens with respect thereto shall have been released, (B) the outstanding letters of credit in an aggregate amount of $1,000,000 to secure worker's compensation and other obligations shall have been replaced with Letters of Credit and (C) the outstanding standby letter of credit dated October 1, 1995 issued by Bank One Appleton, NA for the benefit of ANR Pipeline and/or affiliated companies and/or subsidiaries and shall have been replaced with Letters of Credit. (u) The Lenders shall have received the pro forma consolidated financial statements described in Section 3.05(b), which shall be reasonably satisfactory to the Lenders and shall not be materially inconsistent with the forecasts previously provided to the Lenders. (v) The Lenders shall have received a solvency letter from Gordian Group, L.P. in form and substance reasonably satisfactory to the Lenders, as to the solvency of the Borrower and its Subsidiaries on a consolidated basis after giving effect to the Merger, the initial Credit Event and the consummation of the other Transactions. (w) All requisite material Governmental Authorities and third parties shall have approved or consented to the Merger and the other transactions contemplated hereby to 66 60 the extent required, all applicable appeal periods shall have expired and there shall be no governmental or judicial action, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Merger or the other transactions contemplated hereby, including, without limitation, the consent of Bank One Leasing Corporation pursuant to the Master Lease Agreement between Neenah Foundry Co. and Bank One Leasing Corporation dated December 14, 1992. (x) The Administrative Agent shall have received the financial statements of the Borrower and its Subsidiaries described in Section 3.05(a)(ii), which financial statements shall not be materially inconsistent with the forecasts for such period previously provided to the Lenders. (y) The Administrative Agent shall be reasonably satisfied with all of the Borrower's material agreements with its customers. (z) The Lenders shall be reasonably satisfied with the sufficiency of amounts available hereunder to meet the ongoing working capital requirements of the Borrower and its Subsidiaries following the Merger and the consummation of the other transactions contemplated hereby. (aa) The Administrative Agent shall have received the landlord's waivers described in the proviso of the definition of the term "Eligible Inventory". (bb) Upon the effectiveness of the Merger, Neenah Transport, Inc. shall have notified Ryder Truck Rental, Inc. of the Merger pursuant to the Truck Lease and Services Agreement between Ryder Truck Rental, Inc. and Neenah Transport, Inc. dated March 12, 1992. ARTICLE V Affirmative Covenants Each of Holdings and the Borrower covenants and agrees with each Lender that until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document (other than wholly contingent indemnification obligations) shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full or cash collateralized to the satisfaction of the Administrative Agent and the Issuing Bank, unless the Required Lenders shall otherwise consent in writing, each of Holdings and the Borrower will, and will cause each of the Subsidiaries to: 67 61 SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect in all material respects the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; maintain and operate such business in substantially the manner in which it is presently conducted and operated; comply in all material respects with all applicable laws, rules, regulations (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Mortgaged Properties) and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted, except where such non-compliance could not reasonably be expected to result in a Material Adverse Effect; and, except in the case of sales of assets permitted pursuant to Section 6.05, at all times maintain and preserve all property material to the conduct of such business and keep, in all material respects, such property in good repair, working order and condition, normal wear and tear excepted, and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times. SECTION 5.02. Insurance. In the case of the Borrower and each Subsidiary: (a) Keep its insurable properties adequately insured at all times by financially sound and reputable insurers; and maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, in each case as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by law. (b) Cause all such policies to be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement, in form and substance satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall, during the continuance of such Event of Default, pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a "Replacement Cost Endorsement", without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably require from time to time to protect their interests; deliver original or certified copies of all such policies to the Collateral Agent; cause each such policy to provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon not less than 10 days' prior written notice thereof by the 68 62 insurer to the Administrative Agent and the Collateral Agent (giving the Administrative Agent and the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days' prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent) together with evidence satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor. (c) If at any time the area in which the Premises (as defined in the Mortgages) are located is designated (i) a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time require, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a "Zone 1" area, obtain earthquake insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time require. (d) With respect to any Mortgaged Property, carry and maintain comprehensive general liability insurance including the "broad form CGL endorsement" and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than $25,000,000, naming the Collateral Agent as an additional insured, on forms satisfactory to the Collateral Agent. (e) Notify the Administrative Agent and the Collateral Agent immediately whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by the Borrower; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies. SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other obligations promptly and in accordance with their terms and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk of forfeiture of such property. 69 63 SECTION 5.04. Financial Statements, Reports, etc. In the case of the Borrower, furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such Subsidiaries during such year, all audited by Ernst & Young LLP or other independent public accountants of recognized national standing acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter and the results of its operations and the operations of such Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, all certified by one of its Financial Officers as fairly presenting in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments; (c) concurrently with any delivery of financial statements under sub-paragraph (a) or (b) above, a letter of the accounting firm or certificate of the Financial Officer reporting on or certifying such statements (which letter, when furnished by an accounting firm, may be limited to accounting matters and disclaim responsibility for legal interpretations) reporting that they are unaware that any Event of Default has occurred, in the case of the accounting firm, or certifying that no Event of Default or Default has occurred, in the case of the Financial Officer, or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (d) within 20 days after the end of each calendar month a certificate in the form of Exhibit K (a "Borrowing Base Certificate") showing the Borrowing Base as of the close of business on the last day of such calendar month, each such Certificate to be certified as complete and correct on behalf of the Borrower by a Financial Officer of the Borrower; (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be; and 70 64 (f) prior to the beginning of each fiscal year, a copy of the budget for its consolidated balance sheet and related statements of income and cash flows for each quarter of such fiscal year; and (g) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent, the Issuing Bank and each Lender prompt written notice of the following: (a) the occurrence of any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; (b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect; and (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $1,000,000; and (d) any development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. SECTION 5.06. Maintaining Records; Access to Properties and Inspections. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law are made of all dealings and transactions in relation to its business and activities. Each Loan Party will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of Holdings, the Borrower or any Subsidiary at reasonable times and upon reasonable notice and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of Holdings, the Borrower or any Subsidiary with the officers thereof and independent accountants therefor; provided, however, that, unless a Default or Event of Default shall have occurred and be continuing, in no event shall the Administrative Agent or any Lender or any of their respective designees contact any customer or supplier of the Borrower or any Subsidiary regarding this Agreement and the Indebtedness hereunder without the prior consent of the Borrower. SECTION 5.07. Use of Proceeds. Use the proceeds of the Loans and request the issuance of Letters of Credit only for the purposes set forth in the preamble to this Agreement. 71 65 SECTION 5.08. Compliance with Environmental Laws. Except for any non-compliance that could not reasonably be expected to result in a Material Adverse Effect, comply, and cause all lessees and other persons occupying its Properties to comply, with all Environmental Laws and Environmental Permits applicable to its operations and Properties; obtain and renew all Environmental Permits necessary for its operations and Properties; and conduct any Remedial Action in accordance with Environmental Laws; provided, however, that none of Holdings, the Borrower or any of the Subsidiaries shall be required to undertake any Remedial Action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. SECTION 5.09. Preparation of Environmental Reports. If a Default caused by reason of a breach of Section 3.17 or 5.08 shall have occurred and be continuing, at the request of the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of the Borrower, an environmental site assessment report for the Properties which are the subject of such default prepared by an environmental consulting firm acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Remedial Action in connection with such Properties. SECTION 5.10. Audits. From time to time (but not more than once per fiscal year of the Borrower unless a Default or Event of Default shall have occurred and be continuing) during normal business hours upon reasonable notice from the Collateral Agent or the Required Lenders through the Administrative Agent, permit the Collateral Agent or the Lenders or professionals (including investment bankers, consultants, accountants, lawyers and appraisers) retained by the Collateral Agent or the Lenders to conduct evaluations and appraisals of (a) the Borrower's practices in the computation of the Borrowing Base and (b) the assets included in the Borrowing Base, and pay the reasonable fees and expenses of such professionals. SECTION 5.11. Further Assurances. Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents. The Borrower will cause any subsequently acquired or organized Domestic Subsidiary to execute a Subsidiary Guarantee Agreement, Indemnity Subrogation and Contribution Agreement and each applicable Security Document in favor of the Collateral Agent. In addition, from time to time, the Borrower will, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of its assets and properties as the Administrative Agent or the Required Lenders shall designate (it being understood that it is the intent of the parties that the Obligations shall be secured by, among other things, substantially all the assets of the Borrower (including real and other properties acquired subsequent to the Closing Date)). Such security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust and other instruments and documents in form and substance satisfactory to the Collateral Agent, and the Borrower shall 72 66 deliver or cause to be delivered to the Lenders all such instruments and documents (including legal opinions, title insurance policies and lien searches) as the Collateral Agent shall reasonably request to evidence compliance with this Section. The Borrower agrees to provide such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. ARTICLE VI Negative Covenants Each of Holdings and the Borrower covenants and agrees with each Lender that, until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document (other than wholly contingent indemnification obligations) have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full or cash collateralized to the satisfaction of the Administrative Agent and the Issuing Bank, unless the Required Lenders shall otherwise consent in writing, neither Holdings nor the Borrower will, nor will they cause or permit any of the Subsidiaries to: SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except: (a) Indebtedness for borrowed money existing on the date hereof and set forth in Schedule 6.01; (b) Indebtedness created hereunder and under the other Loan Documents; (c) the Senior Subordinated Notes; (d) Indebtedness consisting of purchase money Indebtedness or Capital Lease Obligations incurred in the ordinary course of business after the Closing Date to finance Consolidated Capital Expenditures, provided that (i) a description of the assets financed thereby shall have been furnished to the Administrative Agent for any assets for which the purchase price is greater than $1,000,000 and (ii) the aggregate principal amount of any Indebtedness or Capital Lease Obligations incurred pursuant to this paragraph (d) outstanding at any time shall not exceed $5,000,000; (e) intercompany loans and advances permitted by Section 6.04(c); (f) Indebtedness of the Borrower or any Subsidiary to Holdings, provided that such Indebtedness (i) is subordinated to the prior payment in full of the Obligations on terms satisfactory to the Administrative Agent and (ii) is evidenced by an intercompany note pledged by Holdings to the Collateral Agent pursuant to the Pledge Agreement for the benefit of the Secured Parties; 73 67 (g) ordinary course Interest Rate Protection Agreements and ordinary course, non-speculative foreign exchange and commodity protection agreements; (h) Indebtedness arising out of judgments or awards (other than any judgment that is described in clause (i) of Article VII and constitutes a Default or Event of Default thereunder) in respect of which the Borrower shall in good faith be prosecuting an appeal or proceedings for review and in respect of which it shall have secured a subsisting stay of execution pending such appeal or proceedings for review, provided the Borrower shall have set aside on its books adequate reserves, in accordance with GAAP, with respect to such judgment or award; (i) Indebtedness under performance bonds in an aggregate principal amount at any time outstanding not exceeding $2,000,000; and (j) additional unsecured Indebtedness in an aggregate amount at any time outstanding not exceeding $15,000,000. SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except: (a) Liens on property or assets of the Borrower and its Subsidiaries existing on the date hereof and set forth in Schedule 6.02; provided that such Liens shall secure only those obligations which they secure on the date hereof; (b) any Lien created under the Loan Documents; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition (except as permitted pursuant to Section 6.02(i)), (ii) such Lien does not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien does not (A) materially interfere with the use, occupancy and operation of any Mortgaged Property, (B) materially reduce the fair market value of such Mortgaged Property but for such Lien or (C) result in any material increase in the cost of operating, occupying or owning or leasing such Mortgaged Property; (d) Liens for taxes not yet due or which are being contested in compliance with Section 5.03; (e) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising, in the case of such other like Liens, in the ordinary course of business and securing obligations that are not due and payable or which are being contested in compliance with Section 5.03; 74 68 (f) pledges and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment insurance and other social security laws or regulations; (g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (h) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred, in the case of such other similar encumbrances, in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (i) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 6.01(d), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 90 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 85% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) (or if such Indebtedness exceeds such 85% limit, such Indebtedness is non-recourse to Holdings, the Borrower and the Subsidiaries) and (iv) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary; (j) any Lien disclosed on the marked and redated title insurance commitments delivered to the Collateral Agent on the Closing Date; (k) Liens arising out of judgments or awards (other than any judgment that is described in clause (i) of Article VII and constitutes a Default or Event of Default thereunder) in respect of which the Borrower shall in good faith be prosecuting an appeal or proceedings for review and in respect of which it shall have secured a subsisting stay of execution pending such appeal or proceedings for review, provided the Borrower shall have set aside on its books adequate reserves, in accordance with GAAP, with respect to such judgment or award; and (l) additional Liens on property or assets securing obligations (other than Indebtedness for borrowed money) not exceeding $250,000 at any time, provided that, to the extent any such Lien applies to any Collateral (as defined in any such Security Document), such Lien does not have priority over the Liens created under the Security Documents. 75 69 SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred. SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except: (a) investments by the Borrower existing on the date hereof in the capital stock of the Subsidiaries and additional investments by Holdings in the Capital Stock of the Borrower or by the Borrower in the Capital Stock of the Subsidiary Guarantors; (b) Permitted Investments; (c) investments, loans or advances made by any Loan Party to the Borrower or any Subsidiary, provided that any such loans or advances are evidenced by an intercompany note pledged to the Collateral Agent pursuant to the Pledge Agreement for the benefit of the Secured Parties; (d) investments consisting of non-cash consideration received in connection with a sale of assets permitted by Section 6.05(b); (e) loans and advances to employees and officers of the Borrower or any of the Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate principal amount outstanding at any one time not to exceed $250,000; (f) loans and advances in an aggregate principal amount outstanding at any one time not to exceed $250,000 to management and other employees of the Borrower, the proceeds of which are used in their entirety to purchase capital stock of Holdings and other investments pursuant to retirement savings programs; (g) the Borrower may make any Permitted Acquisition; provided that (i) the aggregate purchase price of all such Permitted Acquisitions does not exceed $50,000,000 and (ii) the Borrower shall have delivered to the Administrative Agent a certificate certifying that at the time of and immediately after giving effect to such Permitted Acquisition, (A) no Event of Default or Default shall have occurred and be continuing, (B) the Consolidated Leverage Ratio on a pro forma basis (including 76 70 as adjusted to reduce or exclude any identified costs that will be reduced or will cease to be incurred after such Permitted Acquisition) as of the last day of the most recent fiscal quarter adjusted to give effect (as if such event had occurred on the first day of the four fiscal quarter period ended on such last day) to such Permitted Acquisition and the financing therefor shall be less than 5.00 to 1.00 and (C) the Borrower shall be in compliance on a pro forma basis (including as adjusted to reduce or exclude any identified costs that will be reduced or will cease to be incurred after such Permitted Acquisition) with the covenants set forth in Sections 6.11, 6.12 and 6.13, in each case as of the last day of the most recent fiscal quarter adjusted to give effect (as if such event had occurred on the first day of the four fiscal quarter period ended on such last day) to such Permitted Acquisition and the financing therefor, and the adjustments and calculations set forth in such certificate shall be based on assumptions and otherwise in form and substance satisfactory to the Administrative Agent; (h) Consolidated Capital Expenditures permitted pursuant to Section 6.10; (i) Accounts; and (j) ordinary course Interest Rate Protection Agreements and ordinary course, non-speculative foreign exchange and commodity protection agreements. SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions. (a) Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (whether now owned or hereafter acquired) or any capital stock of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that (i) the Borrower may consummate the Merger, (ii) the Borrower and any Subsidiary may purchase and sell inventory and scrap, obsolete, excess and worn out assets in the ordinary course of business, (iii) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (w) any wholly owned Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (x) any wholly owned Subsidiary may merge into or consolidate with any other wholly owned Domestic Subsidiary in a transaction in which the surviving entity is a wholly owned Domestic Subsidiary and no person other than the Borrower or a wholly owned Domestic Subsidiary receives any consideration, (y) Holdings may merge into ACP Holdings or the Borrower in a transaction in which the Borrower is the surviving corporation (in the case of any such merger of Holdings into the Borrower) so long as concurrently with any merger of Holdings with and into the Borrower, or any merger of Holdings with and into ACP Holdings in which Holdings is not the surviving corporation, ACP Holdings assumes all the obligations of Holdings under this Agreement and the other Loan Documents (including entering into a supplement to the Pledge Agreement to pledge 100% of the Capital Stock of the Borrower to the Collateral Agent for the benefit of the Secured Parties) and (z) following any merger described in clause (y), ACP Holdings may merge into ACP Products or the Borrower in a transaction in which the Borrower is the surviving corporation (in the case of any such merger of ACP Holdings into the Borrower) so long as concurrently with any merger of ACP Holdings with and into the Borrower, or any merger of ACP Holdings with and into ACP Products in which ACP Holdings is not the surviving corporation, ACP Products assumes all the obligations of ACP Holdings under this Agreement and the other Loan Documents (including entering into a supplement to the Pledge Agreement to pledge 100% of the Capital Stock of the Borrower to the Collateral Agent for the benefit of the Secured Parties), (iv) the Borrower and any Subsidiary may make Permitted Acquisitions permitted by Section 6.04(g) and (v) the 77 71 Borrower and any Subsidiary may make Consolidated Capital Expenditures permitted by Section 6.10. (b) Neither the Borrower nor any Subsidiary shall engage in any Asset Sale otherwise permitted under paragraph (a) above unless (i) such Asset Sale is for consideration at least 85% of which is cash, (ii) such consideration is at least equal to the fair market value (as determined in good faith by the Borrower's board of directors) of the assets being sold, transferred, leased or disposed of and (iii) the fair market value (as determined in good faith by the Borrower's board of directors) of all assets sold, transferred, leased or disposed of pursuant to this paragraph (b) shall not exceed (i) $1,000,000 in any fiscal year or (ii) $5,000,000 in the aggregate. SECTION 6.06. Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its Capital Stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any shares of any class of its Capital Stock or set aside any amount for any such purpose; provided, however, that (i) any Subsidiary may declare and pay dividends or make other distributions to the Borrower; (ii) the Borrower may declare and pay dividends or make other distributions to Holdings (A) to pay the Borrower Tax Amount required to be paid by Holdings and (B) to fund payments to be made by Holdings as permitted by clause (iv) below in an aggregate amount not to exceed the amounts of such payments; (iii) so long as no Default or Event of Default shall have occurred and be continuing, the Borrower may declare and pay dividends or make other distributions to Holdings to pay the actual operating costs of Holdings and ACP Holdings in an aggregate amount not exceeding $250,000 in any fiscal year of the Borrower; (iv) Holdings may, or Holdings may declare and pay dividends or make other distributions to ACP Holdings to permit ACP Holdings or ACP Products to, purchase, redeem, retire or otherwise acquire (A) shares of its Capital Stock, or options or warrants to purchase shares of its Capital Stock, held by officers, directors or employees of Holdings, the Borrower or any Subsidiary pursuant to a compensation plan or arrangement in connection with the death, disability or termination of employment of any such officer, director or employee or (B) shares of its capital stock owned by any officer, director or employee of Holdings, the Borrower or any Subsidiary pursuant to the exercise of options or warrants to purchase such Capital Stock by such officer, director or employee or to pay taxes incurred in connection with such exercise of options or warrants in an aggregate amount for all such transactions described in clauses (A) and (B) not exceeding the sum of (x) $2,000,000 plus (y) the proceeds of any substantially concurrent issuance of Capital Stock of ACP Products, ACP Holdings or Holdings to any officer, director or employee of Holdings, the Borrower or any Subsidiary; 78 72 (v) Holdings may declare and pay dividends or make other distributions to ACP Holdings to pay the Borrower Tax Amount required to be paid by ACP Holdings; and (vi) so long as no Default or Event of Default shall have occurred and be continuing, Holdings may declare and pay dividends or make other distributions to ACP Holdings, out of the proceeds of dividends or distributions received by Holdings pursuant to clause (iii) above, to pay ACP Holdings' actual operating costs. (b) Permit its subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such subsidiary to (i) pay any dividends or make any other distributions on its capital stock or any other interest or (ii) make or repay any loans or advances to the Borrower or the parent of such subsidiary. SECTION 6.07. Transactions with Affiliates. Except as set forth on Schedule 6.07, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that the Borrower or any Subsidiary may engage in (a) any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) the transactions permitted pursuant to Sections 6.05 and 6.06, and (c) the Transactions. SECTION 6.08. Business of Borrower and Subsidiaries. Engage at any time in any business or business activity other than Related Businesses. SECTION 6.09. Other Indebtedness and Agreements. (a) Permit any waiver, supplement, modification, amendment, termination or release of (i) the Merger Agreement or the Tax Sharing Agreement or (ii) any indenture, instrument or agreement pursuant to which any Indebtedness or preferred stock of the Borrower or any Subsidiary is outstanding in an aggregate outstanding principal amount in excess of $1,000,000, or modify its charter or by-laws, in each case to the extent that any such waiver, supplement, modification, amendment, termination or release would be adverse to the Lenders in any material respect. (b) (i) Make any distribution, whether in cash, property, securities or a combination thereof, other than regular scheduled payments of principal and interest as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or pay, or offer or commit to pay, or directly or indirectly redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes, any Indebtedness for borrowed money of the Borrower or any Subsidiary in an outstanding principal amount exceeding $1,000,000 or (ii) pay in cash any amount in respect of such Indebtedness that may at the obligor's option be paid in kind or in other securities. (c) Notwithstanding anything contained in this Section 6.09 to the contrary, (i) the Borrower shall be permitted to exchange the Senior Subordinated Notes for substantially identical notes in accordance with the Exchange and Registration Rights Agreement dated as of April 30, 1997, relating to the Senior Subordinated Notes. 79 73 SECTION 6.10. Capital Expenditures. Permit the aggregate amount of Consolidated Capital Expenditures (other than Consolidated Capital Expenditures for patterns and Permitted Acquisitions permitted by Section 6.04(g)) made by the Borrower and the Subsidiaries, taken as a whole, in any fiscal year to exceed the sum of (a) $7,000,000, (b) the proceeds of any Equity Issuance made during such fiscal year and substantially concurrently used to fund Consolidated Capital Expenditures, (c) following a prepayment of Term Loans pursuant to Section 2.13(e) during such fiscal year, the amount of Excess Cash Flow for the previous fiscal year of the Borrower not required to be used to prepay Term Loans pursuant to Section 2.13(e) and (d) other Consolidated Capital Expenditures not covered by clauses (a) through (c) above financed by Revolving Loans, so long as the aggregate principal amount of such Revolving Loans at any time outstanding used to finance all such Consolidated Capital Expenditures pursuant to this clause (d) does not exceed the excess of (A) $20,000,000 over (B) the aggregate principal amount of outstanding Revolving Loans used to finance Permitted Acquisitions pursuant to Section 6.04(g); provided, however, that the amount of Consolidated Capital Expenditures in any fiscal year of the Borrower permitted to be incurred pursuant to clause (a) above shall be increased by an amount equal to the amount of unused Consolidated Capital Expenditures permitted to be incurred pursuant to clause (a) above for the immediately preceding fiscal year of the Borrower (without giving effect to this proviso). SECTION 6.11. Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of the end of any fiscal quarter falling in any period set forth below to be in excess of the ratio set forth below for such period.
Period Ratio ------ ----- July 1, 1997 through March 31, 1998 6.00 to 1.00 April 1, 1998 through March 31, 1999 5.75 to 1.00 April 1, 1999 through March 31, 2000 5.50 to 1.00 April 1, 2000 through March 31, 2001 5.25 to 1.00 Thereafter 5.00 to 1.00
SECTION 6.12. Consolidated Net Worth. Permit Consolidated Net Worth (a) on the Closing Date, to be less than $35,000,000 or (b) on the last day of any fiscal quarter, to be less than the sum of (i) $35,000,000 plus (ii) 50% of the cumulative amount of positive Consolidated Net Income for each fiscal year ending after the Closing Date. 80 74 SECTION 6.13. Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio as of the end of any fiscal quarter falling in any period set forth below to be less than the ratio set forth below for such period.
Period Ratio ------ ----- July 1, 1997 through March 31, 1998 1.55 to 1.00 April 1, 1998 through March 31, 1999 1.65 to 1.00 April 1, 1999 through March 31, 2000 1.75 to 1.00 April 1, 2000 through March 31, 2001 1.85 to 1.00 April 1, 2001 through March 31, 2002 1.95 to 1.00 Thereafter 2.00 to 1.00
SECTION 6.14. Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than March 31; provided, however, that the Borrower may, upon written notice to the Administrative Agent, change the fiscal year specified above to any other fiscal year reasonably acceptable to the Administrative Agent, in which case the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary in order to reflect such change in fiscal year. ARTICLE VII Events of Default In case of the happening of any of the following events ("Events of Default"): (a) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or any Fee or L/C Disbursement or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; 81 75 (d) default shall be made in the due observance or performance by Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a), 5.05 or 5.07 or in Article VI; (e) default shall be made in the due observance or performance by Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Borrower; (f) Holdings, the Borrower or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness in a principal amount in excess of $1,750,000, when and as the same shall become due and payable, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, the Borrower or any Subsidiary, or of a substantial part of the property or assets of Holdings, the Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or a Subsidiary or (iii) the winding-up or liquidation of Holdings, the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) Holdings, the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; 82 76 (i) one or more judgments for the payment of money in an aggregate amount in excess of $1,750,000, which amount is not covered by insurance (provided that in the event such a judgment is covered by insurance, the Administrative Agent is provided with satisfactory evidence that the insurance provider will provide the coverage relating thereto) shall be rendered against Holdings, the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of Holdings, the Borrower or any Subsidiary to enforce any such judgment; (j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding (i) $1,000,000 in any year or (ii) $5,000,000 for all periods; or (k) any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates representing securities pledged under the Pledge Agreement or to continue previously filed financing statements prior to the expiration thereof and except to the extent that such loss is covered by a lender's title insurance policy and the related insurer promptly after such loss shall have acknowledged in writing that such loss is covered by such title insurance policy; or (l) there shall have occurred a Change in Control; then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding. 83 77 ARTICLE VIII The Administrative Agent and the Collateral Agent In order to expedite the transactions contemplated by this Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative Agent and Collateral Agent on behalf of the Lenders and the Issuing Bank (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the "Agents"). Each of the Lenders and each assignee of any such Lender, hereby irrevocably authorizes the Agents to take such actions on behalf of such Lender or assignee or the Issuing Bank and to exercise such powers as are specifically delegated to the Agents by the terms and provisions hereof and of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and the Issuing Bank, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders and the Issuing Bank all payments of principal of and interest on the Loans, all payments in respect of L/C Disbursements and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender or the Issuing Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrower of any Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower or any other Loan Party pursuant to this Agreement or the other Loan Documents as received by the Administrative Agent. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents. Neither the Agents nor any of their respective directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or wilful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents, instruments or agreements. The Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Agents nor any of their respective directors, officers, employees or agents shall have any responsibility in their capacity as such to the Borrower or any other Loan Party on account of the failure of or delay in performance or breach by any Lender or the Issuing Bank of any of its obligations hereunder or to any Lender or the Issuing Bank on account of the failure of or delay 84 78 in performance or breach by any other Lender or the Issuing Bank or the Borrower or any other Loan Party of any of their respective obligations hereunder or under any other Loan Document or in connection herewith or therewith. Each of the Agents may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that neither Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor, subject to the Borrower's approval, not to be unreasonably withheld, so long as no Default or Event of Default shall have occurred and be continuing. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. With respect to the Loans made by it hereunder, each Agent in its individual capacity and not as Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Agent, and the Agents and their Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Holdings, the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share (based on its Commitments hereunder) of any expenses incurred for the benefit of the Lenders by the Agents, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, that shall not have been reimbursed by the Borrower and (b) to indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against it in its capacity as Agent, or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower or any other Loan Party, provided that no Lender shall be liable to an Agent or any such other indemnified person for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements are determined by 85 79 a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Agent or any of its directors, officers, employees or agents. Each Revolving Credit Lender agrees to reimburse and indemnify the Issuing Bank to the same extent and subject to the same limitations as provided for the Agents in the preceding sentence. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. ARTICLE IX Miscellaneous SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, or sent by telecopy, as follows: (a) if to the Borrower or Holdings, to it at 2121 Brooks Avenue, Neenah, WI 54956, Attention of President or Chief Financial Officer (Telecopy No. (414) 729-3633) with copies to (which shall not constitute notice to the Borrower) Citicorp Venture Capital, Ltd., 399 Park Avenue, 14th Floor, Zone 4, New York, NY 10043, Attention of Mr. David F. Thomas and Mr. John D. Weber (Telecopy No. (212) 888-2940) and Kirkland & Ellis, Citicorp Center, 153 East 53rd Street, New York, NY 10022, Attention of Kirk A. Radke, Esq. (Telecopy No. (212) 446-4900); (b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Janet Belden (Telecopy No. (212) 552-5658), with a copy to The Chase Manhattan Bank, One Chase Manhattan Plaza, 5th Floor, New York, New York 10081, Attention of James H. Ramage (Telecopy No. (212) 552-5555); and (c) if to a Lender, to it at its address (or telecopy number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch 86 80 by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower or Holdings herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Issuing Bank and shall survive the making by the Lenders of the Loans and the issuance of Letters of Credit by the Issuing Bank, regardless of any investigation made by the Lenders or the Issuing Bank or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount then due and payable under this Agreement or any other Loan Document is outstanding and unpaid (other than wholly-contingent indemnification obligations) or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank. SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, Holdings and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, Holdings, the Administrative Agent, the Issuing Bank or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or an Affiliate of, or an Approved Fund with respect to, such Lender, (x) the Borrower and the Administrative Agent (and, in the case of any assignment of a Revolving Credit Commitment, the Issuing Bank) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld) and (y) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (or, if less, the entire remaining amount of such Lender's Commitment), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 and (iii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon 87 81 acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid). (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Term Loan Commitment and Revolving Credit Commitment, and the outstanding balances of its Term Loans and Revolving Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.05(a) or delivered pursuant to Section 5.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the 88 82 terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive and the Borrower, the Administrative Agent, the Issuing Bank, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower, the Issuing Bank and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders and the Issuing Bank. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e). (f) Each Lender may without the consent of the Borrower, the Issuing Bank or the Administrative Agent sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if they were Lenders and (iv) the Borrower, the Administrative Agent, the Issuing Bank and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans or L/C Disbursements and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans or increasing or extending the Commitments). (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16. (h) Any Lender may at any time assign all or any portion of its rights under this Agreement to a Federal Reserve Bank to secure extensions of credit by such Federal Reserve Bank to such Lender; provided that no such assignment shall release a Lender from any of its obligations 89 83 hereunder or substitute any such Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Borrower by the assigning Lender hereunder. (i) Neither Holdings nor the Borrower shall assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent, the Issuing Bank and each Lender, and any attempted assignment without such consent shall be null and void. (j) In the event that Standard & Poor's Ratings Group, Moody's Investors Service, Inc., and Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders that are insurance companies (or Best's Insurance Reports, if such insurance company is not rated by Insurance Watch Ratings Service)) shall, after the date that any Lender becomes a Revolving Credit Lender, downgrade the long-term certificate deposit ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of a Lender that is an insurance company (or B, in the case of an insurance company not rated by InsuranceWatch Ratings Service)), then the Issuing Bank shall have the right, but not the obligation, at its own expense, upon notice to such Lender and the Administrative Agent, to replace (or to request the Borrower to use its reasonable efforts to replace) such Lender with an assignee (in accordance with and subject to the restrictions contained in paragraph (b) above), and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in paragraph (b) above) all its interests, rights and obligations in respect of its Revolving Credit Commitment to such assignee; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any Governmental Authority and (ii) the Issuing Bank or such assignee, as the case may be, shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. SECTION 9.05. Expenses; Indemnity. (a) The Borrower and Holdings agree, jointly and severally, to pay all out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent and the Issuing Bank in connection with the syndication of the credit facilities provided for herein and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Administrative Agent, the Collateral Agent or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or Letters of Credit issued hereunder, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel for the Administrative Agent, the Collateral Agent or any Lender. (b) The Borrower and Holdings agree, jointly and severally, to indemnify the Administrative Agent, the Collateral Agent, each Lender and the Issuing Bank, each Affiliate of any of the foregoing persons and each of their respective directors, officers, employees and agents 90 84 (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release of Hazardous Materials on any property owned or operated by the Borrower or any of the Subsidiaries, or any Environmental Claim related in any way to the Borrower or the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of any Indemnitee. (c) The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank. All amounts due under this Section 9.05 shall be payable on written demand therefor. SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower or Holdings against any of and all the obligations of the Borrower or Holdings now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK. 91 85 SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower or Holdings in any case shall entitle the Borrower or Holdings to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower, Holdings and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or any date for reimbursement of an L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement, without the prior written consent of each Lender affected thereby, (ii) change or extend the Commitment or decrease or extend the date for payment of the Commitment Fees of any Lender without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 2.17 or 9.04(i), the provisions of this Section, the definition of the term "Required Lenders" or release any Guarantor or all or any substantial part of the Collateral, without the prior written consent of each Lender, (iv) change the allocation between Tranche A Term Loans and Tranche B Term Loans of any prepayment pursuant to Section 2.12 or 2.13 without the prior written consent of (A) Lenders holding Tranche A Term Loans representing more than 50% of the aggregate outstanding principal amount of the Tranche A Term Loans and (B) Lenders holding Tranche B Term Loans representing more than 50% of the aggregate outstanding principal amount of the Tranche B Term Loans, (v) decrease the principal amount of, or extend the date for payment of, any prepayment of (A) Tranche A Term Loans or (B) Tranche B Term Loans, in each case required pursuant to Section 2.13 without the prior written consent of (x) Lenders holding Tranche A Term Loans representing more than 50% of the aggregate outstanding principal amount of the Tranche A Term Loans or (y) Lenders holding Tranche B Term Loans representing more than 50% of the aggregate outstanding principal amount of the Tranche B Term Loans, respectively, or (vi) amend Section 2.13(k) without the prior written consent of Lenders holding Tranche B Term Loans representing more than 50% of the aggregate outstanding principal amount of the Tranche B Term Loans; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent or the Issuing Bank hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Collateral Agent or the Issuing Bank. SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or participation in any L/C Disbursement, 92 86 together with all fees, charges and other amounts which are treated as interest on such Loan or participation in such L/C Disbursement under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof (including, following the Closing Date, the Commitment Letter dated January 6, 1997 among the Administrative Agent, Chase Securities Inc., 399 Venture Partners Inc. and Holdings) is superseded by this Agreement and the other Loan Documents and shall be terminated on the Closing Date. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 93 87 SECTION 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of Holdings and the Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower, Holdings or their respective properties in the courts of any jurisdiction. (b) Each of Holdings and the Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.16. Confidentiality. The Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders agrees to keep confidential (and to use its best efforts to cause its respective agents and representatives to keep confidential) the Information (as defined below) and all copies thereof, extracts therefrom and analyses or other materials based thereon, except that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender shall be permitted to disclose Information (a) to such of its respective officers, directors, employees, agents, affiliates and representatives as need to know such Information, (b) to the extent requested by any regulatory authority, (c) to the extent otherwise required by applicable laws and regulations or by any subpoena or similar legal process, (d) in connection with any suit, action or proceeding relating to the enforcement of its rights hereunder or under the other Loan Documents or (e) to the 94 88 extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.16 or (ii) becomes available to the Administrative Agent, the Issuing Bank, any Lender or the Collateral Agent on a nonconfidential basis from a source other than the Borrower or Holdings. For the purposes of this Section, "Information" shall mean all financial statements, certificates, reports, agreements and information (including all analyses, compilations and studies prepared by the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender based on any of the foregoing) heretofore or hereafter received from the Borrower or Holdings or any of their respective Affiliates and related to the Borrower or Holdings, any shareholder or Affiliate of the Borrower or Holdings or any employee, customer or supplier of the Borrower or Holdings, other than any of the foregoing that were available to the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its disclosure thereto by the Borrower or Holdings, and which are in the case of Information provided after the date hereof, clearly identified at the time of delivery as confidential. The provisions of this Section 9.16 shall remain operative and in full force and effect regardless of the expiration and term of this Agreement. 95 89 SECTION 9.17. Termination. Subject to the last sentence of Section 9.02, this Agreement and the other Loan Documents shall terminate when all the Obligations have been indefeasibly paid in full, the Lenders have no further commitment to lend, the L/C Exposure has been reduced to zero and the Issuing Bank has no further commitment to issue Letters of Credit under this Agreement, at which time the Collateral Agent shall execute and deliver to the Borrower, Holdings and the Subsidiary Guarantors all Uniform Commercial Code termination statements and similar documents which the Borrower, Holdings and the Subsidiary Guarantors shall reasonably request to evidence such termination. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. NC MERGER COMPANY, by_____________________________ Name: Title: NFC CASTINGS, INC., by______________________________ Name: Title: 96 90 THE CHASE MANHATTAN BANK, individually and as Administrative Agent, Collateral Agent and Issuing Bank, by______________________________ Name: Title: 97 91 BANK ONE, WISCONSIN, by______________________________ Name: Title: 98 92 BHF BANK AKTIENGESELLSCHAFT, by______________________________ Name: Title: by______________________________ Name: Title: 99 93 BANKBOSTON, N.A. by______________________________ Name: Title: 100 94 THE FIRST NATIONAL BANK OF CHICAGO, by______________________________ Name: Title: 101 95 FIRST SOURCE FINANCIAL LLP, By First Source Financial Inc., its manager by: ________________________________ Name: Title: 102 96 HELLER FINANCIAL, INC., by_______________________________ Name: Title: 103 97 NATIONAL CITY BANK, by_______________________________ Name: Title: 104 98 PNC BANK, NATIONAL ASSOCIATION, by______________________________ Name: Title: 105 99 SENIOR HIGH INCOME PORTFOLIO, INC., by______________________________ Name: Title: 106 100 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, by______________________________ Name: Title: EX-10.10 23 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT 1 Exhibit 10.10 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT This is a First Amendment to the Employment Agreement entered into the 9th day of September, 1994, by and between NEENAH FOUNDRY COMPANY, a Wisconsin corporation, and its affiliated companies, to-wit, NEENAH CORPORATION, HARTLEY CONTROLS CORPORATION and NEENAH TRANSPORT, INC., hereinafter called the Employer, and JAMES P. KEATING, JR., of Neenah, Wisconsin, hereinafter called the Employee. WITNESSETH: WHEREAS, the parties desire to amend the aforesaid employment agreement. NOW, THEREFORE, it is agreed between the parties that the employment agreement be as amended as follows: 1. That Section 11 be deleted in its entirety and replaced with the following Section 11. "11. Supplemental Employee Retirement Payments (SERP). As additional consideration for entering into this Employment Agreement, which Employment Agreement ends prior to Employee reaching age sixty-five, Employer agrees that at the end of this Employment Agreement period, Employee shall be paid full benefits under Employer's SERP plan as if he retired at age sixty-five without regard to Employer's right to amend, modify or revoke the SERP Plan. The SERP payments will commence on July 1, 1997. Employer and Employee agree that Employee's benefits under the SERP plan shall be fully vested and irrevocable as of the date of this Agreement." 2. All other terms and conditions of the employment agreement, except as modified by this first amendment, are agreed by both parties to be in full force and effect and binding on their heirs, personal representatives, successors and assigns. 2 IN WITNESS WHEREOF, the parties have set their hands and seals this 23rd day of July, 1996. In the Presence of: COMPANY: NEENAH FOUNDRY COMPANY By: __________________________________ Name: Title: NEENAH CORPORATION By: __________________________________ Name: Title: HARTLEY CONTROLS CORPORATION By: __________________________________ Name: Title: NEENAH TRANSPORT, INC. By: __________________________________ Name: Title: CONSULTANT: ______________________________________ James P. Keating, Jr. -2- EX-10.11 24 PLEGE AGREEMENT DATED AS OF APRIL 30, 1997 1 EXHIBIT 10.11 PLEDGE AGREEMENT dated as of April 30, 1997, among NC MERGER COMPANY, a Wisconsin corporation (the "Borrower"), NFC CASTINGS, INC., a Delaware corporation ("Holdings"), each Subsidiary of the Borrower listed on Schedule I hereto (each such Subsidiary, individually, a "Subsidiary Pledgor" and, collectively, the "Subsidiary Pledgors"; the Borrower, Holdings and the Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to (a) the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Holdings, the lenders from time to time party thereto (the "Lenders") and Chase, as administrative agent for the Lenders, Collateral Agent and issuing bank (in such capacity, the "Issuing Bank"), (b) the Parent Guarantee Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between Holdings and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"; and, collectively with the Parent Guarantee Agreement, the "Guarantee Agreements") among the Subsidiary Guarantors and the Collateral Agent. The Lenders have agreed to make Loans to the Borrower and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Holdings and the Subsidiary Guarantors have agreed to guarantee, among other things, all the obligations of the Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Pledgors of a Pledge Agreement in the form hereof to secure (a) the due and punctual payment by the Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including reasonable fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of Holdings under or pursuant to the Parent Guarantee Agreement or the other Loan Documents, (d) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Subsidiary Guarantor under or pursuant to the Subsidiary Guarantee Agreement or the other Loan Documents and (e) the due and punctual payment and performance of all obligations of the Borrower under each Interest Rate Protection Agreement entered into with any counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (e) being referred to collectively as the "Obligations"). Capitalized terms used herein and not defined herein shall have meanings assigned to such terms in the Credit Agreement. 2 2 Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: SECTION 1. Pledge. As security for the payment and performance, as the case may be, in full of the Obligations, each Pledgor hereby transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the Collateral Agent, its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in all of the Pledgor's right, title and interest in, to and under (a) the shares of capital stock owned by it and listed on Schedule II hereto and any shares of capital stock of the Borrower or any Subsidiary obtained in the future by the Pledgor and the certificates representing all such shares (the "Pledged Stock"); provided that the Pledged Stock shall not include (i) more than 65% of the issued and outstanding shares of stock of any Foreign Subsidiary or (ii) to the extent that applicable law requires that a Subsidiary of the Pledgor issue directors' qualifying shares, such qualifying shares; (b)(i) the debt securities listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued to the Pledgor and (iii) the promissory notes and any other instruments evidencing such debt securities (the "Pledged Debt Securities"); (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed, in respect of, in exchange for or upon the conversion of the securities referred to in clauses (a) and (b) above; (e) subject to Section 5, all rights and privileges of the Pledgor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the "Collateral"). Upon delivery to the Collateral Agent, (a) any stock certificates, notes or other securities now or hereafter included in the Collateral (the "Pledged Securities") shall be accompanied by stock powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (b) all other property comprising part of the Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities theretofore and then being pledged hereunder, which schedule shall be attached hereto as Schedule II and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered. TO HAVE AND TO HOLD the Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth. SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities, and any and all certificates or other instruments or documents representing the Collateral. (b) Each Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by any person to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent pursuant to the terms thereof. SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby represents, warrants and covenants, as to itself and the Collateral pledged by it hereunder, to and with the Collateral Agent that: (a) the Pledged Stock represents that percentage as set forth on Schedule II of the issued and outstanding shares of each class of the capital stock of the issuer with respect thereto; 3 3 (b) except for the security interest granted hereunder, the Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Collateral, other than pursuant hereto, and (iv) subject to Section 5, will cause any and all Collateral, whether for value paid by the Pledgor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder; (c) the Pledgor (i) has the power and authority to pledge the Collateral in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than the Lien created by this Agreement), however arising, of all persons whomsoever; (d) no consent of any other person (including stockholders or creditors of any Pledgor) and no consent or approval of any Governmental Authority or any securities exchange was or is necessary to the validity of the pledge effected hereby; (e) by virtue of the execution and delivery by the Pledgors of this Agreement, when the Pledged Securities, certificates or other documents representing or evidencing the Collateral are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a valid and perfected first lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; (f) the pledge effected hereby is effective to vest in the Collateral Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in the Collateral as set forth herein; (g) all of the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable; (h) all information set forth herein relating to the Pledged Stock is accurate and complete in all material respects as of the date hereof; and (i) the pledge of the Pledged Stock pursuant to this Agreement does not violate Regulation G, T, U or X of the Federal Reserve Board or any successor thereto as of the date hereof. SECTION 4. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and until an Event of Default shall have occurred and be continuing: (i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; 4 4 provided, however, that such Pledgor will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Pledged Securities or the rights and remedies of any of the Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same. (ii) The Collateral Agent shall promptly execute and deliver to each Pledgor, or cause to be executed and delivered to each Pledgor, all such proxies, dividend payment orders, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above and to receive the cash dividends it is entitled to receive pursuant to subparagraph (iii) below. (iii) Each Pledgor shall be entitled to receive and retain any and all cash dividends, distributions, interest and principal paid on the Pledged Securities to the extent and only to the extent that such cash dividends, distributions, interest and principal are permitted by, and otherwise paid in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws. All noncash dividends, distributions, interest and principal, and all dividends, distributions, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Pledged Securities, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by any Pledgor, except to the extent otherwise permitted pursuant to the Credit Agreement, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement). (b) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to dividends, distributions, interest or principal that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall cease other than with respect to any such dividends or distributions pursuant to Sections 6.06(a)(ii) and 6.06(a)(v) of the Credit Agreement, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, distributions, interest or principal. All dividends, distributions, interest or principal received by the Pledgor contrary to the provisions of this Section 5 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 7. After all Events of Default have been cured or waived, the Collateral Agent shall, within five Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash and non-cash dividends, distributions, interest or principal (without interest), that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) above and which remain in such account. (c) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to 5 5 paragraph (a)(i) of this Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived, such Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above. SECTION 6. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, subject to applicable regulatory and legal requirements, the Collateral Agent may sell the Collateral, or any part thereof, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby waive all rights of redemption, stay, valuation and appraisal any Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give a Pledgor 10 days' prior written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of such Pledgor's Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid in full by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section 6, any Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal on the part of any Pledgor (all said rights being also hereby waived and released to the fullest extent permitted by applicable law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to it from such Pledgor as a credit against the purchase price, and it may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof, (b) the Collateral Agent shall be free to carry out such sale pursuant to such agreement and (c) such Pledgor shall not be entitled to the 6 6 return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions. SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of Collateral pursuant to Section 6, as well as any Collateral consisting of cash, shall be applied by the Collateral Agent as follows: FIRST, to the payment of all costs and expenses incurred by the Collateral Agent in connection with such sale or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Pledgor and any other reasonable costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (other than Obligations in respect of indemnification and expense reimbursement obligations hereunder or under any other Loan Document to the extent such Obligations are not due and payable) (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, as promptly as practicable, to the Pledgors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees to pay upon reasonable notice to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, other charges and disbursements of its counsel and of any experts or agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (iv) the material failure by such Pledgor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as defined in Section 9.05 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of the 7 7 execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 8 shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 8 shall be payable on written demand therefor and shall bear interest at the rate specified in Section 2.07 of the Credit Agreement. SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent's name or in the name of such Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable to the Pledgor representing any interest or dividend or other distribution payable in respect of the Collateral or any part thereof or on account thereof and to give full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and to make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct. SECTION 10. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or consent to any departure by any Pledgor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Pledgor or Pledgors with 8 8 respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement. SECTION 11. Securities Act, etc. In view of the position of the Pledgors in relation to the Pledged Securities, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the "Federal Securities Laws") with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Securities, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Securities under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Securities, limit the purchasers to those who will agree, among other things, to acquire such Pledged Securities for their own account, for investment, and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 11 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells. SECTION 12. Registration, etc. Each Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default hereunder, if for any reason the Collateral Agent desires to sell any of the Pledged Securities of the Borrower at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Securities to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, reasonable expenses, reasonable costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent for legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent or any other Secured Party expressly for use therein. Each Pledgor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Securities to qualify, file or register, any of the Pledged Securities under the Blue Sky or other securities laws of such states as may be reasonably requested by the 9 9 Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. Each Pledgor will bear all costs and expenses of carrying out its obligations under this Section 12. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 12 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 12 may be specifically enforced. SECTION 13. Security Interest Absolute. All rights of the Collateral Agent hereunder, the grant of a security interest in the Collateral and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any of the foregoing, (c) any exchange, release or nonperfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or in respect of this Agreement (other than the indefeasible payment in full of all the Obligations). SECTION 14. Termination or Release. (a) This Agreement and the security interests granted hereby shall terminate when all the Obligations have been indefeasibly paid in full (other than Obligations in respect of indemnification and expense reimbursement obligations hereunder or under any other Loan Document to the extent such Obligations are not due and payable) and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement. (b) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement to any person that is not a Pledgor, or, upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.08(b) of the Credit Agreement, the security interest in such Collateral shall be automatically released. (c) In connection with any termination or release pursuant to paragraph (a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at such Pledgor's expense, all documents that such Pledgor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 14 shall be without recourse to or warranty by the Collateral Agent. SECTION 15. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Pledgor shall be given to it at the address for notices set forth on Schedule I in care of the Borrower. SECTION 16. Further Assurances. Each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as the Collateral Agent may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder. SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Pledgor that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. This Agreement shall 10 10 become effective as to any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Pledgor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Pledgor shall have the right to assign its rights hereunder or any interest herein or in the Collateral (and any such attempted assignment shall be void and the Collateral Agent shall not have the right to assign its rights or obligations hereunder or any interest herein other than pursuant to any assignment or resignation permitted under the Credit Agreement), except as expressly contemplated by this Agreement or the other Loan Documents. If all of the capital stock of a Pledgor is sold, transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower pursuant to a transaction permitted by Section 6.05 of the Credit Agreement, such Pledgor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Pledgor and may be amended, modified, supplemented, waived or released with respect to any Pledgor without the approval of any other Pledgor and without affecting the obligations of any other Pledgor hereunder. SECTION 18. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by each Pledgor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid (other than Obligations in respect of indemnification and expense reimbursement obligations hereunder or under any other Loan Document to the extent such Obligations are not due and payable) or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitments have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). SECTION 20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute a single contract, and shall become effective as provided in Section 17. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 21. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting this Agreement. 11 11 SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or its properties in the courts of any jurisdiction. (b) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 15. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 24. Additional Pledgors. Pursuant to Section 5.11 of the Credit Agreement, each Domestic Subsidiary of the Borrower that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter in this Agreement as a Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary owns or possesses property of a type that would be considered Collateral hereunder. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary Pledgor hereunder with the same force and effect as if originally named as a Subsidiary Pledgor herein. The execution and delivery of such instrument shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Pledgor as a party to this Agreement. 12 12 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. NFC CASTINGS, INC., by ----------------------------- Name: Title: NC MERGER COMPANY, by ----------------------------- Name: Title: NEENAH FOUNDRY COMPANY, by ----------------------------- Name: Title: HARTLEY CONTROLS CORPORATION, by ----------------------------- Name: Title: NEENAH TRANSPORT, INC., by ----------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent, by ------------------------------ Name: Title: 13 Schedule I to the Pledge Agreement SUBSIDIARY PLEDGORS Name 14 Schedule II to the Pledge Agreement CAPITAL STOCK Number and Number of Registered Class of Percentage Issuer Certificate Owner Shares of Shares - ------ ----------- ----- ------ --------- DEBT SECURITIES Principal Date of Maturity Pledgor Issuer Amount Note Date - ------- ------ ------ ---- ---- 15 Annex 1 to the Pledge Agreement SUPPLEMENT NO. dated as of [ ], to the PLEDGE AGREEMENT dated as of April 30, 1997, among NC MERGER COMPANY, a Wisconsin corporation (the "Borrower"), NFC CASTINGS, INC., a Delaware corporation ("Holdings") and each subsidiary of the Borrower listed on Schedule I to such Pledge Agreement (each such subsidiary, individually, a "Subsidiary Pledgor" and, collectively, the "Subsidiary Pledgors"; the Borrower, Holdings and Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Holdings, the lenders from time to time party thereto (the "Lenders"), Chase, as administrative agent for the Lenders, Collateral Agent and issuing bank (in such capacity, the "Issuing Bank"), (b) the Parent Guarantee Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between Holdings and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"; and, collectively with the Parent Guarantee Agreement, the "Guarantee Agreements") among the Subsidiary Guarantors and the Collateral Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. C. The Pledgors have entered into the Pledge Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Domestic Subsidiary of the Borrower that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter into the Pledge Agreement as a Subsidiary Pledgor upon becoming such a Subsidiary if such Subsidiary owns or possesses property of a type that would be considered Collateral under the Pledge Agreement. Section 24 of the Pledge Agreement provides that such Subsidiaries may become Subsidiary Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Pledgor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Pledgor agree as follows: SECTION 1. In accordance with Section 24 of the Pledge Agreement, the New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as security for the payment and performance in full of the Obligations (as defined in the Pledge Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Pledgor's right, title and interest in and to the Collateral (as defined in the Pledge Agreement) of the New Pledgor. Each reference to a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor. The Pledge Agreement is hereby incorporated herein by reference. 16 2 SECTION 2. The New Pledgor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Pledgor hereby represents and warrants that set forth on Schedule I attached hereto is a true and correct schedule of all its Pledged Securities. SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 15 of the Pledge Agreement. All communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature hereto in care of the Borrower. SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly executed this Supplement to the Pledge Agreement as of the day and year first above written. [Name of New Pledgor], by Name: 17 3 Title: Address: THE CHASE MANHATTAN BANK, as Collateral Agent, by ----------------------------- Name: Title: 18 Schedule I to Supplement No.___ to the Pledge Agreement Pledged Securities of the New Pledgor CAPITAL STOCK Number and Number of Registered Class of Percentage Issuer Certificate Owner Shares of Shares - ------ ----------- ----- ------ --------- DEBT SECURITIES Principal Date of Maturity Pledgor Issuer Amount Note Date - ------- ------ ------ ---- ---- EX-10.12 25 SUBSIDIARY GUARANTEE AGREEMENT 1 EXHIBIT 10.12 SUBSIDIARY GUARANTEE AGREEMENT dated as of April 30, 1997, among each of the subsidiaries listed on Schedule I hereto (each such subsidiary, individually, a "Guarantor" and, collectively, the "Guarantors") of NC MERGER COMPANY, a Wisconsin corporation (the "Borrower"), and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, NFC Castings, Inc. ("Holdings"), the lenders from time to time party thereto (the "Lenders"), and Chase, as administrative agent for the Lenders, Collateral Agent and as issuing bank (in such capacity, the "Issuing Bank"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Guarantors is a wholly owned Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders, and the issuance of the Letters of Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantors of a Subsidiary Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute this Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including reasonable fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents and (c) unless otherwise agreed upon in writing by the applicable Lender party thereto, all obligations of the Borrower, monetary or otherwise, under each Interest Rate Protection Agreement entered into with a counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. Anything contained in this Agreement to the contrary notwithstanding, the obligations of each Guarantor hereunder shall be limited to a maximum aggregate amount equal to the greatest amount that 2 2 would not render such Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any provisions of applicable state law (collectively, the "Fraudulent Transfer Laws"), in each case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Guarantor (a) in respect of intercompany indebtedness to the Borrower or Affiliates of the Borrower to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Guarantor hereunder and (b) under any Guarantee of senior unsecured indebtedness or Indebtedness subordinated in right of payment to the Obligations which Guarantee contains a limitation as to maximum amount similar to that set forth in this paragraph, pursuant to which the liability of such Guarantor hereunder is included in the liabilities taken into account in determining such maximum amount) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such Guarantor pursuant to (i) applicable law or (ii) any agreement providing for an equitable allocation among such Guarantor and other Affiliates of the Borrower of obligations arising under Guarantees by such parties (including the Indemnity, Subrogation and Contribution Agreement). SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other Guarantor under this Agreement or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party. SECTION 3. Security. Each of the Guarantors authorizes the Collateral Agent and each of the other Secured Parties, to (a) take and hold security for the payment of this Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may reasonably determine and (c) release or substitute any one or more endorsees, other guarantors of other obligors. SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any 3 3 extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each of the Guarantors waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each of the Guarantors waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security. SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent or such other Secured Party as designated thereby in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Collateral Agent or any Secured Party as provided above, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Collateral Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. Each of the Guarantors assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 9. Representations and Warranties. Each of the Guarantors represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct. SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded 4 4 or must otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Collateral Agent, and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Guarantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by Section 6.05 of the Credit Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. SECTION 12. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). SECTION 14. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to each Guarantor shall be given to it in care of the Borrower at its address set forth in Schedule I. SECTION 15. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as 5 5 long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitment have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 16. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 11. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 17. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, 6 6 THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. SECTION 20. Additional Guarantors. Pursuant to Section 5.11 of the Credit Agreement, each Domestic Subsidiary of the Borrower that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming such a Subsidiary. Upon execution and delivery after the date hereof by the Collateral Agent and such a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. 7 7 SECTION 21. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Secured Party to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Secured Party under this Section 21 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. NEENAH FOUNDRY COMPANY, by ---------------------------------- Name: Title: HARTELY CONTROLS CORPORATION, by ---------------------------------- Name: Title: NEENAH TRANSPORT, INC., by ---------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent, by Name: Title: 8 Schedule I to the Subsidiary Guarantee Agreement GUARANTORS
Guarantor Address Neenah Foundry Company 2121 Brooks Avenue Neenah, WI 54956 Hartley Controls Corporation 2400 Holly Road Neenah, WI 54956 Neenah Transport, Inc. 2121 Brooks Avenue Neenah, WI 54956
9 Annex 1 to the Subsidiary Guarantee Agreement SUPPLEMENT NO. dated as of [ ], to the Subsidiary Guarantee Agreement dated as of April 30, 1997, among each of the subsidiaries listed on Schedule I thereto (each such subsidiary, individually, a "Guarantor" and, collectively, the "Guarantors") of NC MERGER COMPANY, a Wisconsin corporation (the "Borrower"), and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, NFC Castings, Inc. ("Holdings"), the lenders from time to time party thereto (the "Lenders"), and Chase, as administrative agent for the Lenders, Collateral Agent and issuing bank (in such capacity, the "Issuing Bank"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Subsidiary Guarantee Agreement and the Credit Agreement. C. The Guarantors have entered into the Subsidiary Guarantee Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Domestic Subsidiary of the Borrower that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter into the Subsidiary Guarantee Agreement as a Guarantor upon becoming such a Subsidiary. Section 20 of the Subsidiary Guarantee Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Subsidiary Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Subsidiary Guarantee Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 20 of the Subsidiary Guarantee Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Subsidiary Guarantee Agreement applicable to it as a Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a "Guarantor" in the Subsidiary Guarantee Agreement shall be deemed to include the New Guarantor. The Subsidiary Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Collateral Agent. Delivery of an executed 10 2 signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Subsidiary Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 14 of the Subsidiary Guarantee Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly executed this Supplement to the Subsidiary Guarantee Agreement as of the day and year first above written. [Name Of New Guarantor], by --------------------------------------- Name: Title: Address: ------------------------------ THE CHASE MANHATTAN BANK, as Collateral Agent, by --------------------------------------- Name: Title: EX-10.13 26 PARENT GUARANTEE AGREEMENT DATED AS OF APRIL 30/97 1 EXHIBIT 10.13 PARENT GUARANTEE AGREEMENT dated as of April 30, 1997, between NFC CASTINGS, INC., a Delaware corporation (the "Guarantor") and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among NC Merger Company, a Wisconsin corporation (the "Borrower"), the Guarantor, the lenders from time to time party thereto (the "Lenders") and Chase, as administrative agent for the Lenders, Collateral Agent and issuing bank (in such capacity, the "Issuing Bank"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. As the record owner of all of the issued and outstanding capital stock of the Borrower, the Guarantor acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantor of a Parent Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantor is willing to execute this Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including reasonable fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents and (c) unless otherwise agreed upon in writing by the applicable Lender party thereto, all obligations of the Borrower, monetary or otherwise, under each Interest Rate Protection Agreement entered into with a counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). The Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee not withstanding any extension or renewal of any Obligation. SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, the Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To 2 2 the fullest extent permitted by applicable law, the obligations of the Guarantor hereunder shall not be affected by (a) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other guarantor of the Obligations under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other guarantor of the Obligations or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party. SECTION 3. Security. The Guarantor authorizes the Collateral Agent and each of the other Secured Parties to (a) take and hold security for the payment of this Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may reasonably determine and (c) release or substitute any one or more endorsees, other guarantors or other obligors. SECTION 4. Guarantee of Payment. The Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives to the fullest extent permitted by applicable law any right to require that any resort be had by the Collateral Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of the Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of the Guarantor or that would otherwise operate as a discharge of the Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, the Guarantor waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower or any other guarantor, without affecting or impairing in any way the liability of the Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. To the fullest extent permitted by applicable law, the Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantor against the Borrower or any other guarantor, as the case may be, or any security. 3 3 SECTION 7. Agreement to Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against the Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent or such other Secured Party as designated thereby in cash the amount of such unpaid Obligations. Upon payment by the Guarantor of any sums to the Collateral Agent or any Secured Party as provided above, all rights of the Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by the Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If any amount shall erroneously be paid to the Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Collateral Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. The Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that the Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise the Guarantor of information known to it or any of them regarding such circumstances or risks. SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or the Guarantor upon the bankruptcy or reorganization of the Borrower, the Guarantor or otherwise. SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantor that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective when a counterpart hereof executed on behalf of the Guarantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon the Guarantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of the Guarantor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that the Guarantor shall not have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void) and the Collateral Agent shall not have the right to assign its rights or obligations hereunder or any interest herein other than pursuant to any assignment or resignation permitted under the Credit Agreement. SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents 4 4 are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantor and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). SECTION 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to the Guarantor shall be given to it at 2121 Brooks Avenue, Neenah, WI 54956. SECTION 14. Survival of Agreement. All covenants, agreements, representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitment have not been terminated. SECTION 15. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 10. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 16. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. NFC CASTINGS, INC., as Guarantor, by Name: Title: 5 5 THE CHASE MANHATTAN BANK, as Collateral Agent, by Name: Title: EX-10.14 27 SECURITY AGREEMENT DATED AS OF APRIL 30, 1997 1 EXHIBIT 10.14 SECURITY AGREEMENT dated as of April 30, 1997, among NC MERGER COMPANY, a Wisconsin corporation (the "Borrower"), each subsidiary of the Borrower listed on Schedule I hereto (each such subsidiary, individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors"; the Subsidiary Guarantors and the Borrower are referred to collectively herein as the "Grantors") and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). Reference is made to the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, NFC Castings, Inc. ("Holdings"), the lenders from time to time party thereto (the "Lenders") and Chase, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), Collateral Agent and issuing bank (in such capacity, the "Issuing Bank"). The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Holdings and each Subsidiary Guarantor has agreed to guarantee, among other things, all the obligations of the Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure (a) the due and punctual payment by the Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including reasonable fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents and (d) the due and punctual payment and performance of all obligations of the Borrower under each Interest Rate Protection Agreement entered into with any counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations described in the preceding clauses (a) through (d) being collectively called the "Obligations"). Accordingly, the Grantors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: 2 2 ARTICLE I Definitions SECTION 1.01. Definition of Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the following terms shall have the following meanings: "Account Debtor" shall mean any person who is or who may become obligated to any Grantor under, with respect to or on account of an Account. "Accounts" shall mean any and all right, title and interest of any Grantor to payment for goods and services sold or leased, including any such right evidenced by chattel paper, whether due or to become due, whether or not it has been earned by performance, and whether now or hereafter acquired or arising in the future, including accounts receivable from Affiliates of the Grantors. "Accounts Receivable" shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired. "Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts (including the Concentration Account, the Collection Deposit Accounts and the General Fund Account) and (g) Proceeds. "Collection Deposit Account" shall mean a lockbox account of a Grantor maintained for the benefit of the Secured Parties with the Collateral Agent or with a Sub-Agent pursuant to a Lockbox and Depository Agreement. "Concentration Account" shall mean the cash collateral account established at the office of Chase located at 270 Park Avenue, New York, NY 10017, in the name of the Collateral Agent, Account No. [ ]. "Copyright License" shall mean any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor or which such Grantor otherwise has the right to license, or granting any right to such Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement. "Copyrights" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule II. "Credit Agreement" shall have the meaning assigned to such term in the preliminary statement of this Agreement. 3 3 "Documents" shall mean all instruments, files, records, ledger sheets and documents covering or relating to any of the Collateral. "Equipment" shall mean all equipment, furniture and furnishings, and all tangible personal property similar to any of the foregoing, including tools, parts and supplies of every kind and description, and all improvements, accessions or appurtenances thereto, that are now or hereafter owned by any Grantor. The term Equipment shall include Fixtures. "Fixtures" shall mean all items of Equipment, whether now owned or hereafter acquired, of any Grantor that become so related to particular real estate that an interest in them arises under any real estate law applicable thereto. "General Fund Account" shall mean the general fund account established at the office of Chase located at 270 Park Avenue, New York, NY 10017, in the name of the Borrower, Account No. [ ]. "General Intangibles" shall mean all choses in action and causes of action and all other assignable intangible personal property of any Grantor of every kind and nature (other than Accounts Receivable) now owned or hereafter acquired by any Grantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Interest Rate Protection Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts Receivable. "Intellectual Property" shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing. "Inventory" shall mean all goods of any Grantor, whether now owned or hereafter acquired, held for sale or lease, or furnished or to be furnished by any Grantor under contracts of service, or consumed in any Grantor's business, including raw materials, intermediates, work in process, packaging materials, finished goods, semi-finished inventory, scrap inventory, manufacturing supplies and spare parts, and all such goods that have been returned to or repossessed by or on behalf of any Grantor. "License" shall mean any Patent License, Trademark License, Copyright License or other license or sublicense to which any Grantor is a party, including those listed on Schedule III (other than those license agreements in existence on the date hereof and listed on Schedule III and those license agreements entered into after the date hereof, which by their terms prohibit assignment or a grant of a security interest by such Grantor as licensee thereunder). "Lockbox and Depository Agreement" shall mean a Lockbox and Depository Agreement substantially in the form of Annex 1 hereto among the Borrower, the Collateral Agent and a Sub-Agent. "Lockbox System" shall have the meaning assigned to such term in Section 5.01. "Obligations" shall have the meaning assigned to such term in the preliminary statement of this Agreement. 4 4 "Patent License" shall mean any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement. "Patents" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule IV, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "Perfection Certificate" shall mean a certificate substantially in the form of Annex 2 hereto, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer and the chief legal officer of the Borrower. "Proceeds" shall mean any consideration received from the sale, exchange, license, lease or other disposition of any asset or property that constitutes Collateral, any value received as a consequence of the possession of any Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property which constitutes Collateral, and shall include (a) all cash and negotiable instruments received by or held on behalf of the Collateral Agent pursuant to the Lockbox System, (b) any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (i) past, present or future infringement of any Patent now or hereafter owned by any Grantor, or licensed under a Patent License, (ii) past, present or future infringement or dilution of any Trademark now or hereafter owned by any Grantor or licensed under a Trademark License or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past, present or future breach of any License and (iv) past, present or future infringement of any Copyright now or hereafter owned by any Grantor or licensed under a Copyright License and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) the Issuing Bank, (e) each counterparty to an Interest Rate Protection Agreement entered into with the Borrower if such counterparty was a Lender at the time the Interest Rate Protection Agreement was entered into, (f) the beneficiaries of each indemnification obligation undertaken by any Grantor under any Loan Document and (g) the successors and assigns of each of the foregoing. "Security Interest" shall have the meaning assigned to such term in Section 2.01. "Sub-Agent" shall mean a financial institution which shall have delivered to the Collateral Agent an executed Lockbox and Depository Agreement. "Trademark License" shall mean any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement. "Trademarks" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious 5 5 business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States or any similar offices in any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule V, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill. SECTION 1.03. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. ARTICLE II Security Interest SECTION 2.01. Security Interest. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor's right, title and interest in, to and under the Collateral (the "Security Interest"). Without limiting the foregoing, the Collateral Agent is hereby authorized to file one or more financing statements (including fixture filings), continuation statements, filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party. SECTION 2.02. No Assumption of Liability. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral. ARTICLE III Representations and Warranties The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that: SECTION 3.01. Title and Authority. Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval which has been obtained. SECTION 3.02. Filings. (a) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete. Fully executed Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule 6 to the Perfection Certificate, 6 6 which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. (b) Each Grantor represents and warrants that fully executed security agreements in the form hereof and containing a description of all Collateral consisting of Intellectual Property have been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section 205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, or in any other necessary jurisdiction, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof). SECTION 3.03. Validity of Security Interest. The Security Interest constitutes (a) a legal and valid security interest in all the Collateral securing the payment and performance of the Obligations, (b) subject to the filings described in Section 3.02 above, a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (c) a security interest that shall be perfected in all Collateral in which a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three month period (commencing as of the date hereof) pursuant to 35 U.S.C. Section 261 or 15 U.S.C. Section 1060 or the one month period (commencing as of the date hereof) pursuant to 17 U.S.C. Section 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Collateral, other than Liens expressly permitted to be prior to the Security Interest pursuant to Section 6.02 of the Credit Agreement (including any such Lien expressly permitted pursuant to such Section 6.02 in respect of which a release in a form acceptable to the Collateral Agent has been delivered to the Collateral Agent). SECTION 3.04. Absence of Other Liens. The Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement (including any such Lien expressly permitted pursuant to such Section 6.02 in respect of which a release in a form acceptable to the Collateral Agent has been delivered to the Collateral Agent). The Grantor has not filed or consented to the filing of (a) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Collateral, (b) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (c) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for 7 7 Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement (including any such Lien expressly permitted pursuant to such Section 6.02 in respect of which a release in a form acceptable to the Collateral Agent has been delivered to the Collateral Agent). ARTICLE IV Covenants SECTION 4.01. Change of Name; Location of Collateral; Records; Place of Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change (i) in its corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of its chief executive office, its principal place of business, any office in which it maintains original books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in its identity or corporate structure or (iv) in its Federal Taxpayer Identification Number. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Collateral owned or held by such Grantor is damaged or destroyed. (b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral. SECTION 4.02. Periodic Certification. Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04 of the Credit Agreement, the Borrower shall deliver to the Collateral Agent a certificate executed by a Financial Officer and the chief legal officer of the Borrower (a) setting forth the information required pursuant to Section 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of such certificate or the date of the most recent certificate delivered pursuant to this Section 4.02 and (b) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (a) above to the extent necessary to protect and perfect the Security Interest for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). Each certificate delivered pursuant to this Section 4.02 shall identify in the format of Schedule II, III, IV or V, as applicable, all Intellectual Property of any Grantor in existence on the date thereof and not then listed on such Schedules or previously so identified to the Collateral Agent. SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost and expense, take any and all actions reasonably necessary to defend title to the Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement (including any such Lien expressly 8 8 permitted pursuant to such Section 6.02 in respect of which a release in a form acceptable to the Collateral Agent has been delivered to the Collateral Agent). SECTION 4.04. Further Assurances. Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any reasonable fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent. Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule II, III, IV or V hereto or adding additional schedules hereto to specifically identify any asset or item that may constitute Copyrights, Licenses, Patents or Trademarks; provided, however, that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its best efforts to take such action as shall be reasonably necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral. SECTION 4.05. Inspection and Verification. Upon reasonable notice to the Grantors, the Collateral Agent and such persons as the Collateral Agent may reasonably designate shall at any reasonable time and from time to time at reasonable intervals have the right, at the Grantors' own cost and expense, to inspect the Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral is located, to discuss the Grantors' affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures, in accordance with Sections 5.06 and 5.10 of the Credit Agreement, the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Collateral for the purpose of making such a verification provided, however, that, unless a Default or Event of Default shall have occurred and be continuing, in no event shall the Administrative Agent or any Lender or any of their respective designees contact any customer or supplier of any Grantor regarding any of the Loan Documents or the Obligations without such Grantor's prior consent. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party (it being understood that any such information shall be deemed to be "Information" subject to the provisions of Section 9.16 of the Credit Agreement). SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 6.02 of the Credit Agreement (including any such Lien expressly permitted pursuant to such Section 6.02 in respect of which a release in a form acceptable to the Collateral Agent has been delivered to the Collateral Agent), and may pay for the maintenance and preservation of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.06 shall be interpreted as 9 9 excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents. SECTION 4.07. Assignment of Security Interest. If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other person to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other person granting the security interest. SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance. SECTION 4.09. Use and Disposition of Collateral. None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Collateral or shall grant any other Lien in respect of the Collateral, except as expressly permitted by Section 6.02 of the Credit Agreement (including any such Lien expressly permitted pursuant to such Section 6.02 in respect of which a release in a form acceptable to the Collateral Agent has been delivered to the Collateral Agent). None of the Grantors shall make or permit to be made any transfer of the Collateral and each Grantor shall remain at all times in possession of the Collateral owned by it, except that (a) Inventory may be sold in the ordinary course of business and (b) unless and until the Collateral Agent shall notify the Grantors that an Event of Default shall have occurred and be continuing and that during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Collateral (which notice may be given by telephone if promptly confirmed in writing by first class mail or delivery by hand, Federal Express or any other nationally recognized courier service), the Grantors may use and dispose of the Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, bailee, agent or processor at any time unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and shall have agreed in writing to hold the Inventory subject to the Security Interest and the instructions of the Collateral Agent and to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise. SECTION 4.10. Limitation on Modification of Accounts. None of the Grantors will, without the Collateral Agent's prior written consent, which, prior to the occurrence and continuance of any Default or Event of Default, will not be unreasonably withheld, grant any extension of the time of payment of any of the Accounts Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged. SECTION 4.11. Insurance. The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with Section 5.02 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, 10 10 of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.11, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable, upon written demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby. SECTION 4.12. Legend. Each Grantor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, its Accounts Receivable and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts Receivable have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein. SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of its licensees to, do any act, or omit to do any act, whereby any Patent which is material to the conduct of such Grantor's business may become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws. (b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor's business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights. (c) Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws. (d) Each Grantor shall notify the Collateral Agent promptly if it knows that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor's ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same. (e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent, and, upon reasonable request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent's security interest in such Patent, Trademark 11 11 or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable. (f) Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor's business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties. (g) In the event that any Grantor has reason to believe that any Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor's business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Collateral. (h) Upon and during the continuance of an Event of Default, each Grantor shall use its best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of such Grantor's right, title and interest thereunder to the Collateral Agent or its designee. ARTICLE V Collections SECTION 5.01. Lockbox System. (a) The Grantors have established in the name of the Collateral Agent, and subject to the control of the Collateral Agent pursuant to the Lockbox and Depository Agreements, for the ratable benefit of the Collateral Agent and the other Secured Parties, a system of lockboxes and related deposit accounts (the "Lockbox System") with one or more financial institutions that are reasonably satisfactory to the Collateral Agent into which the Proceeds of all Accounts Receivable and Inventory shall be deposited and forwarded to the Collateral Agent in accordance with the Lockbox and Depository Agreements. (b) All Proceeds of Inventory and Accounts Receivable that have been received on any Business Day through the Lockbox System will be transferred into the Concentration Account on such Business Day to the extent required by the applicable Lockbox and Depository Agreement. All Proceeds stemming from the sale of a substantial portion of the Collateral (other than Proceeds of Accounts) that have been received by a Grantor on any Business Day will be transferred into the Concentration Account on such Business Day. All Proceeds received on any Business Day by the Collateral Agent pursuant to Section 5.02 will be transferred into the Concentration Account on such Business Day. (c) The Concentration Account is, and shall remain, under the sole dominion and control of the Collateral Agent. Each Grantor acknowledges and agrees that (i) such Grantor has no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration Account shall continue to be collateral security for all of the Obligations and (iii) upon the occurrence and during the continuance of an 12 12 Event of Default, at the Collateral Agent's election, the funds on deposit in the Concentration Account shall be applied as provided in Section 6.02. So long as no Event of Default has occurred and is continuing, the Collateral Agent shall promptly remit any funds on deposit in the Concentration Account to the General Fund Account and the Borrower shall have the right, at any time and from time to time, to withdraw such amounts from the General Fund Account as it shall deem to be necessary or desirable. (d) Effective upon notice to the Grantors from the Collateral Agent after the occurrence and during the continuance of an Event of Default (which notice may be given by telephone if promptly confirmed in writing by first class mail, or delivery by hand, Federal Express or any other nationally recognized courier service), the Concentration Account will, without any further action on the part of any Grantor, the Collateral Agent or any Sub-Agent, convert into a closed lockbox account under the exclusive dominion and control of the Collateral Agent in which funds are held subject to the rights of the Collateral Agent hereunder. Each Grantor irrevocably authorizes the Collateral Agent to notify each Sub-Agent (i) of the occurrence of an Event of Default and (ii) of the matters referred to in this paragraph (d). Following the occurrence of an Event of Default, the Collateral Agent may instruct each Sub-Agent to transfer immediately all funds held in each deposit account to the Concentration Account. SECTION 5.02. Collections. (a) Each Grantor agrees (i) to notify and direct promptly each Account Debtor and every other person obligated to make payments on Accounts Receivable or in respect of any Inventory to make all such payments directly to the Lockbox System established in accordance with Section 5.01, (ii) to use all reasonable efforts to cause each Account Debtor and every other person identified in clause (i) above to make all payments with respect to Accounts Receivable and Inventory directly to such Lockbox System and (iii) promptly to deposit all payments received by it on account of Accounts Receivable and Inventory, whether in the form of cash, checks, notes, drafts, bills of exchange, money orders or otherwise, in the Lockbox System in precisely the form in which received (but with any endorsements of such Grantor necessary for deposit or collection), and until they are so deposited such payments shall be held in trust by such Grantor for and as the property of the Collateral Agent. (b) Without the prior written consent of the Collateral Agent, no Grantor shall, in a manner adverse to the Lenders, change the general instructions given to Account Debtors in respect of payment on Accounts to be deposited in the Lockbox System. Until the Collateral Agent shall have advised the Grantors to the contrary, each Grantor shall, and the Collateral Agent hereby authorizes each Grantor to, enforce and collect all amounts owing on the Inventory and Accounts Receivable, for the benefit and on behalf of the Collateral Agent and the other Secured Parties; provided, however, that such privilege may at the option of the Collateral Agent be terminated upon the occurrence and during the continuance of any Event of Default. SECTION 5.03. Power of Attorney. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent with notice to the Grantor) as such Grantor's true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantor's name or otherwise, for the use and benefit of the Collateral Agent and the Secured Parties, upon the occurrence and during the continuance of an Event of Default (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, com promise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make 13 13 any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Secured Party, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Collateral Agent or any Secured Party with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Grantor or to any claim or action against the Collateral Agent or any Secured Party. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable. The provisions of this Section shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any Secured Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any Secured Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise. ARTICLE VI Remedies SECTION 6.01. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any such Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral and without liability for trespass to enter any premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. 14 14 The Collateral Agent shall give the Grantors 10 days' written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply the proceeds of any collection or sale of the Collateral, as well as any Collateral consisting of cash, as follows: FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in its capacity as such hereunder or under any other Loan Document) in connection with such collection or sale or otherwise in connection with this Agreement or any of the Obligations, including all reasonable court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and 15 15 THIRD, as promptly as practicable, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 6.03. Grant of License to Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Article at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sub-license any of the Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sub-license or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default. ARTICLE VII Miscellaneous SECTION 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Guarantor shall be given to it at its address or telecopy number set forth on Schedule I, with a copy to the Borrower. SECTION 7.02. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement (other than the indefeasible payment in full of all the Obligations and termination of all commitments of the Lenders and the Issuing Bank). SECTION 7.03. Survival of Agreement. All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, and the execution and delivery to the Lenders of any 16 16 notes evidencing such Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect until this Agreement shall terminate. SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder. SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a) Each Grantor jointly and severally agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, disbursements and other charges of its counsel and of any experts or agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement (including the customary fees and charges of the Collateral Agent for any audits conducted by it or on its behalf with respect to the Accounts Receivable or Inventory), (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees against, and hold each of them harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable fees, disbursements and other charges of counsel, incurred by or asserted against any of them arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any Lender. All amounts due under this Section 7.06 shall be payable on written demand therefor. 17 17 SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the Collateral Agent, the Issuing Bank, the Administrative Agent and the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement. SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09. SECTION 7.10. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract (subject to Section 7.04), and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. SECTION 7.12. Headings. Article and Section headings used herein are for the purpose of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. 18 18 SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent, the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or its properties in the courts of any jurisdiction. (b) Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement will affected the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 7.14. Termination. This Agreement and the Security Interest shall terminate when all the Obligations have been indefeasibly paid in full (other than Obligations in respect of indemnification and expense reimbursement obligations hereunder or under any other Loan Document to the extent such Obligations are not due and payable), the Lenders have no further commitment to lend, the L/C Exposure has been reduced to zero and the Issuing Bank has no further commitment to issue Letters of Credit under the Credit Agreement, at which time the Collateral Agent shall execute and deliver to the Grantors, at the Grantors' expense, all Uniform Commercial Code termination statements and similar documents which the Grantors shall reasonably request to evidence such termination. Any execution and delivery of termination statements or documents pursuant to this Section 7.14 shall be without recourse to or warranty by the Collateral Agent. A Subsidiary Guarantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Subsidiary Guarantor shall be automatically released in the event that all the capital stock of such Subsidiary Guarantor shall be sold, transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise. 19 19 SECTION 7.15. Additional Grantors. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 3 hereto, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. NC MERGER COMPANY, by ------------------------------------------ Name: Title: NEENAH FOUNDRY COMPANY, by ------------------------------------------ Name: Title: HARTLEY CONTROLS CORPORATION, by ------------------------------------------ Name: Title: NEENAH TRANSPORT, INC., by ------------------------------------------ Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent, by ------------------------------------------ Name: Title: 20 Schedule I to the Security Agreement SUBSIDIARY GUARANTORS Neenah Foundry Company Hartley Controls Corporation Neenah Transport, Inc. 21 Schedule II to the Security Agreement COPYRIGHTS 22 Schedule III to the Security Agreement LICENSES 23 Schedule IV to the Security Agreement PATENTS 24 Schedule V to the Security Agreement TRADEMARKS 25 Annex 1 to the Security Agreement LOCKBOX AND DEPOSITORY AGREEMENT dated as of [ ], among [Name of Grantor], a [ ] corporation (the "Grantor"), THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (such term, and each other capitalized term used but not defined herein, having the meaning given it in the Security Agreement referred to below) and [ ], a [ ] banking corporation (the "Sub-Agent"). A. The Grantor and the Collateral Agent are parties to a Security Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Security Agreement"). Pursuant to the terms of the Security Agreement, the Grantor has granted to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in its Accounts Receivable and other Collateral (including Inventory, cash, cash accounts and Proceeds) to secure the payment and performance of the Obligations and has irrevocably appointed the Collateral Agent as its agent to collect amounts due in respect of Accounts Receivable and Inventory. B. The Sub-Agent has agreed to act as collection sub-agent of the Collateral Agent to receive and forward payments with respect to the Accounts Receivable and Inventory on the terms and subject to the conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. The Collateral Agent hereby appoints the Sub-Agent as its collection sub-agent under the Security Agreement and authorizes the Sub-Agent, on the terms and subject to the conditions set forth herein, to receive payments in respect of Collateral consisting of Accounts Receivable and Inventory. 2. The Sub-Agent has established and shall maintain deposit account number [ ] (including all subaccounts thereof) for the benefit of the Collateral Agent (such account being called the "Collection Deposit Account"). The Collection Deposit Account shall be designated with the title "The Chase Manhattan Bank, as Collateral Agent under the Neenah Corporation Security Agreement dated as of April [ ], 1997" (or a similar title). [Subject to the Sub-Agent's Terms for Remittance Banking (Lockbox) Services attached hereto as Exhibit A, to the extent that the terms thereof relate to procedures or fees and to the extent not inconsistent with the terms hereof,] all payments received by the Sub-Agent in Lockbox Number [ ] and [ ] or any replacements in respect thereof (the "Lockboxes") shall be promptly deposited in the Collection Deposit Account and shall not be commingled with other funds. All funds at any time on deposit in the Collection Deposit Account shall be held by the Sub-Agent for application in accordance with the terms of this Agreement. The Sub-Agent agrees to give the Collateral Agent prompt notice if the Collection Deposit Account shall become subject to any writ, judgment, warrant of attachment, execution or similar process. As security for the payment and performance of the Obligations, the Grantor hereby confirms and pledges, assigns and transfers to the Collateral Agent, and hereby creates and grants to the Collateral Agent, a security interest in the Collection Deposit Account, all property and assets held therein and all Proceeds thereof. 3. The Collection Deposit Account shall be under the sole dominion and control of the Collateral Agent, who shall possess all right, title and interest in all of the items from time to time in the Collection Deposit Account and their Proceeds. The Sub-Agent shall be the Collateral Agent's agent for the purpose of holding and collecting such items and their Proceeds. Neither the Grantor nor any person or entity claiming by, through or under the Grantor shall have any right, title or interest in, or control over the use of, or any right to withdraw any amount from, the Collection Deposit Account, except that the Collateral 26 2 Agent shall have the right to withdraw amounts from the Collection Deposit Account. The Sub-Agent shall be entitled to rely on, and shall act in accordance with, all instructions given to it by the Collateral Agent with respect to the Collection Deposit Account. The Collateral Agent shall have the sole power to agree with the Sub-Agent as to specifications for Lockbox services. 4. Upon receipt of written, telecopy or telephonic notice (which, in the case of telephonic notice, shall be promptly confirmed in writing or by telecopy) from the Collateral Agent, the Sub-Agent shall, if so directed in such notice (subject to the Sub-Agent's right to request that the Collateral Agent furnish, in form satisfactory to the Sub-Agent, signature cards and/or other appropriate documentation), promptly transmit or deliver to the Collateral Agent at the office specified in paragraph 12 hereof (or such other office as the Collateral Agent shall specify) (a) all funds, if any, then on deposit in, or otherwise to the credit of, the Collection Deposit Account (provided that funds on deposit that are subject to collection may be transmitted promptly upon availability for withdrawal), (b) all checks, drafts and other instruments for the payment of money received in the Lockboxes and in the possession of the Sub-Agent, without depositing such checks, drafts or other instruments in the Collection Deposit Account or any other account and (c) any checks, drafts and other instruments for the payment of money received in the Lockboxes by the Sub-Agent after such notice, in whatever form received, provided that the Sub-Agent may retain a reasonable reserve in a separate deposit account with the Sub-Agent in respect of unpaid fees and amounts which may be subject to collection. 5. The Sub-Agent is hereby instructed and authorized to transfer by wire transfer or Automated Clearing House ("ACH") from the Collection Deposit Account all funds that are from time to time deposited or otherwise credited to such account (after such funds become available to the Sub-Agent, either through the Federal Reserve System or other clearing mechanism used by the Sub-Agent's branch and to the extent such funds exceed $1,000), to such account as the Collateral Agent may from time to time direct, provided that, unless the Collateral Agent otherwise instructs, no such transfer shall be required if such transfer would result in the transfer of an amount less than $1,000. Unless otherwise directed by the Collateral Agent, such funds shall be transferred on each business day by wire transfer or ACH and shall be identified as follows: The Chase Manhattan Bank ABA Number For credit to The Chase Manhattan Bank, New York, NY 10017 Account Number Re: Neenah Corporation Cash Collateral Account These transfer instructions and authorizations may not be amended, altered or revoked by the Grantor without the prior written consent of the Collateral Agent. The Collateral Agent, however, shall have the right to amend or revoke these transfer instructions and authorizations at any time without the consent of the Grantor. 6. The Sub-Agent shall furnish the Collateral Agent with monthly statements setting forth the amounts deposited in the Collection Deposit Account and all transfers and withdrawals therefrom, and shall furnish such other information at such times as shall be reasonably requested by the Collateral Agent. 7. The fees for the services of the Sub-Agent shall be mutually agreed upon between the Grantor and the Sub-Agent and shall be the obligation of the Grantor; provided, however, that, notwithstanding the terms of any agreement under which the Collection Deposit Account shall have been established with the Sub-Agent, the Grantor and the Sub-Agent agree not to terminate such Collection Deposit Account for any reason (including the failure of the Grantor to pay such fees) for so long as this Agreement shall remain in effect (it being understood that the foregoing shall not be construed to prohibit the resignation of the Sub-Agent in accordance with paragraph 9 below). Neither the Collateral Agent nor the Secured Parties shall 27 3 have any liability for the payment of any such fees. The Sub-Agent may perform any of its duties hereunder by or through its agents, officers or employees. 8. The Sub-Agent hereby represents and warrants that (a) it is a banking corporation duly organized, validly existing and in good standing under the laws of [] and has full corporate power and authority under such laws to execute, deliver and perform its obligations under this Agreement and (b) the execution, delivery and performance of this Agreement by the Sub-Agent have been duly and effectively authorized by all necessary corporate action and this Agreement has been duly executed and delivered by the Sub-Agent and constitutes a valid and binding obligation of the Sub-Agent enforceable in accordance with its terms. 9. The Sub-Agent may resign at any time as Sub-Agent hereunder by delivery to the Collateral Agent of written notice of resignation not less than thirty days prior to the effective date of such resignation. The SubAgent may be removed by the Collateral Agent at any time, with or without cause, by written, telecopy or telephonic notice (which, in the case of telephonic notice, shall be promptly confirmed in writing or by telecopy) of removal delivered to the Sub-Agent. Upon receipt of such notice of removal, or delivery of such notice of resignation, the Sub-Agent shall (subject to the Sub-Agent's right to request that the Collateral Agent furnish, in form satisfactory to the Sub-Agent, signature cards and/or other appropriate documentation), promptly transmit or deliver to the Collateral Agent at the office specified in paragraph 12 (or such other office as the Collateral Agent shall specify) (a) all funds, if any, then on deposit in, or otherwise to the credit of, the Collection Deposit Account (provided that funds on deposit that are subject to collection may be transmitted promptly upon availability for withdrawal), (b) all checks, drafts and other instruments for the payment of money received in the Lockboxes and in the possession of the Sub-Agent, without depositing such checks, drafts or other instruments in the Collection Deposit Account or any other account and (c) any checks, drafts and other instruments for the payment of money received in the Lockboxes by the Sub-Agent after such notice, in whatever form received. 10. The Grantor consents to the appointment of the Sub-Agent and agrees that the Sub-Agent shall incur no liability to the Grantor as a result of any action taken pursuant to an instruction given by the Collateral Agent in accordance with the provisions of this Agreement. The Grantor agrees to indemnify and defend the Sub-Agent against any loss, liability, claim or expense (including reasonable attorneys' fees) arising from the Sub-Agent's entry into this Agreement and actions taken hereunder, except to the extent resulting from the Sub-Agent's gross negligence or willful misconduct. 11. The term of this Agreement shall extend from the date hereof until the earlier of (a) the date on which the Sub-Agent has been notified in writing by the Collateral Agent that the Sub-Agent has no further duties under this Agreement, (b) the Obligations have been indefeasibly paid in full and all commitments of the Lenders and the Issuing Bank have been terminated and (c) the date of termination specified in the notice of removal given by the Collateral Agent, or notice of resignation given by the Sub-Agent, as the case may be, pursuant to paragraph 9. The obligations of the Sub-Agent contained in the last sentence of paragraph 9 and in paragraph 15, and the obligations of the Grantor contained in paragraphs 7 and 10, shall survive the termination of this Agreement. 12. All notices and communications hereunder shall be in writing and shall be delivered by hand or by courier service, mailed by certified or registered mail or sent by telecopy (except where telephonic instructions or notices are authorized herein) and shall be effective on the day on which received (a) in the case of the Collateral Agent, to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of [Collateral Monitoring Department], and (b) in the case of the Sub-Agent, addressed to [ ], Attention of [ ]. For purposes of this Agreement, any officer of the Collateral Agent shall be authorized to act, and to give instructions and notices, on behalf of the Collateral Agent hereunder. 28 4 13. The Sub-Agent will not assign or transfer any of its rights or obligations hereunder (other than to the Collateral Agent) without the prior written consent of the other parties hereto, and any such attempted assignment or transfer shall be void. 14. Except as provided in paragraph 5 above, this Agreement may be amended only by a written instrument executed by the Collateral Agent, the Sub-Agent and the Grantor, acting by their duly authorized representative officers. 15. Except as otherwise provided in the Credit Agreement with respect to rights of set off available to the Sub-Agent in its capacity as a Lender (if and so long as the Sub-Agent is a Lender thereunder), the SubAgent hereby irrevocably waives any right to set off against, or otherwise deduct from, any funds held in the Collection Deposit Account and all items (and Proceeds thereof) that come into its possession in connection with the Collection Deposit Account any indebtedness or other claim owed by the Grantor or any affiliate thereof to the Sub-Agent; provided, however, that this paragraph shall not limit the ability of the Sub-Agent to, and the Sub-Agent may, (a) exercise any right to set off against, or otherwise deduct from, any such funds to the extent necessary for the Sub-Agent to collect any fees owed to it by the Grantor in connection with the Collection Deposit Account, (b) charge back and net against the Collection Deposit Account any returned or dishonored items or other adjustments in accordance with the Sub-Agent's usual practices and (c) (i) establish the reserves contemplated in paragraph 4 in respect of unpaid fees and amounts which may be subject to collection and (ii) transfer funds in respect of such reserves from the Collection Deposit Account to the separate deposit account with the Sub-Agent as contemplated in paragraph 4. 16. This Agreement shall inure to the benefit of and be binding upon the Collateral Agent, the SubAgent, the Grantor and their respective permitted successors and assigns. 17. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Delivery of an executed signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. 18. EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF [ ] GOVERN THE COLLECTION DEPOSIT ACCOUNT, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). 19. The Sub-Agent shall be an independent contractor. This Agreement does not give rise to any partnership, joint venture or fiduciary relationship. 20. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace 29 5 the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. [Name of Grantor], by ----------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent, by ----------------------------------------- Name: Title: [Name of Sub-Agent], by ----------------------------------------- Name: Title: 30 Annex 2 to the Security Agreement [Form Of] PERFECTION CERTIFICATE Reference is made to the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among NC Merger Company (the "Borrower"), NFC Castings, Inc. ("Holdings"), the lenders from time to time party thereto (the "Lenders") and The Chase Manhattan Bank, as administrative agent for the Lenders, collateral agent for the Lenders and as issuing bank. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Security Agreement. The undersigned, a Financial Officer and a legal officer, respectively, of the Borrower, hereby certify to the Collateral Agent and each other Secured Party as follows: 1. Names. (a) The exact corporate name of each Grantor under the Security Agreement, as such name appears in its respective certificate of incorporation, is as follows: (b) Set forth below is each other corporate name each Grantor has had in the past five years, together with the date of the relevant change: (c) Except as set forth in Schedule 1 hereto, no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature or jurisdiction of corporate organization. If any such change has occurred, include in Schedule 1 the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation. (d) The following is a list of all other names (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years: (e) Set forth below is the Federal Taxpayer Identification Number of each Grantor: 2. Current Locations. (a) The chief executive office of each Grantor is located at the address set forth opposite its name below:
Grantor Mailing Address County State
(b) Set forth below opposite the name of each Grantor are all locations where such Grantor maintains any books or records relating to any Accounts Receivable (with each location at which chattel paper, if any, is kept being indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all the places of business of such Grantor not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
31 2 (d) Set forth below opposite the name of each Grantor are all the locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the names and addresses of all persons other than such Grantor that have possession of any of the Collateral of such Grantor:
Grantor Mailing Address County State
3. Unusual Transactions. All Accounts Receivable have been originated by the Grantors and all Inventory has been acquired by the Grantors in the ordinary course of business. 4. File Search Reports. Attached hereto as Schedule 4(A) are true copies of file search reports from the Uniform Commercial Code filing offices where filings described in Section 3.19 of the Credit Agreement are to be made. Attached hereto as Schedule 4(B) is a true copy of each financing statement or other filing identified in such file search reports. 5. UCC Filings. Duly signed financing statements on Form UCC-1 in substantially the form of Schedule 5 hereto have been prepared for filing in the Uniform Commercial Code filing office in each jurisdiction where a Grantor has Collateral as identified in Section 2 hereof. 6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made. 7. Filing Fees. All filing fees and taxes payable in connection with the filings described in Section 5 above have been paid. 8. Stock Ownership. Attached hereto as Schedule 8 is a true and correct list of all the duly authorized, issued and outstanding stock of the Borrower and each Subsidiary and the record and beneficial owners of such stock. Also set forth on Schedule 8 is each equity investment of the Borrower and each Subsidiary that represents 50% or less of the equity of the entity in which such investment was made. 9. Notes. Attached hereto as Schedule 9 is a true and correct list of all notes held by Holdings, the Borrower and each Subsidiary and all intercompany notes between Holdings, the Borrower and each Subsidiary and between each Subsidiary and each other such Subsidiary. 10. Advances. Attached hereto as Schedule 10 is (a) a true and correct list of all advances made by the Borrower to any subsidiary of the Borrower, or made by any subsidiary of the Borrower or any other subsidiary of the Borrower, which advances will be on and after the date hereof evidenced by one or more intercompany notes pledged to the Collateral Agent under the Pledge Agreement, and (b) a true and correct list of all unpaid intercompany transfers of goods sold and delivered by or to the Borrower or any subsidiary of the Borrower. 11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule setting forth, with respect to each Mortgaged Property, (i) the exact corporate name of the corporation that owns such property as such name 32 3 appears in its certificate of incorporation, (ii) if different from the name identified pursuant to clause (i), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (iii) the filing office in which a Mortgage with respect to such property must be filed or recorded in order for the Collateral Agent to obtain a perfected security interest therein. IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this [ ] day of [ ]. NC MERGER COMPANY, by ------------------------------------------ Name: Title:[Financial Officer] by ------------------------------------------ Name: Title: [Legal Officer] 33 Annex 3 to the Security Agreement SUPPLEMENT NO. __ dated as of , to the Security Agreement dated as of April 30, 1997, among NC MERGER COMPANY, a Wisconsin corporation (the "Borrower"), each subsidiary of the Borrower listed on Schedule I thereto (each such subsidiary, individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors"; the Subsidiary Guarantors and the Borrower are referred to collectively herein as the "Grantors") and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). A. Reference is made to the Credit Agreement dated as of April 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, NFC Castings, Inc., ("Holdings"), the lenders from time to time party thereto (the "Lenders"), and Chase, as administrative agent for the Lenders, Collateral Agent and issuing bank (in such capacity, the "Issuing Bank"). B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement and the Credit Agreement. C. The Grantors have entered into the Security Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Section 7.15 of Security Agreement provides that additional Subsidiaries of the Borrower may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Grantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Security Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Grantor agree as follows: SECTION 1. In accordance with Section 7.15 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Obligations (as defined in the Security Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Grantor's right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Grantor. Each reference to a "Grantor" in the Security Agreement shall be deemed to include the New Grantor. The Security Agreement is hereby incorporated herein by reference. SECTION 2. The New Grantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and equitable principles of general applicability (regardless of whether such enforceability is considered in a proceeding at law or in equity). SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall 34 2 constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Grantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Grantor and (b) set forth under its signature hereto, is the true and correct location of the chief executive office of the New Grantor. SECTION 5. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS). SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Security Agreement. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature below. 35 3 SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written. [Name Of New Grantor], by Name: Title: Address: THE CHASE MANHATTAN BANK, as Collateral Agent, by -------------------------------------------- Name: Title: 36 Schedule I to Supplement No.___ to the Security Agreement LOCATION OF COLLATERAL
Description Location - ----------- --------
EX-10.15 28 FORM OF MORTGAGE 1 EXHIBIT 10.15 [FORM OF] MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS THIS MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS dated as of April [ ], 1997 (this "Mortgage"), by NEENAH FOUNDRY COMPANY, a Wisconsin corporation, having an office at 2121 Brooks Avenue, Neenah, WI 54956] (the "Mortgagor"), to THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), having an office at 270 Park Avenue, New York, New York 10017, as collateral agent (in such capacity, the "Collateral Agent") for the benefit of the Secured Parties (as defined below) (the "Mortgagee"); WITNESSETH THAT: A. Reference is made to the Credit Agreement dated as of April [ ], 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Neenah Corporation (the "Borrower"), NFC Castings, Inc., the financial institutions party thereto as lenders (the "Lenders") and Chase, as administrative agent (in such capacity, the "Administrative Agent"), as Collateral Agent and as issuing bank (in such capacity, the "Issuing Bank"). As used herein, the term "Secured Parties" shall mean (i) the Lenders, (ii) the Administrative Agent, (iii) the Collateral Agent, (iv) the Issuing Bank, (v) each counterparty to an Interest Rate Protection Agreement entered into with the Borrower if such counterparty was a Lender at the time the Interest Rate Protection Agreement was entered into, (vi) the beneficiaries of each indemnification obligation undertaken by the Borrower under any Loan Document and (vii) the successors and permitted assigns of each of the foregoing. Pursuant to the Credit Agreement, (i) the Lenders have lent or agreed to lend to the Borrower (a) on a term basis, Tranche A Term Loans (such term and each other capitalized term used herein but not defined herein shall have the meaning assigned to such term in the Credit Agreement) in an aggregate principal amount not in excess of $30,000,000, (b) on a term basis, Tranche B Term Loans in an aggregate principal amount not in excess of $25,000,000 and (c) on a revolving basis, Revolving Loans, at any time and from time to time prior to the Revolving Credit Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $30,000,000 and (ii) the Issuing Bank has issued and has agreed to issue Letters of Credit in an aggregate face amount at any time outstanding not in excess of $15,000,000 in each case on the terms and subject to the conditions of the Credit Agreement. B. The Borrower has entered into a Merger Agreement whereby the Borrower will merge with and into Neenah Corporation, a Wisconsin corporation ("Neenah"), with Neenah as the surviving corporation. Following the consummation of the Merger, the Mortgagor will become a wholly owned subsidiary of the Borrower and will derive substantial benefit from the making of the Loans by the Lenders and the issuing of the Letters of Credit by the Issuing Bank. In order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Mortgagor has agreed to guarantee pursuant to the Guarantee Agreement the due and punctual payment and performance of Obligations (as defined in paragraph D below). C. The proceeds of the Term Loans will be used by the Borrower, together with proceeds of Revolving Loans to be made on the Closing Date, the proceeds of the Senior Subordinated Notes and the 2 Equity Contribution solely (a) to pay the Merger Consideration and (b) to pay related fees and expenses. The remaining proceeds of the Revolving Loans and the Letters of Credit will be used for general corporate purposes in the ordinary course of the Borrower's business. D. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit under the Credit Agreement are conditioned upon, among other things, the execution and delivery by the Mortgagor of this Mortgage in the form hereof, to secure the due and punctual payment of (a) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (b) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, (c) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including deficiency judgments and monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Mortgagor and the Borrower to the Secured Parties under the Credit Agreement, this Mortgage and the other Loan Documents to which the Mortgagor or the Borrower is or is to be a party, (d) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Mortgagor and the Borrower under or pursuant to the Credit Agreement, this Mortgage and the other Loan Documents to which the Mortgagor or the Borrower is or is to be a party and (e) the due and punctual payment and performance of all obligations of the Borrower under each Interest Rate Protection Agreement entered into with a counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the obligations referred to in the preceding clauses (a) through (e) being referred to collectively, as the "Obligations"). E. Pursuant to the requirements of the Credit Agreement, the Mortgagor is entering into this Mortgage to create a security interest in the Mortgaged Property (as defined herein) to secure the performance and payment by the Mortgagor and the Borrower of the Obligations. The Credit Agreement also requires the granting by Borrower and other Domestic Subsidiaries (the "Other Mortgages") that create security interests in certain Mortgaged Properties other than the Mortgaged Property to secure the performance of the Obligations. Granting Clauses NOW THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure (A) the due and punctual payment and performance of the Obligations, (B) the due and punctual payment by the Mortgagor of all taxes and insurance premiums relating to the Mortgaged Property and (C) all disbursements made by Mortgagee for the payment of taxes, common area charges or insurance premiums, all fees, expenses or advances in connection with or relating to the Mortgaged Property, and interest on such disbursements and other amounts not timely paid in accordance with the terms of the Credit Agreement, this Mortgage and the other Loan Documents, Mortgagor hereby grants, conveys, mortgages, 2 3 assigns and pledges to the Mortgagee, for the ratable benefit of the Secured Parties, a security interest in, all the following described property (the "Mortgaged Property") whether now owned or held or hereafter acquired: (1) all Mortgagor's right, title and interest in all the fee estate in the land more particularly described on Exhibit A hereto (the "Land"), together with all rights appurtenant thereto, including the easements over certain other adjoining land granted by any easement agreements, covenant or restrictive agreements and all air rights, mineral rights, water rights, oil and gas rights and development rights, if any, relating thereto, and also together with all of the other easements, rights, privileges, interests, hereditaments and appurtenances thereunto belonging or in anyway appertaining and all of the estate, right, title, interest, claim or demand whatsoever of Mortgagor therein and in the streets and ways adjacent thereto, either in law or in equity, in possession or expectancy, now or hereafter acquired (the "Premises"); (2) all Mortgagor's right, title and interest in all buildings, improvements, structures, paving, parking areas, walkways and landscaping now or hereafter erected or located upon the Land, and all fixtures of every kind and type affixed to the Premises or attached to or forming part of any structures, buildings or improvements and replacements thereof now or hereafter erected or located upon the Land (the "Improvements"); (3) all Mortgagor's right, title and interest in all apparatus, movable appliances, building materials, equipment, fittings, furnishings, furniture, machinery and other articles of tangible personal property of every kind and nature, and replacements thereof, now or at any time hereafter placed upon or used in any way in connection with the use, enjoyment, occupancy or operation of the Improvements or the Premises, including all of Mortgagor's books and records relating thereto and including all pumps, tanks, goods, machinery, tools, equipment, lifts (including fire sprinklers and alarm systems, fire prevention or control systems, cleaning rigs, air conditioning, heating, boilers, refrigerating, electronic monitoring, water, loading, unloading, lighting, power, sanitation, waste removal, entertainment, communications, computers, recreational, window or structural, maintenance, truck or car repair and all other equipment of every kind), restaurant, bar and all other indoor or outdoor furniture (including tables, chairs, booths, serving stands, planters, desks, sofas, racks, shelves, lockers and cabinets), bar equipment, glasses, cutlery, uniforms, linens, memorabilia and other decorative items, furnishings, appliances, supplies, inventory, rugs, carpets and other floor coverings, draperies, drapery rods and brackets, awnings, venetian blinds, partitions, chandeliers and other lighting fixtures, freezers, refrigerators, walk-in coolers, signs (indoor and outdoor), computer systems, cash registers and inventory control systems, and all other apparatus, equipment, furniture, furnishings, and articles used in connection with the use or operation of the Improvements or the Premises, it being understood that the enumeration of any specific articles of property shall in no way result in or be held to exclude any items of property not specifically mentioned (the property referred to in this subparagraph (3), the "Personal Property"); (4) all Mortgagor's right, title and interest in all general intangibles relating to design, development, operation, management and use of the Premises or the Improvements, all certificates of occupancy, zoning variances, building, use or other permits, approvals, authorizations and consents obtained from and all materials prepared for filing or filed with any governmental agency in connection with the development, use, operation or management of the Premises and 3 4 Improvements, all construction, service, engineering, consulting, leasing, architectural and other similar contracts concerning the design, construction, management, operation, occupancy and/or use of the Premises and Improvements, all architectural drawings, plans, specifications, soil tests, feasibility studies, appraisals, environmental studies, engineering reports and similar materials relating to any portion of or all of the Premises and Improvements, and all payment and performance bonds or warranties or guarantees relating to the Premises or the Improvements, all to the extent assignable (the "Permits, Plans and Warranties"); (5) Mortgagor's interest in and rights under any and all now or hereafter existing leases or licenses (under which Mortgagor is landlord or licensor) and subleases (under which Mortgagor is sublandlord), concession, management, mineral or other agreements of a similar kind that permit the use or occupancy of the Premises or the Improvements for any purpose in return for any payment, or the extraction or taking of any gas, oil, water or other minerals from the Premises in return for payment of any fee, rent or royalty (collectively, "Leases"), and all agreements or contracts for the sale or other disposition of all or any part of the Premises or the Improvements, now or hereafter entered into by Mortgagor, together with all charges, fees, income, issues, profits, receipts, rents, revenues or royalties payable thereunder ("Rents"); (6) all Mortgagor's right, title and interest in and to all real estate tax refunds and all proceeds of the conversion, voluntary or involuntary, of any of the Mortgaged Property into cash or liquidated claims ("Proceeds"), including Proceeds of insurance maintained by the Mortgagor and condemnation awards, any awards that may become due by reason of the taking by eminent domain or any transfer in lieu thereof of the whole or any part of the Premises or Improvements or any rights appurtenant thereto, and any awards for change of grade of streets, together with any and all moneys now or hereafter on deposit for the payment of real estate taxes, assessments or common area charges levied against the Mortgaged Property, unearned premiums on policies of fire and other insurance maintained by the Mortgagor covering any interest in the Mortgaged Property or required by the Credit Agreement; and (7) all Mortgagor's right, title and interest in and to all extensions, improvements, betterments, renewals, substitutes and replacements of and all additions and appurtenances to, the Land, the Premises, the Improvements, the Personal Property, the Permits, Plans and Warranties and the Leases, hereinafter acquired by or released to the Mortgagor or constructed, assembled or placed by the Mortgagor on the Land, the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, deed of trust, conveyance, assignment or other act by the Mortgagor, all of which shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by the Mortgagor and specifically described herein. TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its successors and assigns, for the ratable benefit of the Secured Parties, forever, subject only to the Permitted Encumbrances (as hereinafter defined) and to satisfaction and cancellation as provided in Section 3.04 4 5 ARTICLE I Representations, Warranties and Covenants of Mortgagor Mortgagor agrees, covenants, represents and/or warrants as follows: SECTION 1.01. Title. (a) Mortgagor has good and marketable title to an indefeasible fee estate in the Land and Improvements subject to no lien, charge or encumbrance, and this Mortgage is and will remain a valid and enforceable first and prior lien on the Premises, Improvements and the Rents subject only to, in each case, Liens permitted by Section 6.02 of the Credit Agreement and the exceptions and encumbrances referred to in Schedule B to the title insurance policy being issued to insure the lien of this Mortgage (collectively, the "Permitted Encumbrances"). The Permitted Encumbrances do not materially interfere with the current use, enjoyment or operation of the Mortgaged Property. (b) Mortgagor has good and marketable title to all the Personal Property subject to no lien, charge or encumbrance other than this Mortgage and the Permitted Encumbrances. Except as may be permitted under the Credit Agreement, the Personal Property is not and will not become the subject matter of any lease or other arrangement that is not a Permitted Encumbrance whereby the ownership of any Personal Property will be held by any person or entity other than Mortgagor; except as permitted under the Credit Agreement, none of the Personal Property will be removed from the Premises or the Improvements unless the same is no longer needed for the continued operation of the Premises and the Improvements as currently operated (or as then operated, to the extent that any change from the current manner of operation was permitted by the Credit Agreement) or is replaced by other Personal Property of substantially equal or greater utility and value; and Mortgagor will not create or cause to be created (other than Permitted Encumbrances) any security interest covering any of the Personal Property other than the security interest in the Personal Property created in favor of Mortgagee by this Mortgage or any other agreement collateral hereto. The Mortgaged Property is served by water, gas, electric, storm and sanitary sewage facilities, and such utilities serving the Premises and the Improvements are located in and in the future will be located in the Premises as is reasonable and customary for like kind Improvements in the area. There is vehicular access to the Premises and the Improvements which is provided by, either a public right-of-way abutting and contiguous with the Land or valid recorded unsubordinated easements. (c) Except as set forth on Schedule A hereto, there are no leases affecting any portion of the Mortgaged Property. Each Lease is in full force and effect, and, except as set forth on Schedule A hereto, Mortgagor has not given, nor to Mortgagor's knowledge has it received, any uncured or unwaived notice of default with respect to any material obligation under any Lease. Each Lease is subject to no lien, charge or encumbrance other than this Mortgage and the Permitted Encumbrances. (d) All easement agreements, covenant or restrictive agreements, supplemental agreements and any other material instruments hereinabove referred to and mortgaged hereby are and will remain valid, subsisting and in full force and effect, unless the failure to remain valid, subsisting and in full force and effect, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Mortgaged Property, and Mortgagor is not in default thereunder and has fully performed the material terms thereof required to be performed through the date hereof, and has no knowledge of any default thereunder or failure to fully perform the terms thereof by any other party, nor of the occurrence of any event that after notice or the passage of time or both will constitute a default thereunder. 5 6 (e) Mortgagor has good and lawful right and full power and authority to mortgage the Mortgaged Property and will forever warrant and defend its title to the Mortgaged Property, the rights of Mortgagee therein under this Mortgage and the validity and priority of the lien of this Mortgage thereon against the claims of all persons and parties except those having rights under Permitted Encumbrances to the extent of those rights. (f) This Mortgage, when duly recorded in the appropriate public records and when financing statements are duly filed in the appropriate public records, will create a valid and enforceable lien upon and security interest in all the Mortgaged Property and there will be no defenses or offsets to this Mortgage that will be asserted by Mortgagor or its Affiliates (or any third party defense or offset now known to Mortgagor or its Affiliates) or to any of the Obligations secured hereby for so long as any portion of the Obligations is outstanding, other than payment of the Obligations. SECTION 1.02. Credit Agreement; Certain Amounts. (a) This Mortgage is given pursuant to the Credit Agreement. Each and every term and provision of the Credit Agreement, including the rights, remedies, obligations, covenants, conditions, agreements, indemnities, representations and warranties of the parties thereto shall be considered as if a part of this Mortgage and to the extent there is a specific conflict between the terms hereof and the terms of the Credit Agreement (except with respect to Section 1.01 hereof), the terms of the Credit Agreement shall control. (b) If any remedy or right of Mortgagee pursuant hereto is acted upon by Mortgagee or if any actions or proceedings (including any bankruptcy, insolvency or reorganization proceedings) are commenced in which Mortgagee is made a party and is obliged to defend or uphold or enforce this Mortgage or the rights of Mortgagee hereunder or the terms of any Lease, or if a condemnation proceeding is instituted affecting the Mortgaged Property, Mortgagor will pay all reasonable sums, including reasonable attorneys' fees and disbursements, incurred by Mortgagee related to the exercise of any remedy or right of Mortgagee pursuant hereto or for the reasonable expense of any such action or proceeding together with all statutory or other costs, disbursements and allowances, interest thereon from the date of demand for payment thereof at the rate specified in clause (b) of Section 2.07 of the Credit Agreement (the "Default Interest Rate"), and such sums and the interest thereon shall, to the extent permissible by law, be a lien on the Mortgaged Property prior to any right, title to, interest in or claim upon the Mortgaged Property attaching or accruing subsequent to the recording of this Mortgage and shall be secured by this Mortgage to the extent permitted by law. Any payment of amounts due to Mortgagee under this Mortgage not made on or before the due date for such payments shall accrue interest daily without notice from the due date until paid at the Default Interest Rate, and such interest at the Default Interest Rate shall be immediately due upon demand by Mortgagee. SECTION 1.03. Payment of Taxes, Liens and Charges. (a) Except as may be permitted by Section 5.03 of the Credit Agreement, Mortgagor will pay and discharge from time to time prior to the time when the same shall become delinquent, and before any interest or penalty accrues thereon or attaches thereto, all taxes of every kind and nature, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents, all vault charges, and all other public charges, and all service charges, common area charges, private maintenance charges, utility charges and all other private charges, whether of a like or different nature, imposed upon or assessed against the Mortgaged Property or any part thereof or upon the Rents from the Mortgaged Property or arising in respect of the occupancy, use or possession thereof. 6 7 (b) In the event of the passage of any state, Federal, municipal or other governmental law, order, rule or regulation subsequent to the date hereof (i) deducting from the value of real property for the purpose of taxation any lien or encumbrance thereon or in any manner changing or modifying the laws now in force governing the taxation of this Mortgage or debts secured by mortgages or deeds of trust (other than laws governing income, franchise and similar taxes generally) or the manner of collecting taxes thereon and (ii) imposing a tax to be paid by Mortgagee, either directly or indirectly, on this Mortgage or any of the Loan Documents or requiring an amount of taxes to be withheld or deducted therefrom, Mortgagor will promptly notify Mortgagee of such event. In such event Mortgagor shall (i) agree to enter into such further instruments as may be reasonably necessary or desirable to obligate Mortgagor to make any applicable additional payments and (ii) make such additional payments. (c) At any time that an Event of Default shall occur hereunder and be continuing, or if required by any law applicable to Mortgagor or to Mortgagee, Mortgagee shall have the right to direct Mortgagor to make an initial deposit on account of real estate taxes and assessments, insurance premiums and common area charges, levied against or payable in respect of the Mortgaged Property in advance and thereafter semi-annually, each such deposit to be equal to one-half of any such annual charges estimated in a reasonable manner by Mortgagee in order to accumulate with Mortgagee sufficient funds to pay such taxes, assessments, insurance premiums and charges when the same are due and payable. SECTION 1.04. Payment of Closing Costs. Mortgagor shall pay all costs in connection with, relating to or arising out of the preparation, execution and recording of this Mortgage, including title company premiums and charges, inspection costs, survey costs, recording fees and taxes which are due, reasonable attorneys', engineers', appraisers' and consultants' fees and disbursements and all other similar reasonable expenses of every kind. SECTION 1.05. Alterations and Waste; Plans. (a) Except as may be permitted under the Credit Agreement, no Improvements will be materially altered in a way which will materially interfere with the operation of such Improvements or demolished or removed in whole or in part by Mortgagor. Mortgagor will not erect any additions to the existing Improvements or other structures on the Premises which will materially interfere with the operation conducted thereon on the date hereof, without the written consent of Mortgagee. Mortgagor will not commit any waste on the Mortgaged Property or make any alteration to, or change in the use of, the Mortgaged Property that will diminish the utility thereof for the operation of the business except as may be permitted under the Credit Agreement or materially increase any ordinary fire or other hazard arising out of construction or operation, but in no event shall any such alteration or change be contrary to the terms of any insurance policy required to be kept pursuant to Section 1.06. Mortgagor will maintain and operate the Improvements and Personal Property in good repair, working order and condition, reasonable wear and tear excepted (notwithstanding the terms of Section 5.01 of the Credit Agreement). (b) To the extent the same exist on the date hereof or are obtained in connection with future permitted alterations, Mortgagor shall maintain a complete set of final plans, specifications, blueprints and drawings for the Mortgaged Property either at the Mortgaged Property or in a particular office at the headquarters of Mortgagor to which Mortgagee shall have access upon reasonable advance notice and at reasonable times. 7 8 SECTION 1.06. Insurance. Mortgagor will keep or cause to be kept the Improvements and Personal Property insured against such risks, and in the manner, required by Section 5.02 of the Credit Agreement. SECTION 1.07. Casualty; Condemnation. (a) Notwithstanding any other provision of this Mortgage, the Credit Agreement or the Security Documents, the Mortgagee is authorized, at its option (for the benefit of the Secured Parties), to collect and receive, to the extent payable to the Mortgagor or any other Loan Party, all insurance proceeds, damages, claims and rights of action under any insurance policies with respect to any casualty or other insured damage ("Casualty") to any portion of any Mortgaged Property (collectively, "Insurance Proceeds"), unless the amount of the related Insurance Proceeds is less than $1,000,000 and an Event of Default shall not have occurred and be continuing. The Mortgagor agrees to notify the Mortgagee and the Administrative Agent, in writing, promptly after the Mortgagor obtains notice or knowledge of any Casualty to a Mortgaged Property, which notice shall set forth a description of such Casualty and the Mortgagor's good faith estimate of the amount of related damages. The Mortgagor agrees, subject to the foregoing limitations, to endorse and transfer or cause to be endorsed or transferred any Insurance Proceeds received by it or any other Loan Party to the Mortgagee. (b) The Mortgagor will notify the Mortgagee and the Administrative Agent immediately upon obtaining knowledge of the institution of any action or proceeding for the taking of the Mortgaged Property, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation proceeding, or in any other manner (a "Condemnation"). No settlement or compromise of any claim in connection with any such action or proceeding shall be made without the consent of the Mortgagee, which consent shall not be unreasonably withheld. The Mortgagee is authorized, at its option (for the benefit of the Secured Parties), to collect and receive all proceeds of any such Condemnation (in each case, the "Condemnation Proceeds"). The Mortgagor agrees to execute or cause to be executed such further assignments of any Condemnation Proceeds as the Mortgagee may reasonably require. (c) In the event of any Condemnation of the Mortgaged Property, or any part thereof and subject to the provisions of paragraph (e) below, the Mortgagee shall apply the Condemnation Proceeds first, in the case of a partial Condemnation, to the repair or restoration of any integrated structure subject to such Condemnation or, in the case of a total or "substantially all" Condemnation, to the location of a replacement property, acquisition of such replacement property and construction of the replacement structures, and second, shall apply the remainder of such Condemnation Proceeds (less the reasonable costs, if any, incurred by the Mortgagee in the recovery of such Condemnation Proceeds) to prepay obligations outstanding under the Credit Agreement, with any remaining Condemnation Proceeds being returned to the Mortgagor. (d) In the event of any Casualty of less than 50% of the useable square footage of the improvements of the Mortgaged Property, the Mortgagor shall, subject to the conditions contained in paragraph (e), restore the Mortgaged Property to substantially its same condition immediately prior to such Casualty. In the event of any Casualty of greater than 50% of the useable square footage of the improvements of the Mortgaged Property and so long as no Default or Event of Default has occurred and is continuing, the Mortgagee shall require the Mortgagor to either: (i) restore the Mortgaged Property to a condition substantially similar to its condition immediately prior to such Casualty, provided that the Mortgagor, promptly deposits any excess 8 9 Insurance Proceeds in a cash collateral account established with the Mortgagee for the benefit of the Secured Parties, or (ii) to apply the related Net Insurance Proceeds (as defined in the last sentence of the next succeeding paragraph) towards prepayment of the Obligations with any remaining Insurance Proceeds being returned to the Mortgagor. If the Mortgagor shall be required to restore the Mortgaged Property, the insufficiency of any Insurance Proceeds or Condemnation Proceeds to defray the entire expense of such restoration shall in no way relieve the Mortgagor of such obligation so to restore. In the event the Mortgagor shall be required to restore, the Mortgagor shall diligently and continuously prosecute the restoration of the Mortgaged Property to completion. In addition, there shall first be allowed to the Mortgagor out of the related Insurance Proceeds, an amount sufficient to, and the Mortgagor shall be required to, place the remaining portion, if any, of the Mortgaged Property in a safe condition that is otherwise in compliance with the requirements of applicable Governmental Authorities and the provisions of the Credit Agreement and this Mortgage, and the balance of such related Insurance Proceeds (the "Net Insurance Proceeds") shall constitute the Net Insurance Proceeds to be applied in clause (ii) above. (e) Except as otherwise specifically provided in this Section 1.07, all Insurance Proceeds and all Condemnation Proceeds recovered by the Mortgagee (A) are to be applied to the restoration of the Mortgaged Property (less the reasonable cost, if any, to the Mortgagee of such recovery and of paying out such proceeds, including reasonable attorneys' fees, other charges and disbursements and costs allocable to inspecting the Work (as defined below)) and (B) shall be applied by the Mortgagee to the payment of the cost of restoring or replacing the Mortgaged Property so damaged, destroyed or taken or of the portion or portions of the Mortgaged Property not so taken (the "Work") and (C) shall be paid out from time to time to the Mortgagor as and to the extent the Work (or the location and acquisition of any replacement of any Mortgaged Property) progresses for the payment thereof, but subject to each of the following conditions: (i) the Mortgagor must promptly commence the restoration process or the location, acquisition and replacement process (in the case of a total or "substantially all" Condemnation) in connection with the Mortgaged Property; (ii) the Work shall be in the charge of an architect or engineer and before the Mortgagor commences any Work, other than temporary work to protect property or prevent interference with business, the Mortgagee shall have received the plans and specifications and the general contract for the Work from the Mortgagor. The plans and specifications shall provide for such Work that, upon completion thereof, the improvements shall (A) be in compliance with all requirements of applicable Governmental Authorities such that all representations and warranties of the Mortgagor relating to the compliance of the Mortgaged Property with applicable laws, rules or regulations in this Mortgage, the Credit Agreement or the Security Documents will be correct in all respects and (B) be at least equal in value and general utility to the improvements that were on the Mortgaged Property (or that were on the Mortgaged Property that has been replaced, if applicable) prior to the Casualty or Taking, and in the case of a Taking, subject to the effect of such Taking; (iii) except as provided in (iv) below, each request for payment shall be made on seven days' prior notice to the Mortgagee and shall be accompanied by a certificate to be made by such architect or engineer, stating (A) that all the Work completed has been done in substantial 9 10 compliance with the plans and specifications, (B) that the sum requested is justly required to reimburse the Mortgagor for payments by the Mortgagor to, or is justly due to, the contractor, subcontractors, materialmen, laborers, engineers, architects or other persons rendering services or materials for the Work (giving a brief description of such services and materials) and that, when added to all sums previously paid out by the Mortgagee, does not exceed the value of the Work done to the date of such certificate; (iv) each request for payment in connection with the acquisition of a replacement Mortgaged Property (in the case of a total or "substantially all" Condemnation) shall be made on 30 days' prior notice to the Mortgagee and, in connection therewith, (A) each such request shall be accompanied by a copy of the sales contract or other document governing the acquisition of the replacement property by the Mortgagor and a certificate of the Mortgagor stating that the sum requested represents the sales price under such contract or document and the related reasonable transaction fees and expenses (including brokerage fees) and setting forth in sufficient detail the various components of such requested sum and (B) the Mortgagor shall (I) in addition to any other items required to be delivered under this Section 1.07), provide the Administrative Agent and the Mortgagee with such opinions, documents, certificates, title insurance policies, surveys and other insurance policies as they may reasonably request and (II) take such other actions as the Administrative Agent and the Mortgagee may reasonably deem necessary or appropriate (including actions with respect to the delivery to the Mortgagee of a first priority Mortgage with respect to such real property for the ratable benefit of the Secured Parties); (v) each request shall be accompanied by waivers of lien satisfactory to the Mortgagee covering that part of the Work for which payment or reimbursement is being requested and, if required by the Mortgagee, by a search prepared by a title company or licensed abstractor or by other evidence satisfactory to the Mortgagee, that there has not been filed with respect to the Mortgaged Property any mechanics' or other lien or instrument for the retention of title in respect of any part of the Work not discharged of record or bonded to the reasonable satisfaction of the Mortgagee; (vi) there shall be no Default or Event of Default that has occurred and is continuing; (vii) the request for any payment after the Work has been completed shall be accompanied by a copy of any certificate or certificates required by law to render occupancy of the improvements being rebuilt, repaired or restored legal; and (viii) after commencing the Work, the Mortgagor shall continue to perform the Work diligently and in good faith to completion in accordance with the approved plans and specifications. Upon completion of the Work and payment in full therefor, the Mortgagee will disburse to the Mortgagor the amount of any Insurance Proceeds or Condemnation Proceeds then or thereafter in the hands of the Mortgagee on account of the Casualty or Taking that necessitated such Work to be applied (x) to prepay obligations outstanding under the Credit Agreement, with any excess being returned to the Mortgagor, or (y) to be reinvested in the Mortgagor's principal lines of business within 180 days after the receipt thereof, provided that the Mortgagor, pending such reinvestment, promptly deposits such amounts in a cash collateral account established with the Mortgagee for the benefit of the Secured Parties. 10 11 (f) Notwithstanding any other provisions of this Section 1.07, if the Mortgagor shall have elected to replace the Mortgaged Property in connection with a total or "substantially all" Condemnation as contemplated in paragraph (c) above, all Condemnation Proceeds held by the Mortgagee in connection therewith shall be applied to prepay obligations outstanding under the Credit Agreement if (i) the Mortgagor notifies the Mortgagee and the Administrative Agent that it does not intend to replace the Mortgaged Property, (ii) a Responsible Officer of the Mortgagor shall not have notified the Administrative Agent and the Mortgagee in writing that the Mortgagor has acquired or has entered into a binding contract to acquire land upon which it will construct the replacement property within six months after the Condemnation or (iii) the Mortgagor shall have not notified the Administrative Agent and the Mortgagee in writing that it has begun construction of the replacement structures within one year after the related Condemnation. (g) Nothing in this Section 1.07 shall prevent the Mortgagee from applying at any time all or any part of the Insurance Proceeds or Condemnation Proceeds to (i) the curing of any Event of Default under the Credit Agreement or (ii) the payment of any of the Obligations after the occurrence and during the continuance of an Event of Default. SECTION 1.08. Assignment of Leases and Rents. (a) Mortgagor hereby irrevocably and absolutely grants, transfers and assigns all of its right title and interest in all Leases, together with any and all extensions and renewals thereof for purposes of securing and discharging the performance by Mortgagor of the Obligations. Mortgagor has not assigned or executed any assignment of, and will not assign or execute any assignment of, any other Lease or their respective Rents to anyone other than Mortgagee. (b) Without Mortgagee's prior written consent, Mortgagor will not (i) modify, amend, terminate or consent to the cancellation or surrender of any Lease if such modification, amendment, termination or consent would, in the reasonable judgment of the Mortgagee, be adverse in any material respect to the interests of the Lenders, the value of the Mortgaged Property or the lien created by this Mortgage or (ii) consent to an assignment of any tenant's interest in any Lease or to a subletting thereof covering a material portion of the Mortgaged Property. (c) Subject to Section 1.08(d), Mortgagor has assigned and transferred to Mortgagee all of Mortgagor's right, title and interest in and to the Rents now or hereafter arising from each Lease heretofore or hereafter made or agreed to by Mortgagor, it being intended that this assignment establish, subject to Section 1.08(d), an absolute transfer and assignment of all Rents and all Leases to Mortgagee and not merely to grant a security interest therein. Subject to Section 1.08(d), Mortgagee may in Mortgagor's name and stead (with or without first taking possession of any of the Mortgaged Property personally or by receiver as provided herein) operate the Mortgaged Property and rent, lease or let all or any portion of any of the Mortgaged Property to any party or parties at such rental and upon such terms as Mortgagee shall, in its sole discretion, determine, and may collect and have the benefit of all of said Rents arising from or accruing at any time thereafter or that may thereafter become due under any Lease. (d) So long as an Event of Default shall not have occurred and be continuing, Mortgagee will not exercise any of its rights under Section 1.08(c), and Mortgagor shall receive and collect the Rents accruing under any Lease; but after the happening and during the continuance of any Event of Default, Mortgagee may, at its option, receive and collect all Rents and enter upon the Premises and Improvements through its officers, agents, employees or attorneys for such purpose and for the operation and maintenance thereof. Mortgagor hereby irrevocably authorizes and directs each tenant, if any, and each successor, if any, to the interest of any tenant under any Lease, respectively, to rely upon any notice of a claimed Event of Default 11 12 sent by Mortgagee to any such tenant or any of such tenant's successors in interest, and thereafter to pay Rents to Mortgagee without any obligation or right to inquire as to whether an Event of Default actually exists and even if some notice to the contrary is received from the Mortgagor, who shall have no right or claim against any such tenant or successor in interest for any such Rents so paid to Mortgagee. Each tenant or any of such tenant's successors in interest from whom Mortgagee or any officer, agent, attorney or employee of Mortgagee shall have collected any Rents, shall be authorized to pay Rents to Mortgagor only after such tenant or any of their successors in interest shall have received written notice from Mortgagee that the Event of Default is no longer continuing, unless and until a further notice of an Event of Default is given by Mortgagee to such tenant or any of its successors in interest. (e) Mortgagee will not become a mortgagee in possession so long as it does not enter or take actual possession of the Mortgaged Property. In addition, Mortgagee shall not be responsible or liable for performing any of the obligations of the landlord under any Lease, for any waste by any tenant, or others, for any dangerous or defective conditions of any of the Mortgaged Property, for negligence in the management, upkeep, repair or control of any of the Mortgaged Property or any other act or omission by any other person. (f) Mortgagor shall furnish to Mortgagee, within 30 days after a request by Mortgagee to do so, a written statement containing the names of all tenants, subtenants and concessionaires of the Premises or Improvements, the terms of any Lease, the space occupied and the rentals or license fees payable thereunder. SECTION 1.09. Restrictions on Transfers and Encumbrances. Except as permitted by the Credit Agreement, Mortgagor shall not directly or indirectly sell, convey, alienate, assign, lease, sublease, license, mortgage, pledge, encumber or otherwise transfer, create, consent to or suffer the creation of any lien, charges or any form of encumbrance upon any interest in or any part of the Mortgaged Property, or be divested of its title to the Mortgaged Property or any interest therein in any manner or way, whether voluntarily or involuntarily (other than resulting from a Condemnation), or engage in any common, cooperative, joint, time-sharing or other congregate ownership of all or part thereof; provided, however, that Mortgagor may in the ordinary course of business within reasonable commercial standards, enter into easement or covenant agreements that relate to and/or benefit the operation of the Mortgaged Property and that do not materially or adversely affect the use and operation of the same (except for customary utility easements that service the Mortgaged Property, which are permitted). SECTION 1.10. Security Agreement. This Mortgage is both a mortgage of real property and a grant of a security interest in personal property, and shall constitute and serve as a "Security Agreement" within the meaning of the uniform commercial code as adopted in the state wherein the Premises are located. Mortgagor has hereby granted unto Mortgagee a security interest in and to all the Mortgaged Property described in this Mortgage that is not real property, and simultaneously with the recording of this Mortgage, Mortgagor has filed or will file UCC financing statements, and will file continuation statements prior to the lapse thereof, at the appropriate offices in the state in which the Premises are located to perfect the security interest granted by this Mortgage in all the Mortgaged Property that is not real property. Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute any document and to file the same in the appropriate offices (to the extent it may lawfully do so), and to perform each and every act and thing reasonably requisite and necessary to be done to perfect the security interest contemplated by the preceding sentence. Mortgagee shall have all rights with respect to the part of the Mortgaged Property that is the 12 13 subject of a security interest afforded by the uniform commercial code as adopted in the state wherein the Premises are located in addition to, but not in limitation of, the other rights afforded Mortgagee hereunder and under the Security Agreement. SECTION 1.11. Filing and Recording. Mortgagor will cause this Mortgage, any other security instrument creating a security interest in or evidencing the lien hereof upon the Mortgaged Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien hereof upon, and the security interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all filing, registration or recording fees, and all reasonable expenses incidental to the execution and acknowledgment of this Mortgage, any mortgage supplemental hereto, any security instrument with respect to the Personal Property, and any instrument of further assurance and all Federal, state, county and municipal recording, documentary or intangible taxes and other taxes, duties, imposts, assessments and charges arising out of or in connection with the execution, delivery and recording of this Mortgage, any mortgage supplemental hereto, any security instrument with respect to the Personal Property or any instrument of further assurance. SECTION 1.12. Further Assurances. Upon demand by Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances as Mortgagee shall from time to time reasonably require for the better assuring, conveying, assigning, transferring and confirming unto Mortgagee the property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage, and on demand, Mortgagor will also execute and deliver and hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute and file to the extent it may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments reasonably requested by Mortgagee to evidence more effectively the lien hereof upon the Personal Property and to perform each and every act and thing requisite and necessary to be done to accomplish the same. SECTION 1.13. Additions to Mortgaged Property. All right, title and interest of Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property hereafter acquired by or released to Mortgagor or constructed, assembled or placed by Mortgagor upon the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case without any further mortgage, conveyance, assignment or other act by Mortgagor, shall become subject to the lien and security interest of this Mortgage as fully and completely and with the same effect as though now owned by Mortgagor and specifically described in the grant of the Mortgaged Property above, but at any and all times Mortgagor will execute and deliver to Mortgagee any and all such further assurances, mortgages, conveyances or assignments thereof as Mortgagee may reasonably require for the purpose of expressly and specifically subjecting the same to the lien and security interest of this Mortgage. SECTION 1.14. No Claims Against Mortgagee. Nothing contained in this Mortgage shall constitute any consent or request by Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any 13 14 part thereof, nor as giving Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Mortgagee in respect thereof. SECTION 1.15. Fixture Filing. Certain of the Mortgaged Property is or will become "fixtures" (as that term is defined in the UCC) on the Land, and this Mortgage upon being filed for record in the real estate records of the county wherein such fixtures are situated shall operate also as a financing statement filed as a fixture filing in accordance with the applicable provisions of said UCC upon such of the Mortgaged Property that is or may become fixtures. ARTICLE II Defaults and Remedies SECTION 2.01. Events of Default. It shall be an Event of Default under this Mortgage if any Event of Default (as therein defined) shall exist pursuant to the Credit Agreement. SECTION 2.02. Demand for Payment. If an Event of Default as set forth herein shall occur and be continuing, then, upon written demand of Mortgagee, Mortgagor will pay to Mortgagee all amounts due hereunder and such further amount as shall be sufficient to cover the costs and expenses of collection, including attorneys' fees, disbursements and expenses incurred by Mortgagee and Mortgagee shall be entitled and empowered to institute an action or proceedings at law or in equity for the collection of the sums so due and unpaid, to prosecute any such action or proceedings to judgment or final decree, to enforce any such judgment or final decree against Mortgagor and to collect, in any manner provided by law, all moneys adjudged or decreed to be payable. SECTION 2.03. Rights To Take Possession, Operate and Apply Revenues. (a) To the extent permitted by applicable law, if an Event of Default shall occur and be continuing, Mortgagor shall, upon demand of Mortgagee, forthwith surrender to Mortgagee actual possession of the Mortgaged Property and, if and to the extent permitted by law, Mortgagee itself, or by such officers or agents as it may appoint, may then enter and take possession of all the Mortgaged Property without the appointment of a receiver or an application therefor, exclude Mortgagor and its agents and employees wholly therefrom, and have access to the books, papers and accounts of Mortgagor. (b) To the extent permitted by applicable law, if Mortgagor shall for any reason fail to surrender or deliver the Mortgaged Property or any part thereof after such demand by Mortgagee, Mortgagee may obtain a judgment or decree conferring upon Mortgagee the right to immediate possession or requiring Mortgagor to deliver immediate possession of the Mortgaged Property to Mortgagee, to the entry of which judgment or decree Mortgagor hereby specifically consents. Mortgagor will pay to Mortgagee, upon demand, all reasonable expenses of obtaining such judgment or decree, including reasonable compensation to Mortgagee's attorneys and agents with interest thereon at the Default Interest Rate; and all such expenses and compensation shall, until paid, be secured by this Mortgage. (c) To the extent permitted by applicable law, upon every such entry or taking of possession, Mortgagee may hold, store, use, operate, manage and control the Mortgaged Property, conduct the business thereof and, from time to time, (i) make all necessary and proper maintenance, repairs, renewals, 14 15 replacements, additions, betterments and improvements thereto and thereon, (ii) purchase or otherwise acquire additional fixtures, personalty and other property, (iii) insure or keep the Mortgaged Property insured, (iv) manage and operate the Mortgaged Property and exercise all the rights and powers of Mortgagor to the same extent as Mortgagor could in its own name or otherwise with respect to the same, or (v) enter into any and all agreements with respect to the exercise by others of any of the powers herein granted Mortgagee, all as may from time to time be directed or determined by Mortgagee to be in its best interest and Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to perform any of the foregoing acts. Mortgagee may collect and receive all the Rents, issues, profits and revenues from the Mortgaged Property, including those past due as well as those accruing thereafter, and, after deducting (i) all expenses of taking, holding, managing and operating the Mortgaged Property (including compensation for the services of all persons employed for such purposes), (ii) the costs of all such maintenance, repairs, renewals, replacements, additions, betterments, improvements, purchases and acquisitions, (iii) the costs of insurance, (iv) such taxes, assessments and other similar charges as Mortgagee may at its option pay, (v) other proper charges upon the Mortgaged Property or any part thereof and (vi) the compensation, expenses and disbursements of the attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of the moneys and proceeds so received first to the payment of the Mortgagee for the satisfaction of the Obligations, and second, if there is any surplus, to Mortgagor, subject to the entitlement of others thereto under applicable law. (d) To the extent permitted by applicable law, whenever, before any sale of the Mortgaged Property under Section 2.06, all Obligations that are then due shall have been paid and all Events of Default fully cured, Mortgagee will surrender possession of the Mortgaged Property back to Mortgagor, its successors or assigns. The same right of taking possession shall, however, arise again if any subsequent Event of Default shall occur and be continuing. SECTION 2.04. Right To Cure Mortgagor's Failure to Perform. After any Event of Default at anytime (without requiring future notice) should Mortgagor fail in the payment, performance or observance of any term, covenant or condition required by this Mortgage or the Credit Agreement (with respect to the Mortgaged Property), Mortgagee may pay, perform or observe the same, and all payments made or costs or expenses incurred by Mortgagee in connection therewith shall be secured hereby and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at the Default Interest Rate. Mortgagee shall be the judge using reasonable discretion of the necessity for any such actions and of the amounts to be paid. Mortgagee is hereby empowered to enter and to authorize others to enter upon the Premises or the Improvements or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without having any obligation to so perform or observe and without thereby becoming liable to Mortgagor, to any person in possession holding under Mortgagor or to any other person. SECTION 2.05. Right to a Receiver. If an Event of Default shall occur and be continuing, Mortgagee, upon application to a court of competent jurisdiction, shall be entitled as a matter of right to the appointment of a receiver to take possession of and to operate the Mortgaged Property and to collect and apply the Rents. The receiver shall have all of the rights and powers permitted under the laws of the state wherein the Mortgaged Property is located. Mortgagor shall pay to Mortgagee upon demand all reasonable expenses, including receiver's fees, reasonable attorney's fees and disbursements, costs and agent's compensation incurred pursuant to the provisions of this Section 2.05; and all such expenses shall 15 16 be secured by this Mortgage and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at the Default Interest Rate. SECTION 2.06. Foreclosure and Sale. (a) If an Event of Default shall occur and be continuing, Mortgagee may elect to sell the Mortgaged Property or any part of the Mortgaged Property by exercise of the power of foreclosure or of sale granted to Mortgagee by applicable law or this Mortgage. In such case, Mortgagee may commence a civil action to foreclose this Mortgage, or it may proceed and sell the Mortgaged Property to satisfy any Obligation. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property, may sell all or such parts of the Mortgaged Property as may be chosen by Mortgagee at the time and place of sale fixed by it in a notice of sale, either as a whole or in separate lots, parcels or items as Mortgagee shall deem expedient, and in such order as it may determine, at public auction to the highest bidder. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property may postpone any foreclosure or other sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale. Without further notice, Mortgagee or an officer appointed to sell the Mortgaged Property may make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale. Any person, including Mortgagor or Mortgagee or any designee or affiliate thereof, may purchase at such sale. (b) The Mortgaged Property may be sold subject to unpaid taxes and Permitted Encumbrances, and, after deducting all costs, fees and expenses of Mortgagee (including costs of evidence of title in connection with the sale), Mortgagee or an officer that makes any sale shall apply the proceeds of sale in the manner set forth in Section 2.08. (c) Any foreclosure or other sale of less than the whole of the Mortgaged Property or any defective or irregular sale made hereunder shall not exhaust the power of foreclosure provided for herein; and subsequent sales may be made hereunder until the Obligations have been satisfied, or the entirety of the Mortgaged Property has been sold. (d) If an Event of Default shall occur and be continuing, Mortgagee may instead of, or in addition to, exercising the rights described in Section 2.06(a) above and either with or without entry or taking possession as herein permitted, proceed by a suit or suits in law or in equity or by any other appropriate proceeding or remedy (i) to specifically enforce payment of some or all of the Obligations, or the performance of any term, covenant, condition or agreement of this Mortgage or any other Loan Document or any other right, or (ii) to pursue any other remedy available to it, all as Mortgagee shall determine most effectual for such purposes. SECTION 2.07. Other Remedies. (a) In case an Event of Default shall occur and be continuing, Mortgagee may also exercise, to the extent not prohibited by law, any or all of the remedies available to a secured party under the uniform commercial code of the State wherein the Premises are located, including, to the extent not prohibited by applicable law. (b) In connection with a sale of the Mortgaged Property or any Personal Property and the application of the proceeds of sale as provided in Section 2.08, Mortgagee shall be entitled to enforce payment of and to receive up to the principal amount of the Obligations, plus all other charges, payments and costs due under this Mortgage, and to recover a deficiency judgment for any portion of the aggregate principal amount of the Obligations remaining unpaid, with interest. 16 17 SECTION 2.08. Application of Sale Proceeds and Rents. After any foreclosure sale of all or any of the Mortgaged Property, Mortgagee shall receive the proceeds of sale, no purchaser shall be required to see to the application of the proceeds and Mortgagee shall apply the proceeds of the sale together with any Rents that may have been collected and any other sums that then may be held by Mortgagee under this Mortgage as follows: FIRST, to the payment of the costs and expenses of such sale, including compensation to Mortgagee's attorneys and agents, and of any judicial proceedings wherein the same may be made, and of all expenses, liabilities and advances made or incurred by Mortgagee under this Mortgage, together with interest at the Default Interest Rate on all advances made by Mortgagee, including all taxes or assessments (except any taxes, assessments or other charges subject to which the Mortgaged Property shall have been sold) and the cost of removing any Permitted Encumbrance (except any Permitted Encumbrance subject to which the Mortgaged Property was sold); SECOND, to the Mortgagee for the distribution to the Secured Parties for the satisfaction of the Obligations owed to the Secured Parties; and THIRD, to the Mortgagor, its successors or assigns, or as a court of competent jurisdiction may otherwise direct. The Mortgagee shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Mortgage. Upon any sale of the Mortgaged Property by the Mortgagee (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money paid over to the Mortgagee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Mortgaged Property so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Mortgagee or such officer or be answerable in any way for the misapplication thereof. SECTION 2.09. Mortgagor as Tenant Holding Over. If Mortgagor remains in possession of any of the Mortgaged Property after any foreclosure sale by Mortgagee, at Mortgagee's election Mortgagor shall be deemed a tenant holding over and shall forthwith surrender possession to the purchaser or purchasers at such sale or be summarily dispossessed or evicted according to provisions of law applicable to tenants holding over. SECTION 2.10. Waiver of Appraisement, Valuation, Stay, Extension and Redemption Laws. Mortgagor waives, to the extent not prohibited by law, (i) the benefit of all laws now existing or that hereafter may be enacted providing for any appraisement of any portion of the Mortgaged Property, (ii) the benefit of all laws now existing or that may be hereafter enacted in any way extending the time for the enforcement or the collection of amounts due under any of the Obligations or creating or extending a period of redemption from any sale made in collecting said debt or any other amounts due Mortgagee, (iii) any right to at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, or sale of the Mortgaged Property as separate tracts, units or estates or as a single parcel in the event of foreclosure, and (iv) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of or each of the Obligations and marshalling in the event of foreclosure of this Mortgage. 17 18 SECTION 2.11. Discontinuance of Proceedings. In case Mortgagee shall proceed to enforce any right, power or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings shall be discontinued or abandoned for any reason, or shall be determined adversely to Mortgagee, then and in every such case Mortgagor and Mortgagee shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Mortgagee shall continue as if no such proceeding had been taken. SECTION 2.12. Suits To Protect the Mortgaged Property. Mortgagee shall have power (a) to institute and maintain suits and proceedings to prevent any impairment of the Mortgaged Property by any acts that may be unlawful or in violation of this Mortgage, (b) to preserve or protect its interest in the Mortgaged Property and in the Rents arising therefrom and (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of or compliance with such enactment, rule or order would impair the security or be prejudicial to the interest of Mortgagee hereunder. SECTION 2.13. Filing Proofs of Claim. In case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting Mortgagor, Mortgagee shall, to the extent permitted by law, be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of Mortgagee allowed in such proceedings for the Obligations secured by this Mortgage at the date of the institution of such proceedings and for any interest accrued, late charges and additional interest or other amounts due or that may become due and payable hereunder after such date. SECTION 2.14. Possession by Mortgagee. Notwithstanding the appointment of any receiver, liquidator or trustee of Mortgagor, any of its property or the Mortgaged Property, Mortgagee shall be entitled, to the extent not prohibited by law, to remain in possession and control of all parts of the Mortgaged Property now or hereafter granted under this Mortgage to Mortgagee in accordance with the terms hereof and applicable law. SECTION 2.15. Waiver. (a) No delay or failure by Mortgagee to exercise any right, power or remedy accruing upon any breach or Event of Default shall exhaust or impair any such right, power or remedy or be construed to be a waiver of any such breach or Event of Default or acquiescence therein; and every right, power and remedy given by this Mortgage to Mortgagee may be exercised from time to time and as often as may be deemed expedient by Mortgagee. No consent or waiver by Mortgagee to or of any breach or default by Mortgagor in the performance of the Obligations shall be deemed or construed to be a consent or waiver to or of any other breach or Event of Default in the performance of the same or any other Obligations by Mortgagor hereunder. No failure on the part of Mortgagee to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall constitute a waiver by Mortgagee of its rights hereunder or impair any rights, powers or remedies consequent on any future Event of Default by Mortgagor. (b) Even if Mortgagee (i) grants some forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security for the payment of any sums secured hereby, (iii) waives or does not exercise some right granted herein or under the Loan Documents, (iv) releases a part of the Mortgaged Property from this Mortgage, (v) agrees to change some of the terms, covenants, conditions or agreements of any of the Loan Documents, (vi) consents to the filing of a map, plat or replat affecting the Premises (vii) consents to the granting of an easement or other right affecting the Premises or (viii) makes or consents to an agreement subordinating Mortgagee's lien on the Mortgaged Property 18 19 hereunder; no such act or omission shall preclude Mortgagee from exercising any other right, power or privilege herein granted or intended to be granted in the event of any breach or Event of Default then made or of any subsequent default; nor, except as otherwise expressly provided in an instrument executed by Mortgagee, shall this Mortgage be altered thereby. In the event of the sale or transfer by operation of law or otherwise of all or part of the Mortgaged Property, Mortgagee is hereby authorized and empowered to deal with any vendee or transferee with reference to the Mortgaged Property secured hereby, or with reference to any of the terms, covenants, conditions or agreements hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging any liabilities, obligations or undertakings. SECTION 2.16. Remedies Cumulative. No right, power or remedy conferred upon or reserved to Mortgagee by this Mortgage is intended to be exclusive of any other right, power or remedy, and each and every such right, power and remedy shall be cumulative and concurrent and in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity or by statute. ARTICLE III Miscellaneous SECTION 3.01. Partial Invalidity. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such validity, illegality or unenforceability shall, at the option of Mortgagee, not affect any other provision of this Mortgage, and this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein. SECTION 3.02. Notices. All notices hereunder shall be in writing and given in the case of communications and notices to Mortgagor or the Collateral Agent, as provided in the Credit Agreement. SECTION 3.03. Successors and Assigns. All of the grants, covenants, terms, provisions and conditions herein shall run with the Premises and the Improvements and shall apply to, bind and inure to, the benefit of the permitted successors and assigns of Mortgagor and the successors and assigns of Mortgagee. SECTION 3.04. Satisfaction and Cancelation. (a) The conveyance to Mortgagee created and consummated by this Mortgage shall be null and void when all the Obligations have been indefeasibly paid in full in accordance with the terms of the Loan Documents and the Lenders have no further commitment to make Loans under the Credit Agreement, no Letters of Credit are outstanding and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement. (b) The lien of this mortgage shall be released from such portion of the Mortgaged Property as is required pursuant to and in accordance with the operative provisions of Section 6.05 of the Credit Agreement. (c) In connection with any termination or release pursuant to paragraph (a), the Mortgage shall be marked "satisfied" by the Mortgagee, and this Mortgage shall be canceled of record at the request and at the expense of the Mortgagor. Mortgagee shall execute any documents reasonably requested by Mortgagor 19 20 to accomplish the foregoing or to accomplish any release contemplated by paragraph (a) and Mortgagor will pay all costs and expenses, including reasonable attorneys' fees, disbursements and other charges, incurred by Mortgagee in connection with the preparation and execution of such documents. SECTION 3.05. Definitions. As used in this Mortgage, the singular shall include the plural as the context requires and the following words and phrases shall have the following meanings: (a) "including" shall mean "including but not limited to"; (b) "provisions" shall mean "provisions, terms, covenants and/or conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security interest, mortgage or deed of trust"; (d) "obligation" shall mean "obligation, duty, covenant and/or condition"; and (e) "any of the Mortgaged Property" shall mean "the Mortgaged Property or any part thereof or interest therein". Any act that Mortgagee is permitted to perform hereunder may be performed at any time and from time to time by Mortgagee or any person or entity designated by Mortgagee. Any act that is prohibited to Mortgagor hereunder is also prohibited to all lessees of any of the Mortgaged Property. Each appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage is irrevocable, with power of substitution and coupled with an interest. Subject to the applicable provisions hereof, Mortgagee has the right to refuse to grant its consent, approval or acceptance or to indicate its satisfaction, in its sole discretion, whenever such consent, approval, acceptance or satisfaction is required hereunder. SECTION 3.06. Multisite Real Estate Transaction. Mortgagor acknowledges that this Mortgage is one of a number of Other Mortgages and Security Documents that secure the Obligations. Mortgagor agrees that the lien of this Mortgage shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee and without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by the Mortgagee of any security for or guarantees of any of the Obligations hereby secured, or by any failure, neglect or omission on the part of Mortgagee to realize upon or protect any Obligation or indebtedness hereby secured or any collateral security therefor including the Other Mortgages and other Security Documents. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released), sale, pledge, surrender, compromise, settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the Obligations secured or of any of the collateral security therefor, including the Other Mortgages and other Security Documents or of any guarantee thereof, and Mortgagee may at its discretion foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages and other Security Documents without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of Mortgagee's rights and remedies under any or all of the Other Mortgages and other Security Documents shall not in any manner impair the indebtedness hereby secured or the lien of this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder shall not impair the lien of any of the Other Mortgages and other Security Documents or any of Mortgagee's rights and remedies thereunder. The Mortgagor specifically consents and agrees that Mortgagee may exercise its rights and remedies hereunder and under the Other Mortgages and other Security Documents separately or concurrently and in any order that it may deem appropriate and waives any rights of subrogation. 20 21 ARTICLE IV Particular Provisions This Mortgage is subject to the following provisions relating to the particular laws of the state wherein the Premises are located: SECTION 4.01. Applicable Law; Certain Particular Provisions. This Mortgage shall be governed by and construed in accordance with the internal law of the State of New York; provided, however, that the provisions of this Mortgage relating to the creation, perfection and enforcement of the lien and security interest created by this Mortgage in respect of the Mortgaged Property and the exercise of each remedy provided hereby, including the power of foreclosure or power of sale procedures set forth in this Mortgage, shall be governed by and construed in accordance with the internal law of the state where the Mortgaged Property is located, and Mortgagor and Mortgagee agrees to submit to jurisdiction and the laying of venue for any suit on this Mortgage in such state. The terms and provisions set forth in Appendix A attached hereto are hereby incorporated by reference as though fully set forth herein. In the event of any conflict between the terms and provisions contained in the body of this Mortgage and the terms and provisions set forth in Appendix A, the terms and provisions set forth in Appendix A shall govern and control. IN WITNESS WHEREOF, this Mortgage has been duly authorized and has been executed and delivered to Mortgagee by Mortgagor on the date first written above. NEENAH FOUNDARY COMPANY, a Wisconsin corporation, by_______________________________ Name: Title: Attest: by_______________________________ Name: Title: [CORPORATE SEAL] 21 22 [NEED ACKNOWLEDGEMENTS] 22 23 Exhibit A to the Mortgage Agreement Legal Description EX-12.1 29 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 NEENAH CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (AMOUNTS IN THOUSANDS)
PRO FORMA ---------- YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, ------------------------------------------------------ ---------- 1993 1994 1995 1996 1997 1997 ------ ------- ------- ------- ------- ---------- Income before income taxes................... $3,988 $10,794 $22,570 $28,818 $32,305 $ 8,770 Fixed charges............. 2,348 1,278 907 416 402 22,512 ------ ------- ------- ------- ------- ---------- Earnings.................. $6,336 $12,072 $23,477 $29,234 $32,707 $ 31,282 ====== ======== ======== ======== ======== ========= Interest expense.......... 2,128 1,049 624 84 39 $ 21,474 Amortization of deferred financing costs......... -- -- -- -- -- 675 Interest portion of rent expense................. 220 229 283 332 363 363 ------ ------- ------- ------- ------- ---------- Fixed charges............. $2,348 $ 1,278 $ 907 $ 416 $ 402 $ 22,512 ====== ======== ======== ======== ======== ========= Ratio of earnings to fixed charges................. 2.70 9.45 25.88 70.27 81.36 1.39 ====== ======== ======== ======== ======== =========
EX-21.1 30 SUBSIDIARIES OF REGISTRANT 1 Exhibit 21.1 Subsidiaries of Registrants 1. Neenah Foundry Company Hartley Controls Corporation Neenah Transport, Inc. 2. Hartley Controls Corporation None. 3. Neenah Transport, Inc. None. EX-23.1 31 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the references to our firm under the captions "Experts," "Summary Consolidated Financial and Other Data" and "Selected Consolidated Financial and Other Data" and to the use of our reports dated April 29, 1997, in Amendment No. 1 to the Registration Statement (Form S-4, No. 333-28751) and related Prospectus of Neenah Foundry Company for the registration of $150,000,000 11 1/8% Senior Subordinated Notes. ERNST & YOUNG LLP Milwaukee, Wisconsin July 15, 1997 EX-25.1 32 STATEMENT OF ELIGIBILITY OF TRUSTEE ON FORM T-1 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 -------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE -------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _______ -------------------------- UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I. R. S. Employer if not a U. S. national bank) Identification No.) 114 West 47th Street 10036 New York, New York (Zip Code) (Address of principal executive offices) -------------------------- Teekay Shipping Corporation (Exact name of obligor as specified in its charter) Republic of Liberia Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) -------------------------- 2 - 2 - VSSI Oceans Inc. (Exact name of guarantor as specified in its charter) Republic of Liberia Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) -------------------------- VSSI Atlantic Inc. (Exact name of guarantor as specified in its charter) Republic of Liberia Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) -------------------------- Senang Spirit Inc. (Exact name of guarantor as specified in its charter) Commonwealth of the Bahamas Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) ------------------------- 3 - 3 - VSSI Appian Inc. (Exact name of guarantor as specified in its charter) Republic of Liberia Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) -------------------------- Exuma Spirit Inc. (Exact name of guarantor as specified in its charter) Commonwealth of the Bahamas Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) -------------------------- Nassau Spirit Inc. (Exact name of guarantor as specified in its charter) Commonwealth of the Bahamas Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) -------------------------- 4 - 4 - Andros Spirit Inc. (Exact name of guarantor as specified in its charter) Commonwealth of the Bahamas Not Applicable (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Tradewinds Building, Sixth Floor Bay Street, P.O. Box SS-6293 (Zip code) Nassau, The Bahamas (Address of principal executive offices) -------------------------- ___% First Preferred Ship Mortgage Notes due 2008 (Title of the indenture securities) ================================================================================ 5 - 5 - GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System). Federal Deposit Insurance Corporation, Washington, D. C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None. 3,4,5,6,7,8,9,10,11,12,13,14 and 15. Teekay Shipping Corporation is currently not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). 6 - 5 - GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System). Federal Deposit Insurance Corporation, Washington, D. C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None. 3,4,5,6,7,8,9,10,11,12,13,14 and 15. Teekay Shipping Corporation is currently not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). 7 - 6 - 16. List of Exhibits (cont'd) T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE As of December 15, 1995, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U. S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility, as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. --------------------- 8 - 7 - Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 18th day of December, 1995. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: ------------------------------------ 9 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 -------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE -------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _______ -------------------------- UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I. R. S. Employer if not a U. S. national bank) Identification No.) 114 West 47th Street 10036 New York, New York (Zip Code) (Address of principal executive offices) -------------------------- Lernout & Hauspie Speech Products N.V. (Exact name of obligor as specified in its charter) Belgium N/A (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Sint-Krispijnstraat 7 8900 Ieper (Zip code) Belgium (Address of principal executive offices) -------------------------- 8% Convertible Subordinated Notes due 2001 (Title of the indenture securities) ================================================================================ 10 - 2 - GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System). Federal Deposit Insurance Corporation, Washington, D. C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None. 3,4,5,6,7,8,9,10,11,12,13,14 and 15. Lernout & Hauspie Speech Products N.V. is currently not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). 11 - 3 - 16. List of Exhibits (cont'd) T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE As of June 3, 1997, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U. S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility, as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. --------------------- 12 - 4 - Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 3rd day of June, 1997. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: -------------------------------------- /S/Gerard F. Ganey Senior Vice President 13 Exhibit T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 September 1, 1995 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: --------------------------- /S/Gerard F. Ganey Senior Vice President 14 EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION DECEMBER 31, 1996 (IN THOUSANDS) ASSETS Cash and Due from Banks $ 75,754 Short-Term Investments 276,399 Securities, Available for Sale 925,886 Loans 1,638,516 Less: Allowance for Credit Losses 13,168 ---------- Net Loans 1,625,348 Premises and Equipment 61,278 Other Assets 120,903 ---------- Total Assets $3,085,568 ========== LIABILITIES Deposits: Non-Interest Bearing $ 645,424 Interest Bearing 1,694,581 ---------- Total Deposits 2,340,005 Short-Term Credit Facilities 449,183 Accounts Payable and Accrued Liabilities 139,261 ---------- Total Liabilities $2,928,449 ========== STOCKHOLDER'S EQUITY Common Stock 14,995 Capital Surplus 42,394 Retained Earnings 98,926 Unrealized Gains (Losses) on Securities Available for Sale, Net of Taxes 804 ---------- Total Stockholder's Equity 157,119 ---------- Total Liabilities and Stockholder's Equity $3,085,568 ========== I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkmann, SVP & Controller April 9, 1997 15 - 4 - Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 3rd day of June, 1997. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: ------------------------------------ Gerard F. Ganey Senior Vice President 16 FORM T-1 =============================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _______ ------------------ UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I.R.S. employer if not a U.S. national bank) identification No.) 114 West 47th Street 10036-1532 New York, NY (Zip Code) (Address of principal executive offices) ------------------ Neenah Corporation (Exact name of obligor as specified in its charter) Wisconsin 39-1580331 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ 17 - 2 - Neenah Foundry Company (Exact name of guarantor as specified in its charter) Wisconsin 39-0496210 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ Hartley Controls Corporation (Exact name of guarantor as specified in its charter) Wisconsin 39-0842568 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ Neenah Transport, Inc. (Exact name of guarantor as specified in its charter) Wisconsin 39-1378433 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ Neenah Corporation's 11 1/8% Senior Subordinated Notes due 2007, Series B (Title of the indenture securities) ===================================================== 18 - 3 - GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Washington, D.C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15: Neenah Corporation, Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. currently is not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. 19 - 4 - 16. List of Exhibits (cont'd) T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE As of June 24, 1997, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U.S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. ------------------ Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 24th day of June, 1997. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: ------------------------------- 20 Exhibit T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 September 1, 1995 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: ------------------------------ /S/Gerard F. Ganey Senior Vice President 21 EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION MARCH 31, 1997 (IN THOUSANDS) ASSETS Cash and Due from Banks $ 59,856 Short-Term Investments 213,333 Securities, Available for Sale 968,413 Loans 1,370,272 Less: Allowance for Credit Losses 13,614 ----------- Net Loans 1,356,658 Premises and Equipment 61,183 Other Assets 125,938 ----------- Total Assets $ 2,785,381 =========== LIABILITIES Deposits: Non-Interest Bearing $ 480,539 Interest Bearing 1,738,130 ----------- Total Deposits 2,218,669 Short-Term Credit Facilities 271,567 Accounts Payable and Accrued Liabilities 131,642 ----------- Total Liabilities $ 2,621,878 =========== STOCKHOLDER'S EQUITY Common Stock 14,995 Capital Surplus 42,541 Retained Earnings 101,577 Unrealized Gains (Losses) on Securities Available for Sale, Net of Taxes (2,610) ----------- Total Stockholder's Equity 163,503 ----------- Total Liabilities and Stockholder's Equity $ 2,785,381 =========== I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkmann, SVP & Controller June 22, 1997 22 FORM T-1 =============================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _______ ------------------ UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I.R.S. employer if not a U.S. national bank) identification No.) 114 West 47th Street 10036-1532 New York, NY (Zip Code) (Address of principal executive offices) ------------------ Neenah Corporation (Exact name of obligor as specified in its charter) Wisconsin 39-1580331 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ 23 - 2 - Neenah Foundry Company (Exact name of guarantor as specified in its charter) Wisconsin 39-0496210 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ Hartley Controls Corporation (Exact name of guarantor as specified in its charter) Wisconsin 39-0842568 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ Neenah Transport, Inc. (Exact name of guarantor as specified in its charter) Wisconsin 39-1378433 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 2121 Brooks Avenue, Box 729 Neenah, Wisconsin 54927 (Address of principal executive offices) (Zip Code) ------------------ Neenah Corporation's 11 1/8% Senior Subordinated Notes due 2007, Series B (Title of the indenture securities) ===================================================== 24 - 3 - GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Washington, D.C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15: Neenah Corporation, Neenah Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. currently is not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. 25 - 4 - 16. List of Exhibits (cont'd) T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE As of June 24, 1997, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U.S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. ------------------ Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 24th day of June, 1997. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: ------------------------------- 26 Exhibit T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 September 1, 1995 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: ------------------------------ /S/Gerard F. Ganey Senior Vice President 27 EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION MARCH 31, 1997 (IN THOUSANDS) ASSETS Cash and Due from Banks $ 59,856 Short-Term Investments 213,333 Securities, Available for Sale 968,413 Loans 1,370,272 Less: Allowance for Credit Losses 13,614 ----------- Net Loans 1,356,658 Premises and Equipment 61,183 Other Assets 125,938 ----------- Total Assets $ 2,785,381 =========== LIABILITIES Deposits: Non-Interest Bearing $ 480,539 Interest Bearing 1,738,130 ----------- Total Deposits 2,218,669 Short-Term Credit Facilities 271,567 Accounts Payable and Accrued Liabilities 131,642 ----------- Total Liabilities $ 2,621,878 =========== STOCKHOLDER'S EQUITY Common Stock 14,995 Capital Surplus 42,541 Retained Earnings 101,577 Unrealized Gains (Losses) on Securities Available for Sale, Net of Taxes (2,610) ----------- Total Stockholder's Equity 163,503 ----------- Total Liabilities and Stockholder's Equity $ 2,785,381 =========== I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkmann, SVP & Controller June 22, 1997 EX-99.3 33 FORM OF TENDER INSTRUCTIONS 1 EXHIBIT 99.3 INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF NEENAH FOUNDRY COMPANY 11 1/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus, dated _________ __, 1997 (the "Prospectus") of Neenah Foundry Company, a Wisconsin corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to action to be taken by you relating to the Exchange Offer with respect to the 11 1/8% Series A Senior Subordinated Notes due 2007 (the "Notes") held by you for the account of the undersigned. The aggregate face amount of the Notes held by you for the account of the undersigned is (fill in amount): $ of the 11 1/8% Series A Senior Subordinated Notes due 2007 With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): [ ] TO TENDER the following Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $ [ ] NOT TO TENDER any Notes held by you for the account of the undersigned.. If the undersigned instruct you to tender the Notes held by you for the account of the undersigned, it is understood that you are (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that the undersigned's principal residence is in the state of ________ [FILL IN THE NAME OF THE STATE], (i) the undersigned is acquiring the New Notes in the ordinary course of business of the undersigned, (ii) the undersigned is not participating, does not participate, and has no arrangement or understanding with any person to participate in the distribution of the New Notes, (iii) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Act"), in connection with a secondary resale transaction of the New Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer--Resale of the New Notes," and the undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the Company; to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Notes. 2 [ ] Check this box if the Beneficial Owner of the Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. SIGN HERE Name of beneficial owner(s):____________________________________________________ Signature(s):___________________________________________________________________ Name (please print):____________________________________________________________ Address:________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Telephone number:_______________________________________________________________ Taxpayer Identification or Social Security Number:______________________________ Date:___________________________________________________________________________ -2- -----END PRIVACY-ENHANCED MESSAGE-----