HAWK CORPORATION

-----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, ALfa9ig0o473eospB9F50xEy49+RgY0DmwSjvdW5wUDtkn7xsHUn3dd+PnXV3VWD qWOyNQTUE/SRX6fqqqwAlg== 0000950152-04-007907.txt : 20041104 0000950152-04-007907.hdr.sgml : 20041104 20041104163911 ACCESSION NUMBER: 0000950152-04-007907 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20041101 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041104 DATE AS OF CHANGE: 20041104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWK CORP CENTRAL INDEX KEY: 0000849240 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 341608156 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13797 FILM NUMBER: 041120071 BUSINESS ADDRESS: STREET 1: 200 PUBLIC SQ. STREET 2: STE 1500 CITY: CLEVELAND STATE: OH ZIP: 44114 BUSINESS PHONE: 2168613553 MAIL ADDRESS: STREET 1: 200 PUBLIC SQUARE STREET 2: STE 1500 CITY: CLEVELAND STATE: OH ZIP: 44114-2301 FORMER COMPANY: FORMER CONFORMED NAME: HAWK GROUP OF COMPANIES INC DATE OF NAME CHANGE: 19950417 8-K 1 l10322ae8vk.htm HAWK CORPORATION HAWK CORPORATION

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934

Date of Report: November 1, 2004
(Date of earliest event reported)

Hawk Corporation

(Exact name of registrant as specified in its charter)


Delaware	001-13797	34-1608156
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification Number)

200 Public Square, Suite 1500, Cleveland, Ohio 44114
(Address of principal executive offices including zip code)

(216) 861-3553
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS


SIGNATURES
EXHIBIT INDEX
EX-4.1 INDENTURE
EX-4.2 REGISTRATION RIGHTS AGREEMENT
EX-4.3 FORM OF 8 3/4% SENIOR NOTE DUE 2014
EX-10.1 CREDIT & SECURITY AGREEMENT
EX-99.1 PRESS RELEASE

Item 1.01. Entry into a Material Definitive Agreement.

On November 1, 2004, Hawk Corporation (“Hawk”) completed the private placement of $110 million aggregate principal amount of 8 3/4% senior notes due November 1, 2014 (the “Notes”). The Notes are senior unsecured obligations of Hawk, rank senior in right of payment to all of Hawk’s existing and future subordinated debt and rank equally in right of payment with all of Hawk’s existing and future senior debt, including Hawk’s new credit facility with KeyBank National Association (the “Credit Facility”), which is described below in this Item 1.01.

The Notes are unconditionally guaranteed on a senior unsecured basis (the “Guarantees”) by all of Hawk’s existing and future domestic restricted subsidiaries (the “Guarantors”). The Guarantees rank senior in right of payment to all of the existing and future subordinated debt of the Guarantors and equally in right of payment with all existing and future senior debt of the Guarantors, including the Credit Facility. The Notes and the Guarantees will be effectively subordinated to all Hawk and the Guarantors’ secured debt, including the Credit Facility, to the extent of the value of the assets securing that debt.

On or after November 1, 2009, Hawk may, at its option, redeem some or all of the Notes at the following redemption prices, plus accrued and unpaid interest and additional interest, if any, to the date of redemption:


For the period below	Percentage
On or after November 1, 2009		104.375	%
On or after November 1, 2010		103.281	%
On or after November 1, 2011		102.188	%
On or after November 1, 2012		101.094	%
On or after November 1, 2013		100.000	%

Prior to November 1, 2008, up to 35% of the aggregate principal amount of the Notes originally issued in the offering may be redeemed at Hawk’s option with the net proceeds of certain equity offerings at 108.750% of their principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of redemption, provided at least 65% of the aggregate principal amount of the Notes originally issued in the offering remains outstanding. In addition, upon a change of control as defined in the indenture, dated November 1, 2004, among Hawk, the Guarantors and HSBC Bank USA, National Association, as trustee (the “Indenture”), each holder of the Notes will have the right to require Hawk to repurchase all or any part of such holder’s Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and additional interest, if any, to the date of purchase.

The Notes are governed by the Indenture. The Indenture also contains certain covenants, subject to a number of important limitations and exceptions, that limit Hawk’s ability to:

• incur or guarantee additional debt or issue disqualified capital stock;

• pay dividends, redeem subordinated debt or make other restricted payments;

• issue preferred stock of its subsidiaries;

• transfer or sell assets, including capital stock of its subsidiaries;

• incur dividend or other payment restrictions affecting certain of its subsidiaries;

• make certain investments or acquisitions;

• grant liens on its assets;

• enter into certain transactions with affiliates; and

• merge, consolidate or transfer substantially all of its assets.

The Indenture considers non-compliance with the limitations set forth above events of default. The Indenture also considers non-payment of interest and principal amounts on the Notes and certain payment defaults with respect to other debt in excess of $5.0 million to be events of default. In the event of a default, the principal and interest could be accelerated upon written notice by more than 25% or more of the holders of the Notes.

The Indenture permits Hawk to incur additional debt without limitation, provided that Hawk continues to meet a cash flow ratio greater than 2.0 to 1.0 for its most recently ended four quarters. Hawk may pay cash dividends on its Class A common stock under the Indenture provided:

• there is no default or event of default;

• Hawk meets the cash flow ratio; and

• the amount of the dividend payment plus certain other payments is not in excess of a formula based on the sum of Hawk’s consolidated net income after November 1, 2004, the cash proceeds of certain equity offerings by Hawk after November 1, 2004 and the return on certain investments made by Hawk.

The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). The Notes are subject to restriction on transfer and may only be offered or sold in transactions exempt from or not subject to the registration requirements of the Securities Act.

In connection with the issuance of the Notes, Hawk and the Guarantors entered into a registration rights agreement, dated November 1, 2004, with Jefferies & Company, Inc., the initial purchaser of the Notes (the “Registration Rights Agreement”), under which Hawk agreed to use its best efforts to register a new issue of exchange notes having substantially identical terms as the Notes with the Securities and Exchange Commission (“SEC”) as part of an offer to exchange freely tradable exchange notes for the Notes. In addition, Hawk and the Guarantors have agreed to promptly commence the exchange offer after the exchange offer registration statement is declared effective by the SEC. Hawk and the Guarantors are required to pay additional interest if they fail to comply with their obligations to register the Notes and complete the exchange offer within the specified time periods.

If the offering of the Notes had occurred on June 30, 2004, Hawk’s total debt would have increased from $98.8 million at June 30, 2004 to $113.4 million. Assuming that the offering of the Notes occurred at the beginning of 2004, Hawk’s cash interest expense would have been $9.8 million for the latest twelve months ended June 30, 2004 compared to $9.4 million for the actual results for the latest twelve months ended June 30, 2004. Cash interest expense excludes amortization of deferred financing costs, including debt issuance costs incurred in connection with the offering of the Notes, amortization of a consent payment relating to Hawk’s 12% Senior Notes due 2006 and interest income.

The net proceeds of the offering of the Notes, after deducting offering expenses payable by Hawk, were approximately $106.1 million. Hawk used the proceeds of the offering to refinance its 12% Senior Notes due 2006, to pay accrued interest thereon, to repay loans under its old credit facility, to pay accrued interest on the old credit facility, to pay a consent payment relating to Hawk’s 12% Senior Notes due 2006 and to pay fees and expenses related to the offering and the related transactions and for general corporate purposes.

As a replacement for its old credit facility, Hawk and the Guarantors entered into a Credit and Security Agreement, dated November 1, 2004, with KeyBank National Association, serving as Administrative Agent and Letter of Credit Issuer. The Credit Facility has a maximum revolving credit commitment of $30.0 million, including a $5.0 million letter of credit subfacility. The Credit Facility will mature on November 1, 2009, subject to extension at Hawk’s request on an annual basis thereafter, with the consent of the lender. The interest rates on the Credit Facility range from 150 to 225 basis points over the London Interbank Offered Rates, or alternatively, 0 basis points over the prime rate, and the commitment fee is 25 basis points on the unused portion of the Credit Facility.

The Credit Facility is collateralized by a security interest in the cash, accounts receivable, inventory and certain intangible assets of Hawk and the Guarantors. Hawk also pledged the stock of the Guarantors and 65% of the stock of certain of its foreign subsidiaries as collateral. The restrictive terms of the Credit Facility require that Hawk maintain a minimum amount of shareholders’ equity as determined by reference to shareholders’ equity of Hawk at September 30, 2004 plus net income earned by Hawk after such date. The Credit Facility also requires that Hawk maintain an earnings before interest, taxes, depreciation and amortization to interest expense ratio of at least 1.0 to 1.0, although the lender will test this ratio only if Hawk’s availability falls below $10.0 million. Under the Credit Facility, Hawk may pay cash dividends on its Class A common stock in an amount up to $2.0 million per year provided:

• there is no event of default; and

• Hawk’s availability is not less than $10.0 million.

The Credit Facility requires that Hawk comply with other customary loan covenants.

The foregoing descriptions of the Indenture, Registration Rights Agreement, Notes and Credit Facility are not complete and are qualified in their entirety by reference to the full and complete terms of the Indenture, the Registration Rights Agreement, form of the 8 3/4% Note and the

Credit Agreement and Security Agreement, which are attached as Exhibit 4.1, 4.2, 4.3 and 10.1, respectively, to this report.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure under Item 1.01 of this report is also responsive to Item 2.03 of this report and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits


4.1		Indenture, dated as of November 1, 2004, among Hawk Corporation, the Guarantors named therein, and HSBC Bank USA, National Association, as Trustee

4.2		Registration Rights Agreement, dated as of November 1, 2004, among Hawk Corporation, the Guarantors named therein, and Jefferies & Company, Inc.

4.3		Form of 8 3/4% Senior Note due 2014

10.1		Credit and Security Agreement, dated November 1, 2004, among Hawk Corporation, Allegheny Clearfield, Inc., Friction Products Co., Hawk MIM, Inc., Hawk Motors, Inc., Hawk Precision Components Group, Inc., Helsel, Inc., Logan Metal Stampings, Inc., Net Shape Technologies LLC, Quarter Master Industries, Inc., Sinterloy Corporation, S.K. Wellman Corp., S.K. Wellman Holdings, Inc., Tex Racing Enterprises, Inc., Wellman Products Group, Inc. and Wellman Products, LLC, as borrowers, and KeyBank National Association, as Administrative Agent and LC Issuer

99.1		Press Release dated November 1, 2004

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: November 4, 2004	HAWK CORPORATION

	By:	/s/ Thomas A. Gilbride

		Thomas A. Gilbride
		Vice President – Finance
		and Treasurer

EXHIBIT INDEX


Exhibit Number		Description
4.1		Indenture, dated as of November 1, 2004, among Hawk Corporation, the Guarantors named therein, and HSBC Bank USA, National Association, as Trustee

4.2		Registration Rights Agreement, dated as of November 1, 2004, among Hawk Corporation, the Guarantors named therein, and Jefferies & Company, Inc.

4.3		Form of 8 3/4% Senior Note due 2014

10.1		Credit and Security Agreement, dated November 1, 2004, among Hawk Corporation, Allegheny Clearfield, Inc., Friction Products Co., Hawk MIM, Inc., Hawk Motors, Inc., Hawk Precision Components Group, Inc., Helsel, Inc., Logan Metal Stampings, Inc., Net Shape Technologies LLC, Quarter Master Industries, Inc., Sinterloy Corporation, S.K. Wellman Corp., S.K. Wellman Holdings, Inc., Tex Racing Enterprises, Inc., Wellman Products Group, Inc. and Wellman Products, LLC, as borrowers, and KeyBank National Association, as Administrative Agent and LC Issuer

99.1		Press Release dated November 1, 2004

EX-4.1 2 l10322aexv4w1.txt EX-4.1 INDENTURE EXHIBIT 4.1 EXECUTION COPY ================================================================================ INDENTURE, Dated as of November 1, 2004, among HAWK CORPORATION, as Issuer, THE GUARANTORS NAMED HEREIN, as Guarantors, and HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee 8-3/4% SENIOR NOTES DUE 2014 ================================================================================ CROSS-REFERENCE TABLE

- -------------------- N.A. means Not Applicable NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture. TABLE OF CONTENTS

-i- TABLE OF CONTENTS (continued) PAGE Section 4.04. Payment of Taxes and Other Claims................................................ 35 Section 4.05. Maintenance of Properties and Insurance; Compliance with Laws.................... 35 Section 4.06. Compliance Certificate; Notice of Default........................................ 36 Section 4.07. Waiver of Stay, Extension or Usury Laws.......................................... 36 Section 4.08. Limitation on Incurrence of Additional Indebtedness.............................. 37 Section 4.09. Limitation on Restricted Payments................................................ 37 Section 4.10. Limitation on Asset Sales........................................................ 40 Section 4.11. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.......................................................... 42 Section 4.12. Limitation on Issuances and Sales of Preferred Stock of Subsidiaries............. 44 Section 4.13. Limitation on Liens.............................................................. 44 Section 4.14. Limitations on Transactions with Affiliates...................................... 44 Section 4.15. Additional Subsidiary Guarantees................................................. 45 Section 4.16. Conduct of Business.............................................................. 45 Section 4.17. Reports to Holders............................................................... 46 Section 4.18. Payments for Consent............................................................. 46 Section 4.19. Repurchase Upon Change of Control................................................ 47 Section 4.20. Additional Interest.............................................................. 48 ARTICLE FIVE SUCCESSOR CORPORATION..................................................................... 49 Section 5.01. Merger, Consolidation and Sale of Assets......................................... 49 Section 5.02. Successor Entity Substituted..................................................... 50 ARTICLE SIX DEFAULT AND REMEDIES...................................................................... 50 Section 6.01. Events of Default................................................................ 50 Section 6.02. Acceleration..................................................................... 51 Section 6.03. Other Remedies................................................................... 52 Section 6.04. Waiver of Past Defaults.......................................................... 52 Section 6.05. Control by Majority.............................................................. 52 Section 6.06. Limitation on Suits.............................................................. 53 Section 6.07. Rights of Holders to Receive Payment............................................. 53 Section 6.08. Collection Suit by Trustee....................................................... 53 Section 6.09. Trustee May File Proofs of Claim................................................. 54 Section 6.10. Priorities....................................................................... 54 Section 6.11. Undertaking for Costs............................................................ 54

-ii- TABLE OF CONTENTS (continued)
PAGE Section 6.12. Restoration of Rights and Remedies............................................... 55 ARTICLE SEVEN TRUSTEE................................................................................... 55 Section 7.01. Duties of Trustee................................................................ 55 Section 7.02. Rights of Trustee................................................................ 56 Section 7.03. Individual Rights of Trustee..................................................... 57 Section 7.04. Trustee's Disclaimer............................................................. 57 Section 7.05. Notice of Default................................................................ 58 Section 7.06. Reports by Trustee to Holders.................................................... 58 Section 7.07. Compensation and Indemnity....................................................... 58 Section 7.08. Replacement of Trustee........................................................... 59 Section 7.09. Successor Trustee by Merger, Etc................................................. 60 Section 7.10. Eligibility; Disqualification.................................................... 60 Section 7.11. Preferential Collection of Claims Against Company................................ 61 Section 7.12. Trustee as Paying Agent.......................................................... 61 Section 7.13. Form of Documents Delivered to Trustee........................................... 61 ARTICLE EIGHT SATISFACTION AND DISCHARGE OF INDENTURE................................................... 61 Section 8.01. Legal Defeasance and Covenant Defeasance......................................... 61 Section 8.02. Satisfaction and Discharge....................................................... 64 Section 8.03. Survival of Certain Obligations.................................................. 64 Section 8.04. Acknowledgment of Discharge by Trustee........................................... 64 Section 8.05. Application of Trust Moneys...................................................... 65 Section 8.06. Repayment to the Company; Unclaimed Money........................................ 65 Section 8.07. Reinstatement.................................................................... 65 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS....................................................... 66 Section 9.01. Without Consent of Holders....................................................... 66 Section 9.02. With Consent of Holders.......................................................... 66 Section 9.03. Compliance with TIA.............................................................. 67 Section 9.04. Revocation and Effect of Consents................................................ 68 Section 9.05. Notation on or Exchange of Notes................................................. 68 Section 9.06. Trustee to Sign Amendments, Etc.................................................. 68 Section 9.07. Conformity with Trust Indenture Act.............................................. 69 ARTICLE TEN GUARANTEE................................................................................. 69
-iii- TABLE OF CONTENTS (continued)
PAGE Section 10.01. Guarantee........................................................................ 69 Section 10.02. Release of a Guarantor........................................................... 70 Section 10.03. Limitation of Guarantor's Liability.............................................. 70 Section 10.04. Guarantors May Consolidate, etc., on Certain Terms............................... 71 Section 10.05. Contribution..................................................................... 71 Section 10.06. Waiver of Subrogation............................................................ 71 Section 10.07. Waiver of Stay, Extension or Usury Laws.......................................... 71 ARTICLE ELEVEN MISCELLANEOUS............................................................................. 72 Section 11.01. Trust Indenture Act Controls..................................................... 72 Section 11.02. Notices.......................................................................... 72 Section 11.03. Communications by Holders with Other Holders..................................... 73 Section 11.04. Certificate and Opinion as to Conditions Precedent............................... 73 Section 11.05. Statements Required in Certificate or Opinion.................................... 73 Section 11.06. Rules by Trustee, Paying Agent, Registrar........................................ 73 Section 11.07. Legal Holidays................................................................... 73 Section 11.08. Governing Law.................................................................... 74 Section 11.09. No Adverse Interpretation of Other Agreements.................................... 74 Section 11.10. No Recourse Against Others....................................................... 74 Section 11.11. Successors....................................................................... 74 Section 11.12. Duplicate Originals.............................................................. 74 Section 11.13. Severability..................................................................... 74 Section 11.14. Waiver of Jury Trial............................................................. 75
Exhibit A - Form of Initial Note............................................................ A Exhibit B - Form of Exchange Note............................................................ B Exhibit C - Form of Legend for Global Notes.................................................. C Exhibit D - Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors................................................... D Exhibit E - Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S...................................................... E

NOTE: This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture. -iv- INDENTURE, dated as of November 1, 2004, among Hawk Corporation, a Delaware corporation (the "Company"), the Guarantors (as herein defined) and HSBC Bank USA, National Association, as Trustee (in such capacity, the "Trustee"). WITNESSETH: WHEREAS, the Company has duly authorized the creation of the Notes and, to provide therefor, the Company and the Guarantors have duly authorized the execution and delivery of this Indenture; and WHEREAS, all things necessary to make the Notes, when duly issued and executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of each of the Company and the Guarantors, have been done. NOW, THEREFORE, each party hereto agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "Acceleration Notice" has the meaning set forth in Section 6.02. "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with or into the Company or any of its Restricted Subsidiaries or assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation and which Indebtedness is without recourse to the Company or any of its Subsidiaries or to any of their respective properties or assets other than the Person or the assets to which such Indebtedness related prior to the time such Person became a Restricted Subsidiary of the Company or the time of such acquisition, merger or consolidation. "Additional Interest" has the meaning set forth in the Registration Rights Agreement. "Additional Notes" means all 8-3/4% Senior Notes due 2014 issued after the Issue Date (other than pursuant to Sections 2.06, 2.07, 2.10 and 3.06 of this Indenture and other than Exchange Notes) from time to time in accordance with the terms of this Indenture, including, without limitation, the provisions of Sections 2.02 and 4.08. "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided, that Beneficial Ownership of 10% or more of the Voting Stock of the Person shall be deemed to be control. The terms "controlling" and "controlled" have meanings correlative of the foregoing. "Affiliate Transaction" has the meaning set forth in Section 4.14(a). "Agent" means any Registrar, Paying Agent or co-Registrar. "Agent Members" has the meaning set forth in Section 2.14 and means, with respect to DTC, Euroclear or Clearstream, a Person who has an account with DTC, Euroclear or Clearstream, respectively (and with respect to DTC, shall include Euroclear and Clearstream). "Applicable Indebtedness" means Indebtedness that is pari passu in right of payment with the Notes. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of DTC, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Acquisition" means: (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company; or (2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer (other than a Lien in accordance with this Indenture) for value by (x) the Company or any of its Restricted Subsidiaries to any Person other than the Company or a Guarantor or (y) a Foreign Restricted Subsidiary to any Person other than the Company, a Guarantor or a Wholly-Owned Subsidiary of the Company of: (1) any Capital Stock of any Restricted Subsidiary of the Company (other than directors' qualifying shares); or (2) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sales shall not include: (a) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $1,000,000; (b) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 5.01; (c) any Restricted Payment permitted under Section 4.09, including a Permitted Investment; (d) the sale of Cash Equivalents; and 2 (e) the sale or other disposition of used, worn out, obsolete or surplus equipment. "Authenticating Agent" has the meaning set forth in Section 2.02. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended, and codified as 11 U.S.C. Sections 101 et seq. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have meanings correlative to the foregoing. "Board of Directors" means, as to any Person, the board of directors or similar governing body of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means a day that is not a Legal Holiday. "Capital Stock" means: (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person; (2) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person; and (3) any warrants, rights or options to purchase any of the instruments or interests referred to in clause (1) or (2) above. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Cash Equivalents" means: (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one 3 of the two highest ratings obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (4) certificates of deposit or bankers' acceptances (or, with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined net capital and surplus of not less than $250,000,000; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above. "Cash Flow" means, with respect to any Person for any period, Consolidated Net Income for such Person for such period, plus, without duplication, to the extent deducted in computing such Consolidated Net Income: (1) provision for taxes based on income or profits and any provision for taxes utilized in computing gains and losses, including extraordinary gains and losses; plus (2) Consolidated Interest Expense; plus (3) depreciation, amortization and all other non-cash charges, including all amortization of intangibles, deferred financing charges, consent incentives paid with respect to the tender offer and consent solicitation relating to the Company's 12% Senior Notes due 2006, and non-cash charges relating to incentive programs for executive officers of the Company, but excluding any such non-cash charge to the extent it represents an accrual of a reserve, cash charges in any future period or amortization of a pre-paid cash expense that was paid in a prior period not included in the prior calculation); plus (4) any non-recurring fees, charges or other expenses made or incurred by the Company in connection with the Offering as described in the Offering Circular dated October 25, 2004; provided that if any Restricted Subsidiary is not a wholly owned Restricted Subsidiary of the Company, then Cash Flow shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (a) the amount of Cash Flow attributable to such Restricted Subsidiary, multiplied by (b) the percentage ownership interest in such Restricted Subsidiary not owned by the Company or any of its Restricted Subsidiaries on the last day of such period. "Change of Control" means the occurrence of one or more of the following events: (1) any direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one transaction or a series of related transactions, of 4 all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") other than any or all of the Permitted Holders; (2) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Capital Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); (3) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation, winding up or dissolution of the Company; (4) any Person or Group (other than any or all of the Permitted Holders) is or becomes the Beneficial Owner, directly or indirectly, in the aggregate of more than 35% of the total voting power of the Voting Stock of the Company; or (5) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved pursuant to a vote or written consent of a majority of the directors then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office. Notwithstanding anything to the contrary in the immediately preceding sentence, none of the events described in clause (1), (2) or (4) thereof shall be deemed to constitute a "Change of Control" if in connection with such event: (A) the Company engaged in a "Rule 13e-3 transaction" (as such term is defined in Rule 13e-3(a)(3) under the Exchange Act); (B) immediately after giving effect thereto and all other transactions related thereto occurring on the date thereof (including the making of any dividend or distribution and the repayment or incurrence, if any, of any Indebtedness), (i) the Consolidated Leverage Ratio of the Company (or if the Company consolidates with, or mergers with or into, any Person, or any Person consolidates with, or mergers with or into, the Company, the surviving or transferee Person) is less than 3.5 to 1.0 on a pro forma basis and (ii) no Default or Event of Default shall have occurred and be continuing; and (C) the person who is the Chairman of the Board of the Company on the Issue Date holds the position of Chairman of the Board, Chief Executive Officer or President of the Company (or such surviving or transferee Person) immediately after giving effect thereto "Change of Control Offer" has its meaning set forth in Section 4.19(a). "Change of Control Payment Date" has its meaning set forth in Section 4.19(b)(2). "Clearstream" means Clearstream Banking, societe anonyme and its successors. 5 "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Company" has the meaning set forth in the preamble to this Indenture. "Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio of: (1) the aggregate amount of Cash Flow for such period; to (2) Consolidated Interest Expense for such period, determined on a pro forma basis after giving pro forma effect to: (a) the incurrence of the Indebtedness giving rise to the calculation of the Consolidated Fixed Charge Coverage Ratio and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, at the beginning of such period; (b) the incurrence, repayment or retirement of any other Indebtedness by the Company and its Restricted Subsidiaries since the first day of such period as if such Indebtedness was incurred, repaid or retired at the beginning of such period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average balance of such Indebtedness at the end of each month during such period); (c) in the case of Acquired Indebtedness, the related acquisition as if such acquisition had occurred at the beginning of such period; and (d) any acquisition or disposition by the Company and its Restricted Subsidiaries of any Company or any business or any assets out of the ordinary course of business, or any related repayment of Indebtedness, in each case since the first day of such period, assuming such acquisition or disposition had been consummated on the first day of such period. In addition, for purposes of calculating Cash Flow, acquisitions by the Company or any Restricted Subsidiaries, including through mergers or consolidations, during the period or that relate to the incurrence of the Indebtedness giving rise to the calculation of the Consolidated Fixed Charge Coverage Ratio shall be deemed to have occurred at the beginning of the period. "Consolidated Interest Expense" means, with respect to any Person for any period, the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, as determined in accordance with GAAP, and including, without duplication: (1) all amortization or accretion of original issue discount; (2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period; 6 (3) net cash costs under all Interest Swap Obligations (including amortization of fees); and (4) dividends paid on Disqualified Capital Stock. "Consolidated Leverage Ratio" means, with respect to any Person, as of any date, the ratio of (i) the excess of (A) Consolidated Total Debt of such Person and its Restricted Subsidiaries as of such date over (B) Unrestricted Cash of such Person and its Restricted Subsidiaries as of such date to (ii) Cash Flow of such Person and its Restricted Subsidiaries for the four consecutive full fiscal quarters of such Person most recently ending on or prior to such date for which financial statements are available. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP, adjusted to the extent included in calculating such net income (or loss), by excluding, without duplication: (1) after-tax gains and losses from Asset Sales or abandonments or reserves relating thereto, or from idle asset reserves; (2) after-tax items classified as extraordinary gains or losses; (3) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by such Restricted Subsidiary of such income is restricted by a contract, operation of law or otherwise; (4) the net income of any Person, other than the referent Person or a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a wholly-owned Restricted Subsidiary of the referent Person by such Person; (5) any restoration to income of any material contingency reserve, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, and except for any idle asset reserves; (6) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued); (7) all gains and losses realized on or because of the purchase or other acquisition by such Person or any of its Restricted Subsidiaries after the Issue Date of any securities of such Person or any of its Restricted Subsidiaries; (8) the cumulative effect of a change in accounting principles; (9) interest expense attributable to dividends on Qualified Capital Stock pursuant to Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity"; (10) non-cash charges resulting from the impairment of intangible assets; and 7 (11) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets. "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of the Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) amounts attributable to Disqualified Capital Stock of such Person. "Consolidated Total Debt" means, with respect to any Person, as of any date, the aggregate principal amount of consolidated Indebtedness of such Person and its Restricted Subsidiaries of the nature referred to in clauses (1), (2), (3), (4), (5) and (9) of the definition of the term "Indebtedness". "Corporate Trust Office" means the office of HSBC Bank, National Association at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at 452 Fifth Avenue, New York, New York 10018, Attention: Corporate Trust, or such other address as the Trustee may designate from time to time by notice to the Holders and the Issuer, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Issuer). "Covenant Defeasance" has the meaning set forth in Section 8.01(c). "Credit Agreement" means the credit agreement dated as of the Issue Date, among the Company, the lenders party thereto (together with their successors and assigns, the "Lenders") and KeyBank National Association, as administrative agent, setting forth the terms and conditions of the new bank facility, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended, supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted under clause (2), (8), (11), (12) or (19) of the definition of "Permitted Indebtedness") or adding Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Code. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Depository" means DTC, its nominees and successors. "Disqualified Capital Stock" means that portion of 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 at the option of the holder thereof), or upon the happening of any event (other than an event that would constitute a Change of Control), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except in each case, upon the occurrence of a 8 Change of Control) on or prior to the first anniversary of the final maturity date of the Notes for cash or is convertible into or exchangeable for debt securities of the Company or its Subsidiaries at any time prior to such anniversary. "Domestic Restricted Subsidiary" means, with respect to any Person, a Domestic Subsidiary of such Person that is a Restricted Subsidiary of such Person. "Domestic Subsidiary" means, with respect to any Person, a Subsidiary of such Person that is not a Foreign Subsidiary of such Person. "DTC" means The Depositary Trust Company, its nominees and successors. "Equity Offering" means an underwritten public offering of Common Stock of the Company or any holding company of the Company pursuant to a registration statement filed with the SEC (other than on Form S-8) or any private placement of Common Stock of the Company or any holding company of the Company to any Person other than issuances upon exercise of options by employees of any holding company, the Company or any of the Restricted Subsidiaries. "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system and its successors. "Event of Default" has the meaning set forth in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. "Exchange Notes" means the 8-3/4% Senior Notes due 2014 issued in exchange for the Initial Notes or Additional Notes pursuant to the terms of a Registration Rights Agreement. "Exchange Offer" means an exchange offer that may be made by the Company, pursuant to the Registration Rights Agreement, to exchange for any and all the Initial Notes or Additional Notes a like aggregate principal amount of Exchange Notes having substantially identical terms to the Initial Notes or Additional Notes registered under the Securities Act. "Fair Market Value" means, with respect to any asset or property, the price which could be negotiated in an arm's length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined by the Board of Directors of the Company acting in good faith and, where required by this Indenture, shall be evidenced by a Board Resolution of the Board of Directors of the Company delivered to the Trustee. "Foreign Restricted Subsidiary" means any Restricted Subsidiary that is organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia. "Foreign Subsidiary" means, with respect to any Person, any Subsidiary of such Person that is organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia. "GAAP" means accounting principles generally accepted in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or 9 in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date. "Global Notes" means, collectively, the 144A Global Notes, the IAI Global Notes, the Regulation S Permanent Global Notes and the Regulation S Temporary Global Notes. "Group" has the meaning set forth in the definition of the term "Change of Control". "Guarantee" has the meaning set forth in Section 10.01. "Guarantor" means (1) each of the Company's Domestic Restricted Subsidiaries existing on the Issue Date and (2) each of the Company's Domestic Restricted Subsidiaries that in the future executes a supplemental indenture in which such Domestic Restricted Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of this Indenture. "Holder" means the Person in whose name a Note is registered on the registrar's books. "IAI Global Notes" has the meaning set forth in Section 2.01. "incur" has the meaning set forth in Section 4.08. "Indebtedness" means with respect to any Person, without duplication: (1) all Obligations of such Person for borrowed money; (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person; (4) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and any deferred purchase price represented by earn outs consistent with the Company's past practice); (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, whether or not then due; (6) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (1) through (5) above and clause (8) below; (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) above that are secured by any Lien (other than a Permitted Lien not securing any liability that would itself constitute Indebtedness) on any property or asset of such Person, the amount of any such Obligation being deemed to be the lesser of the Fair Market Value of the property or asset securing such Obligation or the amount of such Obligation; 10 (8) all Interest Swap Obligations and all Obligations under Currency Agreements of such Person; and (9) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Capital Stock, such Fair Market Value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock. "Indemnified Party" has the meaning set forth in Section 7.07. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Indenture Documents" means, collectively, this Indenture, the Notes and the Guarantees. "Independent Financial Advisor" means a nationally-recognized accounting, appraisal or investment banking firm: (1) that does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Company; and (2) that, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Notes" means the 8-3/4% Senior Notes due 2014 issued on the Issue Date. "Initial Purchaser" means Jefferies & Company, Inc. "Institutional Accredited Investor" means an institution that is an "accredited investor" as such term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Payment Date" means the stated maturity of an installment of interest on the Notes. "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" in any Person means any direct or indirect advance (other than advances to suppliers and customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender), loan or other extensions 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 for value of Capital Stock, Indebtedness or other similar instruments issued by such Person. If the Company or any Restricted Subsidiary issues, sells or otherwise disposes of any Capital Stock of a Person that is a 11 Restricted Subsidiary such that, after giving effect thereto, such Person is no longer a Restricted Subsidiary, any Investment by the Company or any Restricted Subsidiary in such Person remaining after giving effect thereto will be deemed to be a new Investment at such time. The acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person at such time. Except as otherwise provided for herein, the amount of an Investment shall be its Fair Market Value at the time the Investment is made and without giving effect to subsequent changes in value. For purposes of the definition of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section 4.09: (1) "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 equal to an amount (if positive) equal to (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) 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 (2) 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 of the Company. "Issue Date" means November 1, 2004. "Legal Defeasance" has the meaning set forth in Section 8.01(b). "Legal Holiday" has the meaning set forth in Section 11.07. "Lenders" has the meaning set forth in the definition of the term "Credit Agreement". "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Maturity Date" means November 1, 2014. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (2) all taxes and other costs and expenses actually paid or estimated by the Company (in good faith) to be payable in cash in connection with such Asset Sale and taxes directly 12 attributable to required prepayments or repayments of Indebtedness with the proceeds of such Asset Sale; (3) repayment of Indebtedness that is secured by the property or assets that are the subject of such Asset Sale and is required to be repaid in connection with such Asset Sale; and (4) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, 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 Sale; provided, however, that if, after the payment of all taxes with respect to such Asset Sale, the amount of estimated taxes, if any, pursuant to clause (2) above exceeded the tax amount actually paid in cash in respect of such Asset Sale, the aggregate amount of such excess shall, at such time, constitute Net Cash Proceeds. "Net Proceeds Offer" has the meaning set forth in Section 4.10. "Net Proceeds Offer Amount" has the meaning set forth in Section 4.10. "Net Proceeds Offer Payment Date" has the meaning set forth in Section 4.10. "Net Proceeds Offer Trigger Date" has the meaning set forth in Section 4.10. "Non-U.S. Person" means a Person who is not a U.S. person, as defined in Regulation S. "Notes" means, collectively, the Initial Notes, the Additional Notes and the Exchange Notes. "Obligations" means all obligations for principal, premium, interest, Additional Interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means the Chairman of the Board, Senior Chairman of the Board, Chief Executive Officer, the President, the Chief Financial Officer, any Vice President or the Secretary of the Company or any other officer designated by the Board of Directors serving in a similar capacity. "Officers' Certificate" means a certificate signed by two Officers of the Company, at least one of whom shall be the principal financial officer of the Company, and delivered to the Trustee. "144A Global Notes" has the meaning set forth in Section 2.01. "Opinion of Counsel" means a written opinion of counsel who shall be reasonably acceptable to the Trustee complying with the requirements of Sections 11.04 and 11.05, as they relate to the giving of an Opinion of Counsel. "Paying Agent" has the meaning set forth in Section 2.03. "Permitted Business" means any business that is the same as or similar, reasonably related, complementary or incidental to the business in which the Company or any of its Restricted Subsidiaries is engaged on the Issue Date. 13 "Permitted Fixed Asset Indebtedness" means Indebtedness of the Company and its Domestic Restricted Subsidiaries incurred for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment, provided that the aggregate principal amount of such Indebtedness does not exceed the lesser of (1) the Fair Market Value of such property or (2) such purchase price of cost as increased by the purchase of additions and accessions to such property and by any fees and other obligations in respect of the Indebtedness. "Permitted Holders" means any of Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz or any "group" (as defined in Rule 13d-5 of the Exchange Act) consisting of any or all of the foregoing or their heirs. "Permitted Indebtedness" means, without duplication, each of the following: (1) Indebtedness under the Notes issued in the Offering described in the Offering Circular dated October 25, 2004, in an aggregate outstanding principal amount not to exceed $110,000,000, and the related Guarantees; (2) Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed the lesser of (a) $30,000,000 or (b) the amount permitted to be borrowed under the Credit Agreement at such time; (3) other than as described in clauses (1) and (2), other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date or that may be borrowed pursuant to any commitment in effect under any credit agreement or facility in existence on the Issue Date; (4) Interest Swap Obligations of the Company or any Restricted Subsidiary of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries; provided, however, that such Interest Swap Obligations are entered into for the purpose of fixing or hedging interest rates with respect to any fixed or variable rate Indebtedness that is permitted by this Indenture to be outstanding to the extent that the notional amount of any such Interest Swap Obligation does not exceed the principal amount of Indebtedness to which such Interest Swap Obligation relates; (5) Indebtedness under Currency Agreements; provided that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (6) Indebtedness owed by any Restricted Subsidiary to the Company or to another Restricted Subsidiary, or owed by the Company to any Restricted Subsidiary that, if owed to a Restricted Subsidiary that is not a Guarantor, is unsecured and subordinated in right of payment to the payment and performance of the Company's obligations under this Indenture and the Notes, except that such Indebtedness must at all times be held by a Person that is either the Company or a Restricted Subsidiary, and except that upon either (a) the transfer or other disposition of any of the Indebtedness to a Person other than the Company or another Restricted Subsidiary or (b) the sale, lease, transfer or other disposition of shares of Capital Stock (including by consolidation or merger) of such Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary, the incurrence of the Indebtedness will be deemed to be an incurrence of Indebtedness that is not permitted by this clause (6); 14 (7) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within three Business Days of incurrence; (8) Indebtedness of the Company or any of its Domestic Restricted Subsidiaries represented by stand-by letters of credit for the account of the Company or such Domestic Restricted Subsidiary, as the case may be; provided, however, that the aggregate outstanding undrawn and unreimbursed amounts in respect of such letters of credit may not at any time exceed $5,000,000 (which letters of credit may, but need not be, issued under the Credit Agreement); (9) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (10) obligations in respect of performance, bid and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; (11) Indebtedness represented by Capitalized Lease Obligations and Purchase Money Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business (including Refinancings thereof that do not result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and the amount of reasonable expenses incurred by the Company in connection with such Refinancing)) not to exceed $5,000,000 at any time outstanding (which Indebtedness may, but need not be, incurred in whole or in part under the Credit Agreement); (12) Indebtedness represented by the Permitted Fixed Asset Indebtedness of the Company and its Domestic Restricted Subsidiaries incurred in the ordinary course of business (including Refinancings thereof that do not result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and the amount of reasonable expenses incurred by the Company in connection with such Refinancing)) not to exceed $5,000,000 at any time outstanding (which Indebtedness may, but need not be, incurred in whole or in part under the Credit Agreement); (13) Refinancing Indebtedness; (14) Indebtedness represented by guarantees by the Company or a Restricted Subsidiary of Indebtedness incurred by the Company or a Restricted Subsidiary so long as the incurrence of such Indebtedness by the Company or any such Restricted Subsidiary is otherwise permitted by the terms of this Indenture; (15) Indebtedness arising from agreements of the Company or a Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any business, assets or Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate 15 liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and the Subsidiary in connection with such disposition; (16) Indebtedness of the Company or any of its Restricted Subsidiaries to the extent the net proceeds thereof are promptly used to redeem the Notes in full or deposited to defease or discharge the Notes, in each case, in accordance with this Indenture; (17) Commodity agreements entered into in the ordinary course of business to protect against fluctuations in the prices of raw materials and not for speculative purposes; (18) Indebtedness of Foreign Subsidiaries, the aggregate principal amount of which Indebtedness outstanding at any time does not exceed, as to all the Foreign Subsidiaries, $5,000,000; provided that for purposes of determining compliance with such U.S. dollar-denominated restriction on the incurrence of such Indebtedness, the U.S. dollar-equivalent principal amount of such Indebtedness denominated in foreign currency shall be calculated based on the relevant currency exchange rate in effect on such date the Indebtedness was incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided further that if Refinancing Indebtedness is incurred to refinance such Indebtedness, and the refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of the refinancing, then the U.S. dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed the principal amount of the Indebtedness being refinanced; and (19) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $5,000,000 at any time outstanding (which Indebtedness may, but need not be, incurred in whole or in part under the Credit Agreement). For purposes of determining compliance with Section 4.08, (a) the outstanding principal amount of any item of Indebtedness shall be counted only once and (b) in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (19) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of Section 4.08, the Company shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with Section 4.08. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock for purposes of Section 4.08. "Permitted Investments" means: (1) Investments by the Company or any Restricted Subsidiary in any Person that is or will become immediately after such Investment a Guarantor or that will merge or consolidate with or into the Company or a Guarantor, or that transfers or conveys all or substantially all of its assets to the Company or a Guarantor; (2) Investments in the Company by any Restricted Subsidiary; provided that any Indebtedness evidencing such Investment is unsecured and subordinated, pursuant to a written agreement, to the Company's Obligations under the Notes and this Indenture; (3) Investments in cash and Cash Equivalents; 16 (4) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with this Indenture; (5) Investments in the Notes; (6) Investments in securities of trade creditors, customers or any other Persons received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such Persons in exchange for claims against such Persons; (7) Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.10; (8) Investments in existence on the Issue Date; (9) loans and advances, including advances for travel and moving expenses, to employees, officers and directors of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $1,000,000 at any one time outstanding; (10) Investments in accounts and notes receivable acquired in the ordinary course of business; and (11) additional Investments in an aggregate amount not to exceed $5,000,000 at any time outstanding. "Permitted Liens" means the following types of Liens: (1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law or pursuant to customary reservations or retentions of title incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) any judgment Lien not giving rise to an Event of Default; 17 (5) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (6) any interest or title of a lessor under any Capitalized Lease Obligation permitted pursuant to clause (11) of the definition of "Permitted Indebtedness"; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation; (7) Liens securing Purchase Money Indebtedness permitted pursuant to clause (11) of the definition of "Permitted Indebtedness"; provided, however, that (a) the Indebtedness shall not exceed the cost of the property or assets acquired, together, in the case of real property, with the cost of the construction thereof and improvements thereto, and shall not be secured by a Lien on any property or assets of the Company or any Restricted Subsidiary of the Company other than such property or assets so acquired or constructed and improvements thereto and (b) the Lien securing such Indebtedness shall be created within 180 days of such acquisition or construction or, in the case of a refinancing of any Purchase Money Indebtedness, within 180 days of such refinancing; (8) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (9) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (10) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (11) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (12) Liens securing Indebtedness under Currency Agreements that are permitted under this Indenture; (13) Liens securing Acquired Indebtedness incurred in accordance with Section 4.08; provided that: (a) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company; and (b) such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company and are no more 18 favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company; (14) Liens existing as of the Issue Date and securing Indebtedness permitted to be outstanding under clause (3) of the definition of the term "Permitted Indebtedness" to the extent and in the manner such Liens are in effect on the Issue Date; (15) Liens on property acquired by the Company or a Restricted Subsidiary, so long as the Liens were in existence before the contemplation of the acquisition and do not extend to any other property; (16) Liens securing Indebtedness under the Credit Agreement to the extent such Indebtedness is permitted under clause (2), (8), (11), (12) or (19) of the definition of "Permitted Indebtedness"; (17) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under this paragraph and which has been incurred in accordance with Section 4.08; provided, however, that such Liens: (a) are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced; and (b) do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced. "Permitted Payments" has the meaning set forth under Section 4.09. "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Physical Notes" has the meaning set forth in Section 2.14(b). "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Private Placement Legend" means the legend set forth on the Initial Notes in the form set forth in Exhibit A. "Public Equity Offering" means an underwritten public offering of Common Stock of the Company or any holding company of the Company pursuant to a registration statement filed with the SEC (other than on Form S-8). "Purchase Money Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries incurred for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment, provided that the aggregate principal amount of such Indebtedness does not exceed the lesser of (1) the Fair Market Value of such property or (2) such purchase price or cost as increased by the purchase of additions and accessions to such property and by any fees and other obligations in respect of the Indebtedness. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. 19 "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Record Date" means any of the Record Dates specified in the Notes, whether or not a Legal Holiday. "Redemption Date" means, when used with respect to any Note to be redeemed, the date fixed for redemption pursuant to this Indenture and the Notes. "Redemption Price" means, when used with respect to any Note to be redeemed, the price fixed for redemption pursuant to this Indenture and the Notes. "Reference Date" has the meaning set forth in Section 4.09. "Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any Restricted Subsidiary of the Company of Indebtedness incurred in accordance with Section 4.08 (other than pursuant to Permitted Indebtedness) or clauses (1), (3) or (13) of the definition of Permitted Indebtedness, in each case that does not: (1) have an aggregate principal amount (or, if such Indebtedness is issued with original issue discount, an aggregate offering price) greater than the sum of (a) the aggregate principal amount of the Indebtedness being Refinanced (or, if such Indebtedness being Refinanced is issued with original issue discount, the aggregate accreted value) as of the date of such proposed Refinancing plus (b) the amount of fees, expenses, premium, defeasance costs and accrued but unpaid interest relating to the Refinancing of such Indebtedness being Refinanced; (2) create Indebtedness with (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; or (3) affect the security, if any, for such Refinancing Indebtedness (except to the extent that less security is granted to holders of such Refinancing Indebtedness). If such Indebtedness being Refinanced is subordinate or junior by its terms to the Notes, then such Refinancing Indebtedness shall be subordinate by its terms to the Notes at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Register" is defined in Section 2.03. "Registrar" has the meaning set forth in Section 2.03. "Registration Rights Agreement" means (1) with respect to the Initial Notes issued on the Issue Date, the Registration Rights Agreement, dated as of the Issue Date, among the Company, the Guarantors and the Initial Purchaser, and (2) with respect to each issuance of Additional Notes issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company, the Guarantors and the initial purchaser(s) under the related purchase agreement, in 20 each case as the same may be amended or modified from time to time in accordance with the terms thereof. "Regulation S" means Regulation S under the Securities Act. "Regulation S Permanent Global Note" means a permanent Global Note deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "Regulation S Temporary Global Note" means a temporary Global Note deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Initial Notes or Additional Notes initially sold in reliance on Rule 903 of Regulation S. "Restricted Payment" has the meaning set forth in Section 4.09. "Restricted Period" means the 40-day distribution compliance period as defined in Regulation S. "Restricted Security" has the meaning assigned to such term in Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "Restricted Subsidiary" means any Subsidiary of the Company that at the time of determination is not an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Significant Subsidiary" with respect to any Person, means any Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1-02(w) of Regulation S-X under the Exchange Act. "Subsidiary" with respect to any Person, means: (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Surviving Entity" has the meaning set forth in Section 5.01. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS 77aaa-77bbbb), as amended. "Trustee" has the meaning set forth in the preamble to this Indenture. 21 "Trust Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee having direct responsibility for the administration of this Indenture, or any other officer to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Unrestricted Cash" means, with respect to any Person, as at any time, cash and Cash Equivalents of such Person and its Restricted Subsidiaries to the extent such cash and Cash Equivalents are not subject to any Lien (other than a Permitted Lien described in clause (16) of the definition thereof (except to the extent such Permitted Liens are granted to cash collateralize letters of credit)) or any restriction as to its use and is included in "cash and cash equivalents" and not "restricted cash" on the consolidated balance sheet of such Person or any such Restricted Subsidiary. "Unrestricted Subsidiary" of any Person means: (1) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated, provided that: (1) the Company certifies to the Trustee that such designation complies with Section 4.09; and (2) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: (1) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.08; and (2) immediately before and immediately after giving effect to such designation, no Default or Event of 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 Board Resolution 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 of, and obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged. 22 "U.S. Legal Tender" means such coin or currency of the United States which, as at the time of payment, shall be immediately available legal tender for the payment of public and private debts. "Voting Stock" means, with respect to any Person, securities of any class or classes of Capital Stock of such Person entitling the holders thereof (irrespective of whether any senior class of stock has voting power by reason of any contingency) to vote in the election of members of the Board of Directors (or equivalent governing body) of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (1) the then outstanding aggregate principal amount of such Indebtedness into (2) the sum of the total of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly-Owned Subsidiary" of any Person means any Restricted Subsidiary of such Person of which all the outstanding Capital Stock (other than in the case of a Foreign Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly-Owned Subsidiary of such Person. Section 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the Notes. 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 and not otherwise defined herein have the meanings assigned to them therein. Section 1.03. 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; 23 (4) words in the singular include the plural, and words in the plural include the singular; (5) "herein", "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (6) when the words "includes" or "including" are used herein, they shall be deemed to be followed by the words "without limitation"; (7) all references to Sections or Articles refer to Sections or Articles of this Indenture unless otherwise indicated; and (8) unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Indenture shall have such meanings when used in each other Indenture Document. ARTICLE TWO THE NOTES Section 2.01. Form and Dating. The Initial Notes and the Additional Notes and the Trustee's certificate of authentication thereon shall be substantially in the form of Exhibit A hereto. The Exchange Notes and the Trustee's certificate of authentication thereon shall be substantially in the form of Exhibit B hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or DTC rule or usage. The Company and the Trustee shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its authentication. The terms and provisions contained in the forms of the Notes annexed hereto as Exhibit A and Exhibit B, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global notes in registered form, substantially in the form set forth in Exhibit A (the "144A Global Notes"), deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Exhibit C. Notes offered and sold to Institutional Accredited Investors in reliance on Rule 501(a)(1), (2), (3) or (7) under the Securities Act shall be issued initially in the form of one or more permanent global notes in registered form, substantially in the form set forth in Exhibit A (the "IAI Global Notes"), deposited with the Trustee, as custodian for DTC, duly executed by the Company and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Exhibit C. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of one or more Regulation S Temporary Global Note deposited with the Trustee, as custodian for the Depository, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Exhibit C. 24 Following the termination of the Restricted Period, beneficial interests in a Regulation S Temporary Global Note will be exchanged for beneficial interests in a Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of a Regulation S Permanent Global Note, the Trustee will cancel the related Regulation S Temporary Global Note. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Note that are held by participants through Euroclear or Clearstream. The aggregate principal amount of any Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC, as hereinafter provided. The definitive Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Notes may be listed, all as determined by the Officer executing such Notes, as evidenced by their execution of such Notes. Section 2.02. Execution and Authentication; Aggregate Principal Amount. An Officer (who shall have been duly authorized by all requisite corporate actions) shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note was an Officer at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. A Note shall not be valid until an authorized officer of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Notes for original issue in the aggregate principal amount not to exceed $110,000,000, (ii) Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes or Additional Notes, and (iii) one or more series of Additional Notes in an unlimited amount in each case upon written orders of the Company in the form of an Officers' Certificate, which Officers' Certificate shall, in the case of any issuance of Additional Notes, certify that such issuance is in compliance with Section 4.08. In addition, each Officers' Certificate shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Initial Notes, Exchange Notes or Additional Notes. All Notes issued under this Indenture shall vote and consent together on all matters as one class and no series of Notes shall have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate Notes. Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an Agent to deal with the Company and Affiliates of the Company. 25 The Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 in principal amount and any integral multiple thereof. If such form or terms have been so established, the Trustee shall not be required to authenticate such Notes if the issue of such Notes pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Notes and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Section 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency which shall initially be the office of the Trustee in the Borough of Manhattan, The City of New York, where (a) Notes may be presented or surrendered for registration of transfer or for exchange (the "Registrar"), (b) Notes may be presented or surrendered for payment (the "Paying Agent") and (c) notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange (the "Register"). The Company, upon prior written notice to the Trustee, may have one or more co-Registrars and one or more additional Paying Agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional Paying Agent. Neither the Company nor any Affiliate of the Company may act as Paying Agent. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall incorporate the provisions of the TIA and implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee in writing, in advance, of the name and address of any such Agent and otherwise be reasonably satisfactory to the Trustee. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of demands and notices in connection with the Notes. The Paying Agent or Registrar may resign upon thirty (30) days' written notice to the Company. Section 2.04. Obligations of Paying Agent. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold separate and apart from, and not commingle with any other properties, for the benefit of the Holders or the Trustee, all assets held by the Paying Agent for the payment of principal of, or interest or Additional Interest, if any, on, the Notes (whether such assets have been distributed to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee in writing of any Default by the Company (or any other obligor on the Notes) in making any such payment. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon receipt by the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. Section 2.05. Holder 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 the Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee before each Record Date and at such other times as the Trustee may request in 26 writing a list as of such date and in such form as the Trustee may reasonably request of the names and addresses of the Holders, which list may be conclusively relied upon by the Trustee. Section 2.06. Transfer and Exchange. Subject to the provisions of Sections 2.14 and 2.15, when Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested; provided, however, that the Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing and such other documents as the Registrar or co-Registrar may reasonably require. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company or the Trustee may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.10, 3.06, 4.10 or 4.19 in which event the Company shall be responsible for the payment of such taxes). The Registrar or co-Registrar shall not be required to register the transfer or exchange of any Note (i) during a period beginning at the opening of business fifteen (15) days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part. Any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through DTC, in accordance with this Indenture and the Applicable Procedures. Section 2.07. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims in writing that the Note has been lost, destroyed or wrongfully taken, then, in the absence of written notice to the Company upon its request or the Trustee that such Note has been acquired by a protected purchaser, the Company shall issue and the Trustee shall authenticate a replacement Note of like tenor and principal amount and bearing a number not contemporaneously outstanding if the Trustee's requirements are met. Except with respect to mutilated Notes, if required by the Trustee or the Company, such Holder must provide an affidavit of lost certificate and an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. The Company may charge such Holder for its reasonable out-of-pocket expenses in replacing a Note, including reasonable fees and expenses of its counsel and of the Trustee and its counsel. In case any mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof. Every replacement Note shall constitute an additional obligation of the Company, entitled to the benefits of this Indenture. Section 2.08. Outstanding Notes. Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section 2.08 as not 27 outstanding. Subject to the provisions of Section 2.09, a Note does not cease to be outstanding because the Company or any of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. If on a Redemption Date or the Maturity Date the Paying Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest and Additional Interest, if any, due on the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest and Additional Interest, if applicable, on them ceases to accrue. Section 2.09. Treasury Notes; When Notes are Disregarded. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or any of its Affiliates shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so considered. Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor. The Company shall notify the Trustee, in writing (which notice shall constitute actual notice for purposes of the foregoing sentence), when it or any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired. Section 2.10. Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and execute and the Trustee shall authenticate temporary Notes upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Notes to be authenticated and the date on which the temporary Notes are to be authenticated. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate upon receipt of a written order of the Company pursuant to Section 2.02 definitive Notes in exchange for temporary Notes. Until so exchanged, the temporary Notes shall be entitled to the same benefits under this Indenture as definitive Notes. Section 2.11. Cancellation. The Company at any time may deliver Notes previously authenticated hereunder which the Company has acquired in any lawful manner, to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes 28 unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. The Trustee shall dispose of all cancelled Notes in accordance with customary procedures or, at the written request of the Company, shall return the same to the Company. Section 2.12. CUSIP Numbers. A "CUSIP" number shall be printed on the Notes, and the Trustee shall use the CUSIP number in notices of redemption, purchase or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee in writing of any change in the CUSIP number. Section 2.13. Deposit of Moneys. Prior to 10:00 a.m. New York City time on each Interest Payment Date and the Maturity Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to make cash payments, if any, due on such Interest Payment Date or the Maturity Date, as the case may be. Section 2.14. Book-Entry Provisions for Global Notes. (a) The Global Notes initially shall (i) be registered in the name of DTC or the nominee of DTC, (ii) be delivered to the Trustee as custodian for DTC and (iii) bear legends as set forth in Exhibit C. Members of, or participants in, DTC ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by DTC, or the Trustee as its custodian, or under any Global Note, and DTC may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note 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 DTC or impair, as between DTC and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of the Global Notes shall be limited to transfers in whole, but not in part, to DTC, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged in accordance with the Applicable Procedures of DTC and the provisions of Section 2.15; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). In addition, Notes in the form of certificated Notes in registered form in substantially the form set forth in Exhibit A hereto (the "Physical Notes") shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Notes if (i) DTC notifies the Company that it is unwilling or unable to continue as depository for the Global Notes and a successor depository is not appointed by the Company within ninety (90) days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from DTC to issue Physical Notes; provided that a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Physical Note or transferred to a Person who takes delivery thereof in the form of a Physical Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. 29 (c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in another Global Note shall, upon transfer, cease to be an interest in such Global Note and become a beneficial interest in such other Global Note and, accordingly, shall thereafter be subject to all transfer restrictions, if any, and other procedures applicable to a beneficial interest in such other Global Notes for as long as it remains such an interest. (d) In connection with any transfer or exchange of a portion of the beneficial interest in the Global Note to beneficial owners pursuant to clause (b) of this Section 2.14, the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and aggregate principal amount. (e) In connection with the transfer of an entire Global Note to beneficial owners pursuant to clause (b) of this Section 2.14, the Global Notes 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 DTC in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount of Physical Notes of authorized denominations. (f) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in the Global Note pursuant to clause (b) or (c) shall, except as otherwise provided by clauses (a)(i)(x) and (c) of Section 2.15, bear the legend regarding transfer restrictions applicable to the Physical Notes set forth in Exhibit A. (g) The Holder of a Global Note 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 Notes. Section 2.15. Special Transfer Provisions. (a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. Persons. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Note constituting a Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after November 1, 2006 or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit E hereto; and (ii) if the proposed transferor is an Agent Member holding a beneficial interest in the Global Note, upon receipt by the Registrar of (x) the certificate, if any, required by clause (i) above and (y) instructions given in accordance with the Applicable Procedures and the Registrar's procedures, whereupon (1) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and 30 (2) the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Notes of like tenor and principal amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): (i) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note 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 QIB within the meaning of Rule 144A, 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 it 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 its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the Global Note, upon receipt by the Registrar of instructions given in accordance with the Applicable Procedures and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (c) Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the circumstance contemplated by clause (a)(i)(x) of this Section 2.15 exists 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. The Registrar shall not register a transfer of any Note unless such transfer complies with the restrictions on transfer of such Note set forth in this Indenture. In connection with any transfer of Notes, each Holder agrees by its acceptance of the Notes to furnish the Registrar or the Company such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Company with respect to) the sufficiency of any such certifications, legal opinions or other information. (d) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it shall transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.14 or this Section 2.15. The Company shall have the right to inspect and make 31 copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Agent Members or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Neither the Trustee nor any Agent shall have any responsibility for any actions taken or not taken by DTC. Section 2.16. Transfers of Global Notes and Physical Notes. A transfer of a Global Note or a Physical Note (including the right to receive principal and interest and Additional Interest, if any, payable thereon) may be made only by the Registrar's entering the transfer in the Register. Prior to such entry, the Company shall treat the person in whose name such Note is registered as the owner of the Note for all purposes. ARTICLE THREE REDEMPTION Section 3.01. Optional Redemption. The Company may, at its option, redeem the Notes, in whole or in part, at specified times and under specified conditions, as set forth in Paragraph 5 of the Notes. If the Company elects to redeem Notes pursuant to Paragraph 5 of the Notes, it shall, at least forty-five (45) days (or such shorter period as the Trustee may agree) before the Redemption Date, furnish to the Trustee and Paying Agent an Officers' Certificate setting forth the Redemption Date and the principal amount of the Notes to be redeemed and the Section of this Indenture or Paragraph of the Notes pursuant to which such redemption shall occur. Each Officers' Certificate provided for in this Section 3.01 shall be accompanied by an Opinion of Counsel stating that such redemption shall comply with the conditions contained herein and in the Notes. Section 3.02. Selection of Notes to be Redeemed. If fewer than all of the Notes are to be redeemed pursuant to Paragraph 5 of the Notes, the Trustee shall select the Notes to be redeemed: (1) in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed or (2) if such Notes are not then listed on a national securities exchange, on a pro rata basis by lot or by such method as the Trustee may reasonably determine is fair and appropriate; provided that no partial redemption will reduce the principal amount of a Note not redeemed to less than $1,000; and provided further, that if a partial redemption is made with the proceeds of an Equity Offering then the selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata 32 basis or on as nearly a pro rata basis as is practicable (subject to the procedures of DTC), unless such method is prohibited. The Trustee shall make the selection from the Notes outstanding and not previously called for redemption and shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount at maturity thereof, to be redeemed. Notes in denominations of $1,000 in principal amount at maturity may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 in principal amount at maturity or any integral multiple thereof) of the principal of Notes that have denominations larger than $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption. At least thirty (30) days but not more than sixty (60) days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first class mail, postage prepaid, to each Holder whose Notes are to be redeemed at its registered address, with a copy to the Trustee and any Paying Agent. At the Company's written request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Failure to give notice of redemption, or any defect therein to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Note. Each notice of redemption shall identify the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest and Additional Interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) the CUSIP number; (5) the subparagraph of the Notes pursuant to which such redemption is being made; (6) the place where such Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest and Additional Interest, if any; (7) that, unless the Company fails to deposit with the Paying Agent funds in satisfaction of the applicable redemption price, interest and Additional Interest, if any, on Notes called for redemption ceases to accrue on and after the Redemption Date in accordance with Section 3.05, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price plus accrued interest and Additional Interest, if any, upon surrender to the Paying Agent of the Notes redeemed; (8) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date, and upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof shall be issued; and 33 (9) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption. If any of the Notes to be redeemed is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the procedures of DTC applicable to redemption. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03, Notes or portions thereof called for redemption shall become irrevocably due and payable on the Redemption Date and at the Redemption Price plus accrued interest and Additional Interest, if any. Upon surrender to the Trustee or Paying Agent, such Notes or portions thereof called for redemption shall be paid at the Redemption Price plus accrued interest and Additional Interest, if any, thereon to the Redemption Date, but installments of interest and Additional Interest, if applicable, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates referred to in the Notes. Section 3.05. Deposit of Redemption Price. Not later than 10:00 a.m. local time in the place of payment on the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest and Additional Interest, if any, of all Notes or portions thereof to be redeemed on that date. The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose, except with respect to monies owed as obligations to the Trustee pursuant to Article Seven. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest and Additional Interest, if any, on the Notes to be redeemed shall cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is to be redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note or Notes equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE FOUR COVENANTS Section 4.01. Payment of Notes. The Company shall pay the principal of, premium, if any, and interest and Additional Interest, if any, on the Notes on the dates and in the manner provided in the Notes and in this Indenture. An installment of principal of, premium, if any, and interest and Additional Interest, if any, on the Notes shall 34 be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or an Affiliate of the Company) holds on that date U.S. Legal Tender designated for and sufficient to pay the installment in full. The Company shall pay interest on overdue principal at 1% per annum in excess of the rate per annum set forth in the Notes, and it shall pay interest on overdue installments of interest and Additional Interest, if any, at the same rate to the extent lawful. Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States from principal or interest payments hereunder. Section 4.02. Maintenance of Office or Agency. The Company shall maintain the office or agency required under Section 2.03. The Company shall give prior written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. Section 4.03. Corporate Existence. Except as otherwise permitted by Article Four, Article Five and Article Ten, the Company shall do or cause to be done, at its own cost and expense, all things necessary to preserve and keep in full force and effect its corporate existence and the limited liability company, partnership or corporate existence of each of the Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the material rights (charter and statutory) and franchises of the Company and each such Restricted Subsidiary; provided, however, that the Company shall not be required to preserve, with respect to itself, any material right or franchise and, with respect to any of the Restricted Subsidiaries, any such existence, material right or franchise, if the Board of Directors of the Company, shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole. Section 4.04. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of the Restricted Subsidiaries or its properties or any of the Restricted Subsidiaries' properties and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon its properties or any of its Restricted Subsidiaries' properties; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being or shall be contested in good faith by appropriate negotiations or proceedings properly instituted and diligently conducted for which adequate reserves, to the extent required under GAAP, have been taken. Section 4.05. Maintenance of Properties and Insurance; Compliance with Laws. (a) The Company shall, and shall cause each of its Restricted Subsidiaries to, maintain in good working order and condition in all material respects (subject to ordinary wear and tear) its properties that are used or useful in the conduct of its business and that are material to the conduct of such business, and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto 35 and actively conduct and carry on its business; provided, however, that nothing in this Section 4.05 shall prevent the Company or any of the Restricted Subsidiaries from discontinuing the operation and maintenance of any of its properties if such discontinuance is, (i) in the ordinary course of business consistent with past practices or (ii) in the good faith judgment of the Board of Directors or other governing body of the Company or the Restricted Subsidiary concerned, as the case may be, desirable in the conduct of its businesses and is not disadvantageous in any material respect to the Holders. (b) The Company shall maintain insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith judgment of the Company, is adequate and appropriate for the conduct of the business of the Company and the Restricted Subsidiaries in a prudent manner, with reputable insurers or with the government of the United States or an agency or instrumentality thereof, in such amounts, with such deductibles, and by such methods as shall be customary, in the good faith judgment of the Company, for companies similarly situated in the industry in which the Company and the Restricted Subsidiaries are engaged. (c) The Company shall, and shall cause each of its Subsidiaries to, comply with all applicable statutes, rules, regulations, orders and restrictions of the United States, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of its businesses and the ownership of its properties, except for such noncompliances as are not in the aggregate reasonably likely to have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole or the ability of the Company to perform its obligations hereunder. Section 4.06. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee, within ninety (90) days after the end of the Company's fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers (one of whom is the principal executive officer, principal financial officer or principal accounting officer) with a view to determining whether they have kept, observed, performed and fulfilled their obligations under this Indenture and the other Indenture Documents and further stating, as to each such Officer signing such certificate, that to the best of such Officer's actual knowledge the Company and its Restricted Subsidiaries during such preceding fiscal year have kept, observed, performed and fulfilled each and every condition and covenant under this Indenture and the other Indenture Documents in all material respects and at the date of such certificate there is no Default or Event of Default that has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe the Default or Event of Default and its status with particularity. (b) The Company shall, so long as any Notes are outstanding, upon any Officer of the Company becoming aware of any Default or Event of Default, deliver to the Trustee an Officers' Certificate specifying such Default or Event of Default within five (5) Business Days of such Officer becoming aware of such occurrence. Section 4.07. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest or Additional Interest, if any, on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the 36 Company hereby expressly waives all benefit or advantage of any such law, and covenant that it shall not, by resort to any such law, 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 4.08. Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness), provided that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of incurring any such Indebtedness, the Company or any of its Restricted Subsidiaries that is or, upon such incurrence, becomes a Guarantor may incur Indebtedness (including, without limitation, Acquired Indebtedness) if, on the date of and after giving effect to the incurrence of such Indebtedness, the Consolidated Fixed Charge Coverage Ratio of the Company and its Restricted Subsidiaries for the most recently ended four fiscal quarters would be greater than 2.0 to 1.0. The principal amount of any Refinancing Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, will be calculated based on the currency exchange rate applicable to the currencies in which the Refinancing Indebtedness is denominated that is in effect on the date of the refinancing. Section 4.09. Limitation on Restricted Payments. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company and dividends and distributions payable to the Company or another Restricted Subsidiary of the Company) on or in respect of shares of Capital Stock of the Company or its Restricted Subsidiaries to holders of such Capital Stock; (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or its Restricted Subsidiaries (other than any such Capital Stock held by the Company or any Restricted Subsidiary); (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company or any Guarantor that is subordinate or junior in right of payment to the Notes or a Guarantee; or (4) make any Investment (other than Permitted Investments); (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) above being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto: (i) a Default or an Event of Default shall have occurred and be continuing; 37 (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.08; (iii) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the Fair Market Value of such property at the time of the making thereof) shall exceed the sum of: (a) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income is a loss, minus 100% of such loss) of the Company earned during the period beginning on the first day of the first fiscal quarter after the Issue Date and ending on the last day of the Company's most recent fiscal quarter ending prior to the date the Restricted Payment occurs for which financial statements are available (the "Reference Date") (treating such period as a single accounting period); plus (b) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company (excluding any net proceeds from an Equity Offering to the extent used to redeem Notes pursuant to Paragraph 5(b) of the Notes); plus (c) without duplication of any amounts included in clause (iii)(B) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock subsequent to the Issue Date and on or prior to the Reference Date (excluding any net proceeds from an Equity Offering to the extent used to redeem Notes pursuant to Paragraph 5(b) of the Notes); plus (d) 100% of the aggregate net cash proceeds received from the issuance of Indebtedness or shares of Disqualified Capital Stock of the Company that have been converted into or exchanged for Qualified Capital Stock of the Company subsequent to the Issue Date and on or prior to the Reference Date; plus (e) an amount equal to the sum of (i) the net reduction in the Investments (other than Permitted Investments) made by the Company or any of its Restricted Subsidiaries in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investment and proceeds representing the return of capital (excluding dividends and distributions), in each case received by the Company or any of its Restricted Subsidiaries, and (ii) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any of its Restricted Subsidiaries in such Person or Unrestricted Subsidiary. In the case of clauses (iii)(b) and (c) above, any net cash proceeds from issuances and sales of Qualified Capital Stock of the Company financed directly or indirectly using funds borrowed from the Company or any Subsidiary of the Company, shall be excluded until and to the extent such borrowing is repaid. 38 Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit the taking of any of the following actions (collectively, "Permitted Payments"): (1) the payment of any dividend or other distribution or redemption within 60 days after the date of declaration of such dividend or call for redemption if such payment would have been permitted on the date of declaration or call for redemption; (2) the acquisition of any shares of Qualified Capital Stock of the Company or any Restricted Subsidiary, either (a) solely in exchange for other shares of Qualified Capital Stock of the Company or (b) through the application of net proceeds of a sale for cash (other than to a Subsidiary) of, or equity contribution with respect to, shares of Qualified Capital Stock of the Company for cash within 60 days after such sale; (3) the acquisition of any Indebtedness of the Company or the Guarantors that is subordinate or junior in right of payment to the Notes and Guarantees either (a) solely in exchange for shares of Qualified Capital Stock of the Company, or (b) through the application of net proceeds of a sale (other than to a Subsidiary) of, or equity contribution with respect to, shares of Qualified Capital Stock of the Company for cash within 60 days after such sale or (c) if no Default or Event of Default would exist after giving effect thereto, with Refinancing Indebtedness; (4) an Investment either (a) solely in exchange for shares of Qualified Capital Stock of the Company or (b) through the application of the net proceeds of a sale (other than to a Subsidiary) of, or equity contribution with respect to, shares of Qualified Capital Stock of the Company for cash within 60 days after such sale; (5) if no Default or Event of Default has occurred and is continuing or would exist after giving effect thereto, the repurchase or other acquisition of shares of Capital Stock of the Company from employees, former employees, directors or former directors of the Company (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors of the Company under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided, however, that the aggregate amount of such repurchases and other acquisitions in any calendar year shall not exceed $250,000; and provided further, however, that such amount in any calendar year may be increased by an amount not to exceed the net cash proceeds of key man life insurance policies received by the Company after the Issue Date; (6) in the event of a Change of Control, and if no Default shall have occurred and be continuing or would exist after giving effect, the payment, purchase, redemption, defeasance or other acquisition or retirement of Indebtedness that is subordinated to the Notes or the Guarantees, in each case, at a purchase price not greater than 101% of the principal amount of such Indebtedness (or, if such Indebtedness was issued with original issue discount, 101% of the accreted value), plus any accrued and unpaid interest and Additional Interest, if any, thereon; provided, however, that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Company has made a Change of Control Offer with respect to the Notes as a result of such Change of Control and has repurchased all Notes validly tendered and not withdrawn in connection with such Change of Control Offer; 39 (7) repurchases of Capital Stock deemed to occur upon exercise of stock options, warrants or other similar rights if such Capital Stock represents a portion of the exercise price of such options, warrants or other similar rights; (8) payments or distributions to dissenting stockholders of Capital Stock of the Company pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of this Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of the Company or any of its Restricted Subsidiaries; (9) the application of the proceeds from the issuance of the Notes on the Issue Date as described above under the "Use of Proceeds" section of the Offering Circular dated October 25, 2004; (10) paying any dividend on, or redeeming any or all of, the Company's redeemable 9.8% cumulative preferred stock, par value $0.01 per share, Series D, outstanding on the Issue Date; and (11) if no Default shall have occurred and be continuing or would exist after giving effect thereto, other Restricted Payments not to exceed $4,000,000 in the aggregate since the Issue Date. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the first paragraph of this Section 4.09, any Permitted Payments made pursuant to clauses (1), (2)(b), (3)(b), (4)(b) and (11) of the immediately preceding paragraph shall be included in such calculation, and any other Permitted Payments described above shall be excluded. Not later than 30 days after the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company's latest available internal quarterly financial statements. Section 4.10. Limitation on Asset Sales. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed; (2) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale is in the form of cash or Cash Equivalents and is received at the time of such disposition; provided that the amount of any liabilities (as shown on the most recent applicable balance sheet) of the Company or such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets shall be deemed to be cash for purposes of this provision so long as the documents governing such liabilities provide that there is no further recourse to the Company or any of its Subsidiaries with respect to such liabilities; and 40 (3) the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 180 days of receipt thereof either: (a) to repay Indebtedness under the Credit Agreement and permanently reduce the commitments thereunder or make open market repurchases of the Notes; (b) to make an investment in, or acquire, property, plant, equipment or other non-current assets that replace the properties and assets that were the subject of such Asset Sale or that will be used or useful in a Permitted Business (including expenditures for maintenance, repair or improvement of existing properties and assets) or the acquisition of all of the Capital Stock of a Person engaged in any Permitted Business engaged in by the Company or any of its Subsidiaries; or (c) a combination of repayment and investment permitted by the foregoing clauses (3)(a) and (3)(b). Pending the final application of Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or invest such Net Cash Proceeds in any Investments described in clause (3) of the definition of "Permitted Investments". On the 181st day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clause (3)(a), (3)(b) or (3)(c) of the preceding paragraph (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of the preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by the Company or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders and all holders of other Applicable Indebtedness (other than the Credit Agreement) containing provisions similar to those set forth in this Section 4.10 on a pro rata basis, the maximum principal amount of Notes and such other Applicable Indebtedness that may be purchased with the Net Proceeds Offer Amount at a price equal to 100% of the principal amount thereof (or if such Indebtedness was issued with original issue discount, 100% of the accreted value), plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder on the date of such conversion or disposition, as the case may be, and the Net Cash Proceeds thereof shall be applied in accordance with this Section 4.10. The Company may defer any Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5,000,000 resulting from one or more Asset Sales in which case the accumulation of such amount shall constitute a Net Proceeds Offer Trigger Date (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5,000,000, shall be applied as required pursuant to the immediately preceding paragraph). To the extent that any Net Proceeds remain after completion of a Net Proceeds Offer, the Company may use the remaining amount for general corporate purposes otherwise permitted by this Indenture. Upon the completion of each Net Proceeds Offer, the Net Proceeds Offer Amount will be reset at zero. In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted in Section 5.01, which transaction does not constitute a Change of Control, the successor entity shall be deemed to 41 have sold the properties and assets of the Company and its Restricted Subsidiaries not so transferred for purposes of this Section 4.10, and shall comply with the provisions of this Section 4.10 with respect to such deemed sale as if it constituted an Asset Sale. In addition, the Fair Market Value of such properties and assets of the Company or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this Section 4.10. Each notice of a Net Proceeds Offer shall be mailed first class, postage prepaid, to the record Holders as shown on the register of Holders within 20 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.10, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.10 by virtue of such compliance. Section 4.11. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to: (1) pay dividends or make any other distributions on or in respect of its Capital Stock; (2) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or (3) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company; except for such encumbrances or restrictions existing under or by reason of: (a) applicable law, rule or regulation; (b) this Indenture, the Notes or the Guarantees; (c) customary non-assignment, subletting or net worth provisions of any lease, or other agreement entered into in the ordinary course of business and consistent with past practices, of the Company or any Restricted Subsidiary to the extent such provisions restrict the transfer of the lease or the property leased thereunder; 42 (d) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (e) the Credit Agreement (and all replacements or substitutions thereof on terms no more adverse to the Holders and no less favorable or more onerous to the Company and its Restricted Subsidiaries); (f) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (g) restrictions on the transfer of assets subject to any Lien permitted under this Indenture; (h) restrictions imposed by any agreement to sell assets or Capital Stock permitted under this Indenture to any Person pending the closing of such sale; (i) provisions in joint venture agreements and other similar agreements (in each case relating solely to the respective joint venture or similar entity or the equity interests therein) entered into in the ordinary course of business; (j) restrictions contained in the terms of the Purchase Money Indebtedness or Capitalized Lease Obligations not incurred in violation of this Indenture; provided, that such restrictions relate only to the assets financed with such Indebtedness; (k) restrictions in other Indebtedness incurred in compliance with Section 4.08; provided that such restrictions, taken as a whole, are, in the good faith judgment of the Company's Board of Directors, no more restrictive in any material respect with respect to such encumbrances and restrictions than those contained in the existing agreements referenced in clauses (b), (e) and (f) above; (l) restrictions on cash or other deposits imposed by customers under contracts or other arrangements entered into or agreed to in the ordinary course of business; (m) restrictions on the ability of any Foreign Restricted Subsidiary to make dividends or other distributions resulting from the operation of covenants contained in documentation governing Indebtedness of such Subsidiary permitted under this Indenture; or (n) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (b), (d), (e), (f), (j) or (k) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness, taken as a whole, are, in the good faith judgment of the Company's Board of Directors, no more restrictive in any material respect with respect to such encumbrances and restrictions than those contained in the existing agreements referenced in such clause (b), (d), (e), (f), (j) or (k). 43 Section 4.12. Limitation on Issuances and Sales of Preferred Stock of Subsidiaries. The Company will not permit or cause any of its Restricted Subsidiaries to issue or sell any Preferred Stock (other than to the Company or to a Wholly-Owned Subsidiary of the Company) or permit any Person (other than the Company or a Wholly- Owned Subsidiary of the Company) to own or hold any Preferred Stock of any Restricted Subsidiary of the Company. Section 4.13. Limitation on Liens. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens (other than Permitted Liens) of any kind against or upon any property or assets of the Company or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom, unless (1) if such Lien secures Indebtedness that is pari passu in right of payment with the Notes, then the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligation is no longer secured by a Lien or (2) if such Lien secures Indebtedness that is subordinated in right of payment to the Notes, any such Lien shall be subordinated to a Lien granted to the Holders of the Notes in the same collateral as that securing such Lien to the same extent as such subordinated Indebtedness is subordinated to the Notes. Section 4.14. Limitations on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (1) Affiliate Transactions described in clause (b) below, and (2) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary. With respect to all Affiliate Transactions involving aggregate payments or other property with a Fair Market Value in excess of $500,000, the Company shall deliver an Officers' Certificate to the Trustee certifying that such transactions are in compliance with clause (a)(2) of the preceding paragraph. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a Fair Market Value in excess of $2,000,000 shall be approved by a majority of the members of the Board of Directors of the Company (including a majority of the disinterested members thereof), as the case may be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined that such transaction complies with the foregoing provisions. If the Company or any Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate Fair Market Value of more than $5,000,000, then the Company shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of the financial terms of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from an Independent Financial Advisor and file the same with the Trustee. (b) The restrictions set forth in clause (a) above shall not apply to: 44 (1) reasonable fees and compensation paid to, indemnity and reimbursement or advancement of out of pocket expenses provided on behalf of, officers, directors, employees or consultants of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (2) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by this Indenture; (3) any agreement as in effect as of the Issue Date or any transaction contemplated thereby and any amendment thereto or any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (4) Restricted Payments permitted by this Indenture; (5) any merger or other transaction with an Affiliate solely for the purpose of reincorporating the Company in another jurisdiction or creating a holding company of the Company; and (6) any employment, stock option, stock repurchase, employee benefit compensation, business expense reimbursement, severance, termination or other employment-related agreements, arrangements or plans entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business. Section 4.15. Additional Subsidiary Guarantees. If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Restricted Subsidiary after the Issue Date (other than an Unrestricted Subsidiary), then the Company shall cause such Domestic Restricted Subsidiary to: (1) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Domestic Restricted Subsidiary shall fully and unconditionally guarantee on a senior unsecured basis all of the Company's obligations under the Notes and this Indenture on the terms set forth in this Indenture; (2) take such further action and execute and deliver such other documents specified in this Indenture or otherwise reasonably requested by the Trustee to effectuate the foregoing; and (3) deliver to the Trustee an Opinion of Counsel that such supplemental indenture and any other documents required to be delivered have been duly authorized, executed and delivered by such Domestic Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligations of such Domestic Restricted Subsidiary. Thereafter, such Domestic Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture. Section 4.16. Conduct of Business. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any businesses other than Permitted Businesses, except to such extent as is not material to the Company and its Restricted Subsidiaries taken as a whole. 45 Section 4.17. Reports to Holders. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Trustee and to the Holders or otherwise make publicly available: (1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company, if any) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants; and (2) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports, in each case within the time periods specified in the SEC's rules and regulations, in each case, within the time periods required for filing such forms and reports as specified in the SEC's rules and regulations. Notwithstanding the foregoing, the Company may satisfy such requirements prior to the effectiveness of the registration statement contemplated by the Registration Rights Agreement by filing with the SEC such registration statement within the time period required for such filing as specified in the Registration Rights Agreement, to the extent that any such registration statement contains substantially the same information as would be required to be filed by the Company if it were subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, and by providing the Trustee and Holders with or otherwise making publicly available such Registration Statement (and any amendments thereto) promptly following the filing thereof. In addition, following the consummation of the Exchange Offer, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing). In addition, prior to the consummation of the Exchange Offer, for so long as any Notes remain outstanding, the Company shall furnish to the Holders upon their request, the information required to be delivered pursuant to Rule 144(A)(d)(4) under the Securities Act. Delivery of such reports, information and documents to the Trustee pursuant to this Section 4.17 is for informational purposes only and the Trustee's receipt of such reports shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 4.18. Payments for Consent. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an 46 inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.19. Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require that the Company purchase all or a portion of such Holder's Notes using immediately available funds pursuant to the requirements described in clause (b) below (the "Change of Control Offer"), at a purchase price in cash equal to 101% of the principal amount of such Holder's tendered Notes on the date of purchase, plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase. (b) Within thirty (30) days following the date upon which the Change of Control occurred, the Company shall send, by registered first class mail, postage prepaid, a notice to each record Holder as shown on the register of Holders, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Change of Control Offer. Such notice shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.19 and that, to the extent lawful, all Notes tendered and not withdrawn shall be accepted for payment; (2) the purchase price (including the amount of accrued interest and Additional Interest, if any) and the purchase date (which shall be no earlier than thirty (30) days nor later than sixty (60) days from the date such notice is mailed, other than as may be required by law) (the "Change of Control Payment Date"); (3) that any Note not tendered shall continue to accrue interest and Additional Interest, if applicable; (4) that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest and Additional Interest, if applicable, after the Change of Control Payment Date; (5) that any Holder electing to have a Note purchased pursuant to a Change of Control Offer shall be required to surrender its Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than five (5) Business Days prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Notes purchased; (7) that Holders whose Notes are purchased only in part shall be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof; and 47 (8) the circumstances and relevant facts regarding such Change of Control. If any of the Notes subject to the Change of Control Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to comply with the procedures of the Depositary applicable to repurchases. On or before the Change of Control Payment Date, the Company shall, to the extent lawful (i) accept for payment Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued interest and Additional Interest, if any, of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Notes so tendered the purchase price for such Notes and the Company shall promptly issue and the Trustee shall promptly (but in any case not later than five days after the Change of Control Payment Date) authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. Any Notes not so accepted shall be promptly mailed by the Company to the Holders thereof. For purposes of this Section 4.19, the Trustee shall act as the Paying Agent. Any amounts remaining after the purchase of Notes pursuant to a Change of Control Offer shall be returned by the Trustee to the Company. Neither the Board of Directors of the Company nor the Trustee may waive the Company's obligation to offer to purchase the Notes pursuant to this Section 4.19. The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements of this Section 4.19 and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent the provisions of any securities laws or regulations conflict with the provisions under this Section 4.19, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.19 by virtue thereof. Section 4.20. Additional Interest. If Additional Interest becomes payable by the Company pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee an Officers' Certificate stating (i) the amount of Additional Interest due and payable, (ii) the Section of the Registration Rights Agreement pursuant to which Additional Interest is due and payable and (iii) the date on which Additional Interest is payable. Unless and until a Responsible Officer of the Trustee receives such an Officers' Certificate, the Trustee may assume without inquiry that no Additional Interest is payable; provided, that the failure of the Company to deliver to the Trustee such Officers' Certificate shall not relieve the Company of its obligation to pay any such Additional Interest when due and payable. 48 ARTICLE FIVE SUCCESSOR CORPORATION Section 5.01. Merger, Consolidation and Sale of Assets. The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and the Company's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: (1) either: (a) the Company shall be the surviving or continuing corporation; or (b) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity"): (i) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; and (ii) shall expressly assume, by supplemental indenture (in form and substance reasonably satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, interest and Additional Interest, if any, on all of the Notes and the performance of every covenant of the Notes, this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed thereunder; (2) immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(ii) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, (a) shall have a Consolidated Net Worth at least equal to the Consolidated Net Worth of the Company immediately prior to such transaction and (b) shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.08; (3) immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(ii) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (4) the Company or the Surviving Entity shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the 49 applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Any merger or consolidation of (i) a Guarantor with and into the Company (with the Company being the surviving entity) or another Guarantor or (ii) a Guarantor or the Company with an Affiliate organized solely for the purpose of reincorporating such Guarantor or the Company in another jurisdiction in the United States or any state thereof or the District of Columbia need only comply with (A) clause (4) of the first paragraph of this Section 5.01; and (B) in the case of a merger or consolidation involving the Company as described in clause (ii) of this sentence, clause (1)(b)(ii) of the first paragraph of this Section 5.01. Section 5.02. Successor Entity Substituted. Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company is not surviving or the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes with the same effect as if such surviving entity had been named as such. Upon such substitution the Company and any Guarantors that remain Subsidiaries of the Company shall be released from their obligations under this Indenture and the Guarantees. ARTICLE SIX DEFAULT AND REMEDIES Section 6.01. Events of Default. The following events are defined as "Events of Default": (1) the failure to pay interest or Additional Interest, if any, on any Notes or any other amount (other than principal for the Notes) when the same becomes due and payable and the default continues for a period of thirty (30) days; (2) the failure to pay the principal of or premium, if any, on any Notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer); (3) a default in the observance or performance of any other covenant or agreement contained in this Indenture (other than the payment of the principal of, or premium, if any, or interest or Additional Interest, if any, on any Note) which default continues for a period of thirty (30) days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to Section 5.01 or 10.04, which will constitute an Event of Default with such notice requirement but without such passage of time requirement); 50 (4) the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 20 days from the date of acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated (in each case with respect to which the 20-day period described above has elapsed), aggregates $5,000,000 or more at any time; (5) one or more judgments in an aggregate amount in excess of $5,000,000 shall have been rendered against the Company or any of its Restricted Subsidiaries (other than any judgment as to which a reputable and solvent third party insurer has accepted coverage) and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; (6) the Company or any Significant Subsidiary (A) commences a voluntary case or proceeding under any Bankruptcy Code with respect to itself, (B) consents to the entry of an order for relief against it in an involuntary case under any Bankruptcy Code, (C) consents to the appointment of a Custodian of it or for substantially all of its property, (D) makes a general assignment for the benefit of its creditors; or (E) takes any corporate action to authorize or effect any of the foregoing; (7) a court of competent jurisdiction enters an order or decree that (A) is an order for relief in respect of the Company or any Significant Subsidiary in an involuntary case under any Bankruptcy Code, (B) appoints a Custodian of the Company or any Significant Subsidiary or for substantially all of its property or (C) orders the winding-up or liquidation of its affairs; and such order or decree shall remain unstayed and in effect for a period of sixty (60) consecutive days; or (8) any Guarantee of a Significant Subsidiary ceases to be in full force and effect or any Guarantee of a Significant Subsidiary is declared to be null and void and unenforceable or any Guarantee of a Significant Subsidiary is found to be invalid or any Guarantor denies its liability under its Guarantee (other than by reason of release of such Guarantor in accordance with the terms of this Indenture). Section 6.02. Acceleration. (a) If an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7) above with respect to the Company) shall occur and be continuing and has not been waived, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and premium, if any, accrued interest and Additional Interest, if any, on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same shall become immediately due and payable. (b) If an Event of Default specified in Section 6.01(6) or (7) above with respect to the Company occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest and Additional Interest, if any, on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. 51 (c) At any time after a declaration of acceleration with respect to the Notes as described in clause (a) or (b) above, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences: (i) if the rescission would not conflict with any judgment or decree; (ii) if all existing Events of Default have been cured or waived except nonpayment of principal, premium, if any, interest or Additional Interest, if any, that has become due solely because of the acceleration; (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and Additional Interest, if any, and overdue principal and premium, if any, which has become due otherwise than by such declaration of acceleration, has been paid; (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its reasonable expenses, disbursements and its advances; and (v) in the event of the cure or waiver of an Event of Default of the type described in Section 6.01(6) or (7), the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. (d) 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 by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest or Additional Interest, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder 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 to the extent permitted by law. Section 6.04. Waiver of Past Defaults. Subject to Sections 2.09, 6.02, 6.07 and 9.02, the Holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default and its consequences, except (other than as provided in Section 6.02(c)) a default in the payment of the principal of or premium, if any, interest or Additional Interest, if any, on any Notes. When a Default or Event of Default is waived, it is cured and ceases to exist. Section 6.05. Control by Majority. Subject to Section 2.09, the Holders of a majority in principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, including, without limitation, any remedies provided for in Section 6.03. Subject to Section 7.01 and 7.02(f), however, the Trustee may 52 refuse to follow any direction (which direction, if sent to the Trustee, shall be in writing) that the Trustee reasonably believes conflicts with any applicable law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Holder, or that may subject the Trustee to personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction (which direction, if sent to the Trustee, shall be in writing). Section 6.06. Limitation on Suits. A Holder may not pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) subject to Section 2.09, Holders of at least 25% in principal amount of the outstanding Notes make a written request to the Trustee to institute proceedings in respect of that Event of Default; (3) such Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request; (4) the Trustee does not comply with the request within sixty (60) days after receipt of the request and the offer of indemnity; and (5) during such sixty (60) day period the Holders of a majority in principal amount of the outstanding Notes do not give the Trustee a written direction which, in the opinion of the Trustee, is inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. 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, premium, if any, and interest and Additional Interest, if any, on a Note, on or after the respective due dates expressed in such Note, 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 (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust, in each case, against the Company or any other obligor on the Notes for the whole amount of principal of, premium, if any, and accrued interest and Additional Interest, if any, remaining unpaid on, the Notes, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest and Additional Interest, if any, at the rate set forth in Section 4.01 and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel and any other amounts due the Trustee under Section 7.07. 53 Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relating to the Company or any other obligor upon the Notes, any of their respective creditors or any of their respective property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such 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 to it for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee Section 7.07. The Company's payment obligations under this Section 6.09 shall be secured in accordance with the provisions of Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee, the Paying Agent and the Registrar for amounts due under Section 7.07 (including payment of all compensation expense, all liabilities incurred and all advances made by the Trustee and the costs and expenses of collection); Second: if the Holders are forced to proceed against the Company directly without the Trustee, to Holders for their collection costs; Third: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest and Additional Interest, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest and Additional Interest, if any, respectively; and Fourth: to the Company or any other obligor on the Notes, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. All parties to this Indenture agree, and each Holder by its acceptance of its Note shall be deemed to have agreed, that 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 6.11 does not apply to a suit by the Trustee a suit by a Holder pursuant to 54 Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Notes. Section 6.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceedings 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 Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted. ARTICLE SEVEN TRUSTEE Section 7.01. Duties of Trustee. The duties and responsibilities of the Trustee shall be as provided by the TIA and as set forth herein. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the TIA and the Trustee need perform only such duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in or 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; provided, however, in case of any such certificates or opinions furnished to the Trustee which by the provisions hereof are furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this clause (c) does not limit the effect of clause (b) above; (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 55 (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 direction received by it pursuant to Section 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any liability. The Trustee shall be under no obligation to exercise of any of its rights or powers under this Indenture at the request, order or direction of any Holders unless such Holders have offered to the Trustee security and indemnity reasonably satisfactory to the Trustee against the costs and expenses which may be incurred by it in compliance with such request, order or direction. (e) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to clauses (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Company. Money and assets held in trust by the Trustee need not be segregated from other funds or assets held by the Trustee except to the extent required by law. Section 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement instrument, opinion, report, request direction, consent, order, bond, note or other paper or 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 consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, or both, which shall conform to Sections 11.04 and 11.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The written advice of the Trustee's counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by the Trustee hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and 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 that it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers under this Indenture. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records and premises of the Company, personally or by agent or attorney and to consult with the officers and representatives of the Company, including the Company's accountants and attorneys. Except as expressly stated herein to the contrary, in no event shall the Trustee have any responsibility to ascertain whether there 56 has been compliance with any of the covenants or provisions of Articles Four or Five or Section 10.04 hereof. (f) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (g) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company and any resolution of the Board of Directors shall be sufficient if evidenced by a copy of such resolution certified by an Officer of the Company to have been duly adopted and in full force and effect on the date hereof. (h) The Trustee shall not be deemed to have notice or be charged with knowledge of any Default or Event of Default unless the Trustee shall have received from the Company, any Guarantor or any other obligor upon the Notes or from any Holder written notice thereof at its address set forth in Section 11.02 hereof, and such notice references the Notes and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. (j) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any persons authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. (k) The permissive right of the Trustee to take any action under this Indenture shall not be construed as a duty to so act. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any Subsidiary of the Company or its respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11 of this Indenture, and the Trustee is subject to TIA Sections 310(b) and 311. Section 7.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity, adequacy or sufficiency of this Indenture or the Notes, and it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture, the Notes or any other documents in connection with the issuance of the Notes other than the Trustee's certificate of authentication, which shall be taken as the statement of Company, and the Trustee assumes no responsibility for their correctness. 57 Section 7.05. Notice of Default. If a Default or an Event of Default occurs and is continuing and if a Trust Officer has actual knowledge or has received written notice from the Company or any Holder, the Trustee shall mail to each Holder, with a copy to the Company, notice of the Default or Event of Default within thirty (30) days thereof. Except in the case of a Default or an Event of Default in payment of principal of, premium, if any, or interest and Additional Interest, if any, on, any Note, including an accelerated payment and the failure to make payment on the Change of Control Payment Date pursuant to a Change of Control Offer and, except in the case of a failure to comply with Article Five, the Trustee may withhold the notice if and so long as its Board of Directors, the executive committee of its Board of Directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Holders. Section 7.06. Reports by Trustee to Holders. Within sixty (60) days after each May 15, beginning with May 15, 2005, the Trustee shall, to the extent that any of the events described in TIA Section 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b) and (c). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed by the Company with the SEC and each stock exchange or market, if any, on which the Notes are listed or quoted. The Company shall promptly notify the Trustee if the Notes become listed or quoted on any stock exchange or market and the Trustee shall comply with TIA Section 313(d) and any delisting thereof. Section 7.07. Compensation and Indemnity. The Company and the Guarantors, jointly and severally, shall pay to the Trustee, the Paying Agent and the Registrar (each, an "Indemnified Party") from time to time compensation for their respective services as Trustee, Paying Agent or Registrar, as the case may be. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse each Indemnified Party upon request for all reasonable out-of-pocket expenses incurred or made by it in connection with the performance of its duties under, as the case may be, this Indenture. Such expenses shall include the reasonable fees and expenses of each of such Indemnified Party's agents and counsel. The Company and the Guarantors, jointly and severally, hereby indemnify each Indemnified Party and its agents, employees, stockholders and directors and officers for, and holds each of them harmless against, any loss, cost, claim, liability or expense (including taxes) incurred by any of them except for such actions to the extent caused by any gross negligence, bad faith or willful misconduct on the part of such Indemnified Party, arising out of or in connection with this Indenture, or the administration of this trust, including the reasonable costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder or thereunder (including the reasonable fees and expenses of counsel). The Trustee shall notify the Company promptly of any claim asserted against an Indemnified Party for which such Indemnified Party has advised the Trustee that it may seek indemnity hereunder. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. At the Indemnified Party's sole discretion, the Company shall defend the claim and the Indemnified Party shall cooperate and may 58 participate in the defense; provided that any settlement of a claim shall be approved in writing by the Indemnified Party. Alternatively, the Indemnified Party may at its option have separate counsel of its own choosing and the Company shall pay the reasonable fees and expenses of such counsel; provided that the Company shall not be required to pay such fees and expenses if it assumes the Indemnified Party's defense and there is no conflict of interest between the Company and the Indemnified Party in connection with such defense as reasonably determined by the Indemnified Party. The Company need not pay for any settlement made without its written consent, which consent shall not be unreasonably withheld. To secure the Company's and each Guarantor's payment obligations in this Section 7.07, each Indemnified Party shall have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except assets or money held in trust to pay principal of or interest and Additional Interest, if any, on particular Notes which have been called for redemption. When an Indemnified Party incurs expenses or renders services after an Event of Default specified in Section 6.01(6) or (7) occurs, such expenses (including the reasonable fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Code. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee. The Trustee shall comply with the provisions of TIA Section 312(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. The Trustee may resign by so notifying the Company. The Holders of a majority in aggregate principal amount of the outstanding Notes may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor Trustee. The Company, by a Board Resolution, may 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 becomes incapable of acting with respect to the Notes. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder in writing of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, trusts, duties and obligations of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such Trustee so ceasing to act hereunder subject nevertheless to its lien, if any, provided for in Section 7.07. Upon request of the Company or the successor Trustee, such retiring Trustee shall at the expense of the Company and upon 59 payment of the charges of the Trustee then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. If a successor Trustee does not take office within thirty (30) days after the retiring Trustee resigns or is removed, the retiring Trustee, at the Company's expense, the Company or the Holders of at least 10% in principal amount of the outstanding Notes 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 Holder who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. The Company shall give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders in writing. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office and its notice address for purposes of Section 11.02. Notwithstanding any resignation or replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another Person, the resulting, surviving or transferee Person without any further act shall, if such resulting, surviving or transferee Person is otherwise eligible hereunder, be the successor Trustee; provided, however, that such Person shall be otherwise qualified and eligible under this Article Seven. In case any Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes. Section 7.10. Eligibility; Disqualification. (a) This Indenture shall always have a Trustee who satisfies the requirements of TIA Sections 310(a)(1), (2), (3) and (5). The Trustee (or, in the case of a corporation included in a bank holding company system, the related bank holding company) 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. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA Section 310(a)(2). 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 outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA Section 310 shall apply to the Company, as obligor of the Notes. (b) If the Trustee has or acquires a conflicting interest within the meaning of the TIA, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the TIA and this Indenture. 60 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 therein. Section 7.12. Trustee as Paying Agent. References to the Trustee in Sections 7.01(f), 7.02, 7.03, 7.04, and 7.07 shall include the Trustee in its role as Paying Agent. Section 7.13. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion, or representation by, counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel or representation by counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel has actual knowledge that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. ARTICLE EIGHT SATISFACTION AND DISCHARGE OF INDENTURE Section 8.01. Legal Defeasance and Covenant Defeasance. (a) The Company may, at its option and at any time, elect to have either clause (b) or clause (c) below be applied to the outstanding Notes upon compliance with the applicable conditions set forth in clause (d). (b) Upon the Company's exercise under clause (a) of the option applicable to this clause (b), the Company and the Guarantors shall be deemed to have been released and discharged from their obligations with respect to the outstanding Notes and the Guarantees on the date the applicable conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of the Sections and matters under this Indenture referred to in clause (i) and (ii) below, and the Company 61 and the Guarantors shall be deemed to have satisfied all their other obligations under such Notes and this Indenture and the Guarantees, except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in clause (d) below and as more fully set forth in such clause, payments in respect of the principal of, premium, if any, interest and Additional Interest, if any, on such Notes when such payments are due, (ii) obligations listed in Section 8.03, subject to compliance with this Section 8.01 and (iii) the rights, powers, trusts, duties and immunities of the Trustee and the Company's obligations in connection therewith. The Company may exercise its option under this clause (b) notwithstanding the prior exercise of its option under clause (c) below with respect to the Notes. (c) Upon the Company's exercise under clause (a) of the option applicable to this clause (c), the Company and its Restricted Subsidiaries shall be released and discharged from their obligations under any covenant contained in Section 4.05 (other than clause (c) thereof), Sections 4.08 through 4.17, Section 4.19 and Section 5.01(2), with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed to be not "outstanding" for the purpose of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under clause (a) hereof of the option applicable to this clause (c), subject to the satisfaction of the conditions set forth in clause (d) below, Sections 6.01(3), (4), (5) and (8) shall not constitute Events of Default. (d) The following shall be the conditions to application of either clause (b) or clause (c) above to the outstanding Notes: (1) The Company shall have irrevocably deposited in trust with the Trustee, pursuant to an irrevocable trust and security agreement in form and substance reasonably satisfactory to the Trustee, U.S. Legal Tender or non-callable U.S. Government Obligations or a combination thereof, in such amounts and at such times as are sufficient, in the opinion of a nationally-recognized firm of independent public accountants, to pay the principal of, and premium, if any, interest and Additional Interest, if any, on the outstanding Notes on the stated dates for payment or redemption, as the case may be; provided, however, that the Trustee (or other qualifying trustee) shall have received an irrevocable written order from the Company instructing the Trustee (or other qualifying trustee) to apply such U.S. Legal Tender or the proceeds of such U.S. Government Obligations to said payments with respect to the Notes to maturity or redemption; (2) In the event the Company elects clause (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (b) since the Issue Date, 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 Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance contemplated hereby and will 62 be subject to federal income tax in the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) In the event the Company elects clause (c) above, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance contemplated hereby and will be subject to federal income tax in 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; (4) No Default or Event of Default shall have occurred and be continuing on the date of such deposit pursuant to clause (1) of this clause (d) (except such Default or Event of Default resulting from the failure to comply with Section 4.08 as a result of the borrowing of funds required to effect such deposit) or insofar as Defaults or Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of such deposit; (5) Such Legal Defeasance or Covenant Defeasance shall not result in a breach of, or constitute a default hereunder or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) The Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit under clause (1) of this clause (d) was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (7) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with; and (8) The Company shall have delivered to the Trustee an Opinion of Counsel (subject to customary qualifications and exclusions) to the effect that the trust resulting from the deposit under clause (1) of this clause (d) does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940. Notwithstanding the foregoing, the Opinion of Counsel required by Section 8.01(d)(4)(i) above with respect to a Legal Defeasance need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (1) have become due and payable or (2) shall become due and payable on the maturity date within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. In the event all or any portion of the Notes are to be redeemed through such irrevocable trust, the Company must make arrangements reasonably satisfactory to the Trustee, at the time of such deposit, for the giving of the notice of such redemption or redemptions by the Trustee in the name and at the expense of the Company. 63 Section 8.02. Satisfaction and Discharge. In addition to the Company's rights under Section 8.01, the Company may terminate all of its obligations under this Indenture (subject to Section 8.03), and this Indenture, the Notes and the Guarantees, shall be discharged and shall cease to be in effect when: (1) either: (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid as provided in Section 2.07 and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or (b) all Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable at their stated maturity within one year or (iii) are to be called for redemption within one year under arrangements reasonably satisfactory to the Trustee, and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, interest and Additional Interest, if any, on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (2) the Company has paid all other sums payable under this Indenture; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with. Section 8.03. Survival of Certain Obligations. Notwithstanding the satisfaction and discharge of this Indenture and of the Notes referred to in Section 8.01 or 8.02, the respective obligations of the Company and the Trustee under Sections 2.03, 2.04, 2.05, 2.06, 2.07 and 2.08, Sections 7.07 and 7.08 and Sections 8.05, 8.06 and 8.07 shall survive until the Notes are no longer outstanding, and thereafter the obligations of the Company and the Trustee under Sections 7.07, 8.04, 8.05 and 8.06 and 8.07 shall survive. Section 8.04. Acknowledgment of Discharge by Trustee. Subject to Section 8.07, after (i) the conditions of Section 8.01 or 8.02 have been satisfied, (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company and (iii) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee, upon written request, shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.03. 64 Section 8.05. Application of Trust Moneys. The Trustee shall hold any U.S. Legal Tender or U.S. Government Obligations deposited with it in the irrevocable trust established pursuant to Section 8.01. The Trustee shall apply the deposited U.S. Legal Tender or the U.S. Government obligations, together with earnings thereon, through the Paying Agent, in accordance with this Indenture and the terms of the irrevocable trust agreement established pursuant to Section 8.01, to the payment of principal of, premium, if any, and interest and Additional Interest, if any, on the Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company's request any U.S. Legal Tender or U.S. Government Obligations held by it as provided in Section 8.01(d) 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 that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. 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 Section 8.01 or 8.02 or the principal, premium, if any, and interest and Additional Interest, if any, received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Notes. Section 8.06. Repayment to the Company; Unclaimed Money. Subject to Sections 7.07, 8.01 and 8.02, the Trustee and the Paying Agent shall promptly pay to the Company upon written request from the Company any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time. The Trustee and the Paying Agent shall pay to the Company, upon receipt by the Trustee or the Paying Agent, as the case may be, of a written request from the Company any money held by it for the payment of principal, premium, if any, or interest and Additional Interest, if any, that remains unclaimed for two years after payment to the Holders is required, without interest thereon; provided, however, that the Trustee and the Paying Agent before being required to make any payment may, but need not, at the expense of the Company cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least thirty (30) days from the date of such publication or mailing, any unclaimed balance of such money then remaining shall be repaid to the Company, without interest thereon. After payment to the Company, Holders entitled to money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designated another Person, and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01 or 8.02 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 and each Guarantors' obligations under this Indenture and each other Indenture Document to which such person is a party shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 or 8.02 until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01 or 8.02; provided, however, that if the Company has made any payment of premium, if any, or interest and Additional Interest, if any, on or principal of any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. 65 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01. Without Consent of Holders. From time to time, the Company, the Guarantors and the Trustee, without the consent of the Holders, may amend, modify, waive or supplement provisions of this Indenture, the Notes and the Guarantees: (1) to cure any ambiguity, defect or inconsistency contained therein; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Company's or a Guarantor's obligations to Holders in accordance with Section 5.01 or 10.04; (4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights of any such Holder under this Indenture, the Notes or the Guarantees; (5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (6) to allow any Subsidiary or any other Person to guarantee the Notes; (7) to release a Guarantor as permitted by this Indenture and the relevant Guarantee; (8) to secure the Notes, this Indenture and the Guarantees; or (9) to make any amendment to the provisions of this Indenture relating to the form, authentication, transfer or legending of the Notes; provided, however, that (a) compliance with this Indenture as so amended would not result in the Notes being transferred in violation of the Securities Act or any other applicable securities law and (b) such amendment does not materially affect the rights of Holders to transfer the Notes, so long as such amendment, modification, waiver or supplement does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an Opinion of Counsel. After an amendment, modification, waiver or supplement under this Section 9.01 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, modification, waiver or supplement. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, modification, waiver or supplement. Section 9.02. With Consent of Holders. The Company and the Guarantors, when authorized by a Board Resolution, and the Trustee, together, with the written consent of the Holder or Holders of at least a majority in aggregate principal 66 amount of the outstanding Notes, may amend or supplement this Indenture, the Notes or the Guarantees without notice to any other Holders. The Holder or Holders of a majority in aggregate principal amount of the outstanding Notes may waive compliance by the Company with any provision of this Indenture, the Guarantees or the Notes without notice to any other Holder. However, no amendment, supplement or waiver, including a waiver pursuant to Section 6.04, shall without the consent of each Holder of each Note affected thereby: (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver of any provision of this Indenture or the Notes; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including default interest, or Additional Interest on any Notes; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or reduce the redemption price therefor; (4) make any Notes payable in money other than that stated in the Notes; (5) make any change in provisions of this Indenture (a) protecting the right of each Holder to receive payment of principal of, premium, if any, interest and Additional Interest, if any, on such Note on or after the due date thereof or to bring suit to enforce such payment, or (b) permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default; (6) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer after the occurrence of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or, modify any of the provisions or definitions with respect thereto; (7) subordinate the Notes in right of payment to any other Indebtedness of the Company or any Guarantor; (8) release any Guarantor from any of its obligations under its Guarantee or this Indenture otherwise than in accordance with the terms of this Indenture; or (9) make any change to Section 9.01 or this Section 9.02. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. Section 9.03. Compliance with TIA. Every amendment, waiver or supplement of this Indenture, the Notes or the Guarantees shall comply with the TIA as then in effect. 67 Section 9.04. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to such Holder's Note or portion of such Note by written notice to the Trustee and the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. An amendment, waiver or supplement shall become effective upon receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes or such Officers' Certificate, whichever first occurs, and the execution thereof by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be either (i) at least thirty (30) days prior to the first solicitation of such consent or (ii) the date of the most recent list furnished to the Trustee under Section 2.05. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than ninety (90) days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it makes a change described in any of clauses (1) through (10) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of, premium, if any, and interest and Additional Interest, if any, on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. Section 9.05. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of the Note to deliver the Note to the Trustee. The Trustee at the written direction of the Company may place an appropriate notation on the Note about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Note thereafter authenticated. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make an appropriate notation, or issue a new Note, shall not affect the validity and effect of such amendment, supplement or waiver. Any such notation or exchange shall be made at the sole cost and expense of the Company. Failure to make the appropriate notation or issue a new Note shall not effect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the rights, duties or immunities of the Trustee under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, in addition to any 68 other documents required by Section 11.04, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. Such Opinion of Counsel shall not be an expense of the Trustee and shall be paid for by the Company. Section 9.07. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the TIA as then in effect. ARTICLE TEN GUARANTEE Section 10.01. Guarantee. Each Guarantor hereby fully, irrevocably and unconditionally, jointly and severally, guarantees (such guarantee to be referred to herein as the "Guarantee"), to each of the Holders and the Trustee and its respective successors and assigns that (i) the principal of, premium, if any, and interest and Additional Interest, if any, on the Notes shall be promptly paid in full when due, subject to any applicable grace period, whether upon redemption pursuant to the terms of the Notes, by acceleration or otherwise, and interest on the overdue principal, if any, and interest on any interest and Additional Interest, if any, to the extent lawful, of the Notes and all other obligations of the Company to the Holders and the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any of the Notes or of any such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 10.03. The Guarantee of each Guarantor shall rank senior in right of payment to all subordinated Indebtedness of such Guarantor and equal in right of payment with all other senior obligations of such Guarantor. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any of the Holders with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and in this Guarantee. The obligations of each Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, shall result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. The net worth of any Guarantor for such purpose shall include any claim of such Guarantor against the Company for reimbursement and any claim against any other Guarantor for contribution. Each Guarantor may consolidate with or merge into or sell its assets to the Company or another Guarantor without limitation in accordance with Sections 4.10, 5.01 and 10.04. If any Holder or the Trustee is required by any court or otherwise to return to the Company, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or any Guarantor, 69 any amount paid by the Company or any Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, 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 Six for the purposes of this Guarantee notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article Six, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee. Section 10.02. Release of a Guarantor. A Guarantor will be automatically and unconditionally released from its Guarantee (and may subsequently dissolve) without any action required on the part of the Trustee or any Holder: (1) if (a) the Company sells or otherwise disposes of all of the Capital Stock issued by such Guarantor or all or substantially all of the assets of such Guarantor are sold or otherwise disposed of (including by way of merger or consolidation) to a Person other than the Company or any of its Domestic Restricted Subsidiaries or (b) such Guarantor ceases to be a Restricted Subsidiary, and the Company otherwise complies, to the extent applicable, with Section 4.10, or (2) if the Company designates such Guarantor as an Unrestricted Subsidiary in accordance with Section 4.09, or (3) if the Company exercises its legal defeasance option or its covenant defeasance option as described in Section 8.01, or (4) upon satisfaction and discharge of this Indenture in accordance with Section 8.02 or payment in full in cash of the principal of, premium, if any, accrued and unpaid interest and Additional Interest, if any, on the Notes and all other Obligations that are then due and payable. The Trustee shall promptly deliver an appropriate instrument evidencing such release upon receipt of a request by the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section 10.02. Any Guarantor not so released remains liable for the full amount of its Guarantee as provided in this Article Ten. Section 10.03. Limitation of Guarantor's Liability. Each Guarantor and, by its acceptance hereof, each of the Holders hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under the Guarantee shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 10.05, result in the obligations of such Guarantor under the Guarantee not constituting such fraudulent transfer or conveyance. 70 Section 10.04. Guarantors May Consolidate, etc., on Certain Terms. Each Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and this Indenture in connection with any transaction complying with this Section 10.04 and Section 4.10) will not, and the Company will not cause or permit any Guarantor to, consolidate with or merge with or into any Person, other than the Company or any other Guarantor, unless: (1) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; (2) such entity assumes by supplemental indenture (in form and substance reasonably satisfactory to the Trustee), executed and delivered to the Trustee, all of the obligations of the Guarantor under the Guarantee and the performance of every covenant of the Guarantee, this Indenture and the Registration Rights Agreement; and (3) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. Any merger or consolidation of (i) a Guarantor with and into the Company (with the Company being the surviving entity) or another Guarantor or (ii) a Guarantor or the Company with an Affiliate organized solely for the purpose of reincorporating such Guarantor or the Company in another jurisdiction in the United States or any state thereof or the District of Columbia need only comply with (A) clause (4) of the first paragraph of Section 5.01; and (B) in the case of a merger or consolidation involving the Guarantor as described in clause (ii) of this sentence, clause (2) of the immediately preceding paragraph. Section 10.05. Contribution. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a pro rata contribution from each other Guarantor hereunder based on the net assets of each other Guarantor. The preceding sentence shall in no way affect the rights of the Holders of Notes to the benefits of this Indenture, the Notes or the Guarantees. Section 10.06. Waiver of Subrogation. Each Guarantor 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 guaranteed hereby. Section 10.07. Waiver of Stay, Extension or Usury Laws. Each Guarantor covenants to the extent permitted by law that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive such Guarantor from performing its Guarantee as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Guarantee; and each Guarantor hereby expressly waives to the extent permitted by law all benefit or advantage of any such law, and covenants that it 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. 71 ARTICLE ELEVEN MISCELLANEOUS Section 11.01. 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. Any provision of the TIA which is required to be included in a qualified Indenture, but not expressly included herein, shall be deemed to be included by this reference. Section 11.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company: Hawk Corporation 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Chief Financial Officer Facsimile Number: (216) 861-4546 if to the Trustee: HSBC Bank USA, National Association 452 Fifth Avenue New York, NY 10018 Attention: Corporate Trust Facsimile Number: (212) 525-1300 Each of the Company and the Trustee by written notice to each other may designate additional or different addresses for notices to such Person. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address or a notice sent by mail to the Trustee shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Holder shall be mailed to such Holder by first class mail or other equivalent means at such Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given to such Holder if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. 72 Section 11.03. Communications by Holders with Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture, any Guarantee or the Notes. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA Section 312(c). Section 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company or any Guarantor to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee upon request: (1) an Officers' Certificate, in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent to be performed by the Company or the applicable Guarantor (as the case may be), if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent to be performed by the Company or the applicable Guarantor (as the case may be), if any, provided for in this Indenture relating to the proposed action have been complied with. Section 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.06, shall include: (1) a statement that the Person 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 Person, he has made such examination or investigation as is reasonably 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 each such Person, such condition or covenant has been complied with. Section 11.06. Rules by Trustee, Paying Agent, Registrar. The Trustee may make reasonable rules in accordance with the Trustee's customary practices for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. Section 11.07. Legal Holidays. A "Legal Holiday" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York or at such place of payment are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on 73 the next succeeding day that is not a Legal Holiday, and no interest or Additional Interest, if applicable, shall accrue for the intervening period. Section 11.08. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. Section 11.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 11.10. No Recourse Against Others. A past, present or future director, officer, employee, stockholder or incorporator, as such, of the Company or of the Trustee shall not have any liability for any obligations of the Company or the Guarantors under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder, by accepting a Note, waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. Section 11.11. Successors. All agreements of the Company and the Guarantors in this Indenture, the Notes, and the Guarantees shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 11.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. Section 11.13. Severability. In case any one or more of the provisions in this Indenture, the Notes or in the Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. 74 Section 11.14. WAIVER OF JURY TRIAL. THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS INDENTURE, THE NOTES, THE GUARANTEES OR THE TRANSACTIONS CONTEMPLATED BY THIS INDENTURE. 75 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. HAWK CORPORATION By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board, Chief Executive Officer and President FRICTION PRODUCTS CO., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer LOGAN METAL STAMPINGS, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HELSEL, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer S.K. WELLMAN HOLDINGS, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer INDENTURE S-1 S.K. WELLMAN CORP., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer ALLEGHENY CLEARFIELD, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HAWK MIM, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HAWK MOTORS, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HAWK PRECISION COMPONENTS GROUP, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer INDENTURE S-2 NET SHAPE TECHNOLOGIES LLC, as a Guarantor By: HAWK MIM, INC., its Sole Member By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer QUARTER MASTER INDUSTRIES, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer SINTERLOY CORPORATION, as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer TEX RACING ENTERPRISES, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer WELLMAN PRODUCTS GROUP, INC., as a Guarantor By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer INDENTURE S-3 WELLMAN PRODUCTS, LLC, as a Guarantor By: WELLMAN PRODUCTS GROUP, INC., its Sole Member By: /s/ Ronald E. Weinberg --------------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee By: /s/ Frank Godino --------------------------------------- Name: Frank Godino Title: Vice President INDENTURE S-1 EXHIBIT A [FORM OF INITIAL NOTE] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS A NON-U.S. PURCHASER AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE OR ANY INTEREST OR PARTICIPATION HEREIN, 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 NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) 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 WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, 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, (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER 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 (C), (D) OR (F) TO REQUIRE THE DELIVERY A-1 OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE SHALL BE COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. A-2 HAWK CORPORATION 8-3/4% SENIOR NOTES DUE 2014 CUSIP No. [___________] No. [___________] $ [___________] Hawk Corporation, a Delaware corporation, for value received promises to pay to ___________________, or registered assigns, the principal sum of ____________ DOLLARS ($ [___________]) on November 1, 2014. Interest Rate: 8-3/4% per annum Interest Payment Dates: January 1 and July 1, commencing January 1, 2005 Record Dates: December 15 and June 15 Reference is made to the further provisions of this Note contained on the reverse side of this Note, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer. HAWK CORPORATION By: ____________________________________ Name: Title: Dated: November 1, 2004 A-3 TRUSTEE CERTIFICATE OF AUTHENTICATION This is one of the 8-3/4% Senior Notes due 2014 referred to in the within-mentioned Indenture. HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee Dated: November 1, 2004 By: ______________________________________ Authorized Officer A-4 (REVERSE OF NOTE) 8-3/4% SENIOR NOTE DUE 2014 1. Interest. Hawk Corporation (the "Company", which term includes any Surviving Entity) promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Note will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from and including the date of issuance. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing January 1, 2005. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. [FOR REGULATION S TEMPORARY GLOBAL NOTES INSERT: Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture.] 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange after such Record Date, and on or before such Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall 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 ("U.S. Legal Tender"). However, the Company may pay principal and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, HSBC Bank USA, National Association (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. Neither the Company nor any Affiliate of the Company shall act as Paying Agent or Registrar. 4. Indenture. The Notes and the Guarantees were issued under an Indenture, dated as of November 1, 2004 (the "Indenture"), among the Company, the Guarantors named therein and the Trustee. The terms of the Notes 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. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such tIme as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under A-5 the TIA. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. The Notes are senior obligations of the Company. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. 5. Redemption. (a) Optional Redemption on or after November 1, 2009. Except as described in Section 5(b), the Notes are not redeemable before November 1, 2009. Thereafter, the Company may on any one or more occasions redeem the Notes. The Notes will be redeemed at their option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the aggregate principal amount thereof) if redeemed during the twelve-month period commencing on November 1 of the year set forth below:
Year Percentage - ---- ---------- 2009............................................................... 104.375% 2010............................................................... 103.281% 2011............................................................... 102.188% 2012............................................................... 101.094% 2013............................................................... 100.000%
In addition, the Company must pay accrued and unpaid interest and Additional Interest, if any, on the aggregate principal amount of the Notes redeemed to the Redemption Date. (b) Optional Redemption upon Equity Offerings. At any time, or from time to time, on or prior to November 1, 2008, the Company may, at its option, use an amount not to exceed the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the aggregate principal amount of the Notes ever issued under this Indenture. The Notes will be redeemed at a redemption price of 108-3/4% of the aggregate principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, provided that: (1) at least 65% of the original principal amount of Notes ever issued under this Indenture remains outstanding immediately after any such redemption; and (2) the Company makes such redemption not more than 120 days after the consummation of any such Equity Offering. (c) 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 Notes to be redeemed at such Holder's registered address. If fewer than all of the Notes are to be redeemed, at any time, selection of Notes for redemption will be made by the Trustee in A-6 compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee deems to be fair and appropriate; provided that no partial redemption will reduce the principal amount of a Note not redeemed to a denomination of less than $1,000; and provided, further, that any such partial redemption made with the proceeds of an Equity Offering will be made only on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of the DTC or any other depository) unless such method is otherwise prohibited. Notes in denominations of $1,000 or more may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date sufficient to pay such redemption price plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, the Notes called for redemption will cease to bear interest from and after such Redemption Date, and the only remaining right of the Holders of such Notes will be to receive payment of the redemption price plus accrued and unpaid interest and Additional Interest, if any, as of the Redemption Date upon surrender to the Paying Agent of the Notes redeemed. 6. Offers to Purchase. Sections 4.10 and 4.19 of the Indenture provide that after certain Asset Sales, and upon the occurrence of a Change of Control and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 7. Registration Rights. Pursuant to the Registration Rights Agreement among the Company, the Guarantors and the Initial Purchaser of the Initial Notes, the Company will be obligated to consummate an exchange offer. Upon such exchange offering, the Holders of the Initial Notes shall have the right, subject to compliance with securities laws, to exchange such Initial Notes for 8-3/4% Senior Notes due 2014, which have been registered under the Securities Act, in like principal amount and having terms identical in all material respects to the Initial Notes. The Holders of the Initial Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 8. Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes, fees or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption. A-7 9. Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it and the Notes of which it is composed for all purposes. 10. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent may pay the money without interest thereon back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 11. Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or Maturity and complies with the other provisions of the Indenture relating thereto, the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, except for the rights of Holders to receive payments in respect of the principal of, and premium, if any, interest and Additional Interest, if any, on the Notes when such payments are due from the deposits referred to above. 12. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture, the Notes or the Guarantees may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without consent of any Holder, the parties thereto may amend or supplement the Indenture, the Notes or the Guarantees to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes or Guarantees in addition to or in place of certificated Notes or Guarantees, comply with the TIA, or comply with Article Five or Section 10.04 of the Indenture or make any other change that does not adversely affect in any material respect the rights of any Holder of a Note. 13. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries to, among other things, incur additional Indebtedness or grant Liens, make payments in respect of their Capital Stock or certain Indebtedness, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries, merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. A-8 14. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes, the Guarantees and the Indenture, the predecessor will be released from those obligations. 15. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest. 16. Trustee Dealings with Company. Subject to the terms of the TIA and the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, the Subsidiaries or their respective Affiliates as if it were not the Trustee. 17. No Recourse Against Others. No past, present or future stockholder, director, officer, employee or incorporator, as such, of the Company or the Guarantors shall have any liability for any obligation of the Company under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of a Note by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 18. Guarantees. Payment of principal and interest and Additional Interest, if any (including interest on overdue principal and overdue interest, if lawful), is unconditionally guaranteed, jointly and severally, by each of the Guarantors. 19. Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. A-9 20. Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS NOTE, THE GUARANTEES AND THE INDENTURE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 21. Waiver of Jury Trial. Each of the parties hereto and the holders (by their acceptance of the Note) hereby irrevocably waives, to the fullest extent permitted by law, any and all right to trial by jury in any action or proceeding arising out of or in connection with the Indenture, this Note, the Guarantees or the transactions contemplated by the Indenture. 22. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture. Requests may be made to: Hawk Corporation, 200 Public Square, Suite 1500, Cleveland, Ohio 44114-2301. A-10 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: ________________________________________________________________________________ ________________________________________________________________________________ (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint ______________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: _________________________ Signed: ______________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ___________________________________ In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) November 1, 2006, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Note is being transferred: [CHECK ONE] [ ] (1) to the Company or a subsidiary thereof; or [ ] (2) pursuant to and in compliance with Rule 144A under the Securities Act; or [ ] (3) to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or [ ] (4) outside the United States to a person other than a "U.S. person" in compliance with Rule 904 of Regulation S under the Securities Act; or [ ] (5) pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or A-11 ? (6) pursuant to an effective registration statement under the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided that if box (3), (4) or (5) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Notes, in its sole discretion, such legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or 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. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.15 of the Indenture shall have been satisfied. Dated: ___________________________ Signed: _________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: _____________________________ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note 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 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 A-12 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.19 of the Indenture, check the appropriate box: [ ] Section 4.10 [ ] Section 4.19 If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.10 or 4.19 of the Indenture, state the amount you elect to have purchased: $ ___________________________________ Dated: ______________________________ _____________________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed by the endorser's bank or broker. Signature Guarantee: A-13 EXHIBIT B [FORM OF EXCHANGE NOTE] HAWK CORPORATION 8-3/4% SENIOR NOTES DUE 2014 CUSIP No. [___________] No. [___________] $ [___________] Hawk Corporation, a Delaware corporation, for value received promises to pay to ___________________, or registered assigns, the principal sum of ____________ DOLLARS ($ [___________]) on November 1, 2014. Interest Rate: 8-3/4% per annum Interest Payment Dates: January 1 and July 1, commencing January 1, 2005 Record Dates: December 15 and June 15 Reference is made to the further provisions of this Note contained on the reverse side of this Note, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer. HAWK CORPORATION By: _________________________________ Name: Title: Dated: B-1 TRUSTEE CERTIFICATE OF AUTHENTICATION This is one of the 8-3/4% Senior Notes due 2014 referred to in the within-mentioned Indenture. HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee Dated: By: _____________________________________ Authorized Officer B-2 (REVERSE OF NOTE) 8-3/4% SENIOR NOTE DUE 2014 1. Interest. Hawk Corporation (the "Company", which term includes any Surviving Entity) promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Note will accrue (a) from the later of (i) the last interest payment date on which interest was paid on the note surrendered in exchange for this Note (the "Surrendered Note"), or (ii) if the Surrendered Note is surrendered for exchange on a date in a period that includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date; or (b) if no interest has been paid on such Surrendered Note, from the Issue Date. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing January 1, 2005. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange after such Record Date, and on or before such Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall 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 ("U.S. Legal Tender"). However, the Company may pay principal and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, HSBC Bank USA, National Association (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. Neither the Company nor any Affiliate of the Company shall act as Paying Agent or Registrar. 4. Indenture. The Notes and the Guarantees were issued under an Indenture, dated as of November 1, 2004 (the "Indenture"), among the Company, the Guarantors named therein and the Trustee. The terms of the Notes 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. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such tIme as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Notes are subject to all such B-3 terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. The Notes are senior obligations of the Company. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. 5. Redemption. (a) Optional Redemption on or after November 1, 2009. Except as described in Section 5(b), the Notes are not redeemable before November 1, 2009. Thereafter, the Company may on any one or more occasions redeem the Notes. The Notes will be redeemed at their option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the aggregate principal amount thereof) if redeemed during the twelve-month period commencing on November 1 of the year set forth below:
Year Percentage - ---- ---------- 2009.................................................................... 104.375% 2010.................................................................... 103.281% 2011.................................................................... 102.188% 2012.................................................................... 101.094% 2013.................................................................... 100.000%
In addition, the Company must pay accrued and unpaid interest and Additional Interest, if any, on the aggregate principal amount of the Notes redeemed to the Redemption Date. (b) Optional Redemption upon Equity Offerings. At any time, or from time to time, on or prior to November 1, 2008, the Company may, at its option, use an amount not to exceed the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the aggregate principal amount of the Notes ever issued under this Indenture. The Notes will be redeemed at a redemption price of 108-3/4% of the aggregate principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, provided that: (1) at least 65% of the original principal amount of Notes ever issued under this Indenture remains outstanding immediately after any such redemption; and (2) the Company makes such redemption not more than 120 days after the consummation of any such Equity Offering. (c) 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 Notes to be redeemed at such Holder's registered address. If fewer than all of the Notes are to be redeemed, at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which B-4 the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee deems to be fair and appropriate; provided that no partial redemption will reduce the principal amount of a Note not redeemed to a denomination of less than $1,000; and provided, further, that any such partial redemption made with the proceeds of an Equity Offering will be made only on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of the DTC or any other depository) unless such method is otherwise prohibited. Notes in denominations of $1,000 or more may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date sufficient to pay such redemption price plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, the Notes called for redemption will cease to bear interest from and after such Redemption Date, and the only remaining right of the Holders of such Notes will be to receive payment of the redemption price plus accrued and unpaid interest and Additional Interest, if any, as of the Redemption Date upon surrender to the Paying Agent of the Notes redeemed. 6. Offers to Purchase. Sections 4.10 and 4.19 of the Indenture provide that after certain Asset Sales, and upon the occurrence of a Change of Control and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 7. Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes, fees or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption. 8. Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it and the Notes of which it is composed for all purposes. 9. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent may pay the money without interest thereon back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. B-5 10. Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or Maturity and complies with the other provisions of the Indenture relating thereto, the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, except for the rights of Holders to receive payments in respect of the principal of, and premium, if any, interest and Additional Interest, if any, on the Notes when such payments are due from the deposits referred to above. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture, the Notes or the Guarantees may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without consent of any Holder, the parties thereto may amend or supplement the Indenture, the Notes or the Guarantees to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes or Guarantees in addition to or in place of certificated Notes or Guarantees, comply with the TIA, or comply with Article Five or Section 10.04 of the Indenture or make any other change that does not adversely affect in any material respect the rights of any Holder of a Note. 12. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries to, among other things, incur additional Indebtedness or grant Liens, make payments in respect of their Capital Stock or certain Indebtedness, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries, merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 13. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes, the Guarantees and the Indenture, the predecessor will be released from those obligations. 14. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received B-6 indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest. 15. Trustee Dealings with Company. Subject to the terms of the TIA and the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, the Subsidiaries or their respective Affiliates as if it were not the Trustee. 16. No Recourse Against Others. No past, present or future stockholder, director, officer, employee or incorporator, as such, of the Company or the Guarantors shall have any liability for any obligation of the Company under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of a Note by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 17. Guarantees. Payment of principal and interest and Additional Interest, if any (including interest on overdue principal and overdue interest, if lawful), is unconditionally guaranteed, jointly and severally, by each of the Guarantors. 18. Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. 19. Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS NOTE, THE GUARANTEES AND THE INDENTURE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 20. Waiver of Jury Trial. Each of the parties hereto and the holders (by their acceptance of the Note) hereby irrevocably waives, to the fullest extent permitted by law, any and all right to trial by jury in any action or proceeding arising out of or in connection with the Indenture, this Note, the Guarantees or the transactions contemplated by the Indenture. B-7 21. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture. Requests may be made to: Hawk Corporation, 200 Public Square, Suite 1500, Cleveland, Ohio 44114-2301. B-8 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: ________________________________________________________________________________ ________________________________________________________________________________ (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint _______________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: ___________________ Signed: _____________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: _________________________ In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) November 1, 2006, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Note is being transferred: [CHECK ONE] [ ] (1) to the Company or a subsidiary thereof; or [ ] (2) pursuant to and in compliance with Rule 144A under the Securities Act; or [ ] (3) to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or [ ] (4) outside the United States to a person other than a "U.S. person" in compliance with Rule 904 of Regulation S under the Securities Act; or [ ] (5) pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or B-9 ? (6) pursuant to an effective registration statement under the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided that if box (3), (4) or (5) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Notes, in its sole discretion, such legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or 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. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.15 of the Indenture shall have been satisfied. Dated: ___________________________ Signed: ______________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note 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 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 B-10 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.19 of the Indenture, check the appropriate box: [ ] Section 4.10 [ ] Section 4.19 If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.10 or 4.19 of the Indenture, state the amount you elect to have purchased: $ __________________________________ Dated: ________________________ ________________________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed by the endorser's bank or broker. Signature Guarantee: ________________ B-11 EXHIBIT C [FORM OF LEGEND FOR GLOBAL NOTES] Any Global Note authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form: [If a Regulation S Temporary Global Note, insert: THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.] THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("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 IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO 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. C-1 EXHIBIT D [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS] ___________'____ HSBC Bank USA, National Association 452 Fifth Avenue New York, NY 10018 Attention: Corporate Trust Re: 8-3/4% Senior Notes due 2014 (the "Notes") of Hawk Corporation, a Delaware corporation (the "Company") Ladies and Gentlemen: In connection with our proposed purchase of $_____________ aggregate principal amount of the Notes, we confirm that: 1. We have received a copy of the Offering Circular (the "Offering Circular"), dated October 25, 2004, relating to the Notes and such other information as we deem necessary in order to make our investment decision. We acknowledge that we have read and agreed to the matters stated in the section entitled "Notice to Investors" of the Offering Circular. 2. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of November 1, 2004 relating to the Notes (the "Indenture") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 3. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell or otherwise transfer any Notes prior to the date which is within two years after the original issuance of the Notes or the last date on which the Note is owned by the Company or any affiliate of the Company, we will do so only (i) to the Company or any of its subsidiaries, (ii) inside the United States in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) provided that, prior to such transfer, the transferee furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes, substantially in the form of this letter, (iv) outside the United States in accordance with Rule 904 D-1 of Regulation S under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 4. We are not acquiring the Notes for or on behalf of, and will not transfer the Notes to, any pension or welfare plan (as defined in Section 3 of the Employee Retirement Income Security Act of 1974), except as permitted in the section entitled "Notice to Investors" of the Offering Circular. 5. We understand that, on any proposed resale of any Notes, we will be required to furnish to you and the Company such certification, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 6. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 7. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. 8. We are not acquiring Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any state of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our and their control. 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, and we agree to notify you promptly if any of our representations or warranties herein cease to be accurate and complete. D-2 This letter shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. Very truly yours, [Name of Transferee] By: ___________________________________ Authorized Signature D-3 EXHIBIT E [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S] HSBC Bank USA, National Association 452 Fifth Avenue New York, NY 10018 Attention: Corporate Trust Re: 8-3/4% Senior Notes due 2014 (the "Notes") of Hawk Corporation (the "Company") Ladies and Gentlemen: In connection with our proposed sale of $________________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: 1. the offer of the Notes was not made to a person in the United States; 2. either (a) at the time the buy offer 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 pre-arranged 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; 4. the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and 5. we have advised the transferee of the transfer restrictions applicable to the Notes. E-1 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 Transferee] By: ____________________________________ Authorized Signature E-2 EX-4.2 3 l10322aexv4w2.txt EX-4.2 REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2 EXECUTION COPY HAWK CORPORATION $110,000,000 8-3/4% OF SENIOR NOTES DUE 2014 REGISTRATION RIGHTS AGREEMENT November 1, 2004 JEFFERIES & COMPANY, INC. 520 Madison Avenue 12th Floor New York, NY 10022 Ladies and Gentlemen: HAWK CORPORATION, a Delaware corporation (the "Company"), is issuing and selling to JEFFERIES & COMPANY, INC. (the "Initial Purchaser"), upon the terms set forth in the Purchase Agreement dated October 25, 2004, by and among the Company, the Initial Purchaser and the Guarantors named therein (the "Purchase Agreement"), $110,000,000 aggregate principal amount of 8-3/4% Senior Notes due 2014 issued by the Company (each, a "Note" and collectively, the "Notes"). As an inducement to the Initial Purchaser to enter into the Purchase Agreement, the Company and the Guarantors listed on the signature pages hereto agree with the Initial Purchaser, for the benefit of the Holders (as defined below) of the Notes (including, without limitation, the Initial Purchaser), as follows: 1. DEFINITIONS Capitalized terms that are used herein without definition and are defined in the Purchase Agreement shall have the respective meanings ascribed to them in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: ADDITIONAL INTEREST: See Section 4(a). ADVICE: See Section 5(w). AGREEMENT: This Registration Rights Agreement, dated as of the Issue Date, between the Company and the Initial Purchaser. APPLICABLE PERIOD: See Section 2(e). BUSINESS DAY: A day that is not a Saturday, a Sunday or a day on which banking institutions in the City of New York are authorized or required by law or executive order to be closed. COMPANY: See the introductory paragraph to this Agreement. DAY: Unless otherwise expressly provided, a calendar day. EFFECTIVENESS DATE: The 150th day after the Issue Date. EFFECTIVENESS PERIOD: See Section 3(a). EVENT DATE: See Section 4(b). EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE NOTES: 8-3/4% Senior Notes due 2014 of the Company, identical in all material respects to the Notes, including the guarantees endorsed thereon, except for references to series and restrictive legends. EXCHANGE OFFER: See Section 2(a). EXCHANGE REGISTRATION STATEMENT: See Section 2(a). FILING DATE: The 90th day after the Issue Date. GUARANTOR: Each subsidiary of the Company that guarantees the obligations of the Company under the Notes and Indenture. HOLDER: Any registered holder of Registrable Notes. INDEMNIFIED PARTY: See Section 7(c). INDEMNIFYING PARTY and INDEMNIFYING PARTIES: See Section 7(c). INDENTURE: The Indenture, dated as of the Issue Date, among the Company, the Guarantors and HSBC Bank USA, National Association, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms hereof. INITIAL PURCHASER: See the introductory paragraph to this Agreement. INITIAL SHELF REGISTRATION: See Section 3(a). INSPECTORS: See Section 5(o). ISSUE DATE: November 1, 2004 LOSSES: See Section 7(a). NASD: National Association of Securities Dealers, Inc. NOTES: See the introductory paragraph to this Agreement. 2 PARTICIPATING BROKER-DEALER: See Section 2(e). PERSON: An individual, trustee, corporation, partnership, limited liability company, joint stock company, trust, unincorporated association, union, business association, firm, government or agency or political subdivision thereof, or other legal entity. PRIVATE EXCHANGE: See Section 2(f). PRIVATE EXCHANGE NOTES: See Section 2(f). PROSPECTUS: The prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. PURCHASE AGREEMENT: See the introductory paragraph to this Agreement. RECORDS: See Section 5(o). REGISTRABLE NOTES: (i) Notes, (ii) Private Exchange Notes and (iii) Exchange Notes received in the Exchange Offer, in each case, that may not be sold without restriction under federal or state securities laws. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors filed with the SEC under the Securities Act (including, but not limited to, the Exchange Registration Statement, the Shelf Registration and any Subsequent Shelf Registration) that covers any of the Registrable Notes pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer or such securities being free of the registration and prospectus delivery requirements of the Securities Act. RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. RULE 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. 3 RULE 430A: Rule 430A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. SECURITIES: The Notes, the Exchange Notes and the Private Exchange Notes. SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. SHELF NOTICE: See Section 2(j). SHELF REGISTRATION: See Section 3(b). SUBSEQUENT SHELF REGISTRATION: See Section 3(b). TIA: The Trust Indenture Act of 1939, as amended. TRUSTEE: The trustee under the Indenture and, if existent, the trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any). UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. EXCHANGE OFFER (a) Unless the Exchange Offer would not be permitted by applicable laws or a policy of the SEC, the Company shall (and shall cause each Guarantor to) (i) prepare and file with the SEC no later than the Filing Date, a registration statement (the "Exchange Registration Statement") on an appropriate form under the Securities Act with respect to an offer (the "Exchange Offer") to the Holders of Notes to issue and deliver to such Holders, in exchange for the Notes, a like principal amount of Exchange Notes, (ii) use its best efforts to cause the Exchange Registration Statement to become effective no later than the Effectiveness Date, (iii) use its best efforts to keep the Exchange Registration Statement effective until the consummation of the Exchange Offer in accordance with its terms, and (iv) to commence the Exchange Offer and to issue on or prior to 30 Business Days after the date on which the Exchange Registration Statement is declared effective, Exchange Notes in exchange for all Notes tendered prior thereto in the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the staff of the SEC. (b) The Exchange Notes shall be issued under, and entitled to the benefits of, the Indenture or a trust indenture that is identical to the Indenture (other than such changes as are necessary to comply with any requirements of the SEC to effect or maintain the qualifications thereof under the TIA). 4 (c) Interest on the Exchange Notes and Private Exchange Notes will accrue from the last interest payment due date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the date of original issue of the Notes. Each Exchange Note and Private Exchange Note shall bear interest at the rate set forth thereon; provided, that interest with respect to the period prior to the issuance thereof shall accrue at the rate or rates borne by the Notes from time to time during such period. (d) The Company may require each Holder as a condition to participation in the Exchange Offer to represent (i) that any Exchange Notes received by it will be acquired in the ordinary course of its business, (ii) that at the time of the commencement and consummation of the Exchange Offer such Holder has not entered into any arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the provisions of the Securities Act, (iii) that such Holder is not an "affiliate" of the Company within the meaning of Rule 405 of the Securities Act, or, if it is an "affiliate" of the Company, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable to it, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Notes and (v) if such Holder is a Participating Broker-Dealer, that it will deliver a Prospectus in connection with any resale of the Exchange Notes. (e) The Company shall (and shall cause each Guarantor to) include within the Prospectus contained in the Exchange Registration Statement a section entitled "Plan of Distribution" reasonably acceptable to the Initial Purchaser which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer for its own account in exchange for Notes that were acquired by it as a result of market-making or other trading activity (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the judgment of the Initial Purchaser, represent the prevailing views of the staff of the SEC. Such "Plan of Distribution" section shall also allow, to the extent permitted by applicable policies and regulations of the SEC, the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including, to the extent so permitted, all Participating Broker-Dealers, and include a statement describing the manner in which Participating Broker-Dealers may resell the Exchange Notes. The Company shall use its best efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such Persons must comply with such requirements in order to resell the Exchange Notes (the "Applicable Period"). 5 (f) If, upon consummation of the Exchange Offer, the Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Company (upon the written request from the Initial Purchaser) shall, simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to the Initial Purchaser, in exchange (the "Private Exchange") for the Notes held by the Initial Purchaser, a like principal amount of Senior Notes that are identical to the Exchange Notes except for the existence of restrictions on transfer thereof under the Securities Act and securities laws of the several states of the United States (the "Private Exchange Notes") (and which are issued pursuant to the same indenture as the Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. (g) In connection with the Exchange Offer, the Company shall (and shall cause each Guarantor to): (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal that is an exhibit to the Exchange Offer Registration Statement, and any related documents; (ii) keep the Exchange Offer open for not less than 20 Business Days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (iii) utilize the services of a depository for the Exchange Offer with an address in the Borough of Manhattan, the City of New York, which may be the Trustee or an affiliate thereof; (iv) permit Holders to withdraw tendered Registrable Notes at any time prior to the close of business, New York time, on the last Business Day on which the Exchange Offer shall remain open; and (v) otherwise comply in all material respects with all applicable laws. (h) As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall (and shall cause each Guarantor to): (i) accept for exchange all Registrable Notes validly tendered pursuant to the Exchange Offer or the Private Exchange, as the case may be, and not validly withdrawn; (ii) deliver to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (iii) cause the Trustee to authenticate and deliver promptly to each Holder tendering such Registrable Notes, Exchange Notes or Private Exchange 6 Notes, as the case may be, equal in principal amount to the Registrable Notes of such Holder so accepted for exchange. (i) The Exchange Notes and the Private Exchange Notes may be issued under (i) the Indenture or (ii) an indenture identical to the Indenture (other than such changes as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA), which in either event will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture, that the Private Exchange Notes will be subject to the transfer restrictions set forth in the Indenture, and that the Exchange Notes, the Private Exchange Notes and the Notes, if any, will be deemed one class of security (subject to the provisions of the Indenture) and entitled to participate in any Guarantee (as such terms are defined in the Indenture) on an equal and ratable basis. (j) If: (i) because of any change in law or in currently prevailing interpretations of the staff of the SEC, the Company is not permitted to effect the Exchange Offer (after the Company has complied with the procedures set forth herein); (ii) subsequent to the consummation of the Private Exchange, any Holder of Private Exchange Notes so requests; (iii) the Exchange Offer is not consummated within 30 Business Days after the Effectiveness Date; or (iv) in the case of (A) any Holder not permitted by applicable law or SEC policy to participate in the Exchange Offer, (B) any Holder participating in the Exchange Offer that receives Exchange Notes that may not be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of the Company within the meaning of the Securities Act) or (C) any broker-dealer that holds Notes acquired directly from the Company or any of its affiliates and, in each such case contemplated by this clause (iv), and such Holder notifies the Company within six months of consummation of the Exchange Offer; then the Company shall promptly (and in any event within five Business Days) deliver to the Holders (or in the case of an occurrence of any event described in clause (iv) of this Section 2(j), to any such Holder) and the Trustee notice thereof (the "Shelf Notice") and shall file an Initial Shelf Registration pursuant to Section 3. 3. SHELF REGISTRATION If a Shelf Notice is delivered pursuant to Section 2(j), then this Section 3 shall apply to all Registrable Notes. Otherwise, upon consummation of the Exchange Offer in accordance with Section 2, the provisions of Section 3 shall apply solely with respect to (i) Notes held by any Holder thereof not permitted to participate in the Exchange Offer, (ii) Notes held by any broker-dealer that acquired such Notes directly from the Company or any of its affiliates and (iii) Exchange Notes that are not freely tradeable as contemplated by Section 2(j)(iv) hereof, provided in each case that the relevant Holder has duly notified the Company within six months of the Exchange Offer as required by Section 2(j)(iv). (a) Initial Shelf Registration. The Company shall (and shall cause each Guarantor to), as promptly as practicable, file with the SEC a Registration Statement for an 7 offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the "Initial Shelf Registration"). If the Company (and any Guarantor) has not yet filed an Exchange Registration Statement, the Company shall (and shall cause each Guarantor to) file with the SEC the Initial Shelf Registration on or prior to the Filing Date and shall use its best efforts to cause such Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date. Otherwise, the Company shall (and shall cause each Guarantor to) file with the SEC the Initial Shelf Registration within 30 days of the delivery of the Shelf Notice and shall use its best efforts to cause such Shelf Registration to be declared effective under the Securities Act as promptly as practicable thereafter (but in no event more than 90 days after delivery of the Shelf Notice). The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners reasonably designated by them (including, without limitation, one or more underwritten offerings). The Company and Guarantors shall not permit any securities other than the Registrable Notes to be included in any Shelf Registration. The Company shall (and shall cause each Guarantor to) use its best efforts to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is 24 months from the Issue Date (subject to extension pursuant to the last paragraph of Section 5(w) (the "Effectiveness Period"), or such shorter period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration, (ii) a Subsequent Shelf Registration covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration has been declared effective under the Securities Act or (iii) there cease to be any outstanding Registrable Notes. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below) ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Company shall (and shall cause each Guarantor to) use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend such Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file (and cause each Guarantor to file) an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company shall (and shall cause each Guarantor to) use its best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Subsequent Shelf Registration continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously continuously effective. As used herein the term "Shelf Registration" means the Initial Shelf Registration and any Subsequent Shelf Registrations. 8 (c) Supplements and Amendments. The Company shall promptly supplement and amend any Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested in writing by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Shelf Registration or by any underwriter of such Registrable Notes. (d) Provision of Information. No Holder of Registrable Notes shall be entitled to include any of its Registrable Notes in any Shelf Registration pursuant to this Agreement unless such Holder furnishes to the Company and the Trustee in writing, within 45 days after receipt of a written request therefor, such information as the Company and the Trustee after conferring with counsel with regard to information relating to Holders that would be required by the SEC to be included in such Shelf Registration or Prospectus included therein, may reasonably request for inclusion in any Shelf Registration or Prospectus included therein, and no such Holder shall be entitled to Additional Interest pursuant to Section 4 hereof unless and until such Holder shall have provided such information. 4. ADDITIONAL INTEREST (a) The Company and each Guarantor acknowledges and agrees that the Holders of Registrable Notes will suffer damages if the Company or any Guarantor fails to fulfill its material obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company and the Guarantors agree to pay additional cash interest on the Notes ("Additional Interest") under the circumstances and to the extent set forth below (each of which shall be given independent effect): (i) if (A) neither the Exchange Registration Statement nor the Initial Shelf Registration is filed with the SEC on or prior to the Filing Date or (B) notwithstanding that the Company has consummated or will consummate an Exchange Offer, the Company is required to file an Initial Shelf Registration and such Initial Shelf Registration is not filed on or prior to 30 days of the delivery of a Shelf Notice, then commencing on the day after either such required filing date, Additional Interest shall accrue on the principal amount of the Notes over and above any stated interest at a rate of 0.25% per annum for the first 90 days immediately following each such filing date, such Additional Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; (ii) if (A) neither the Exchange Registration Statement nor the Initial Shelf Registration is declared effective by the SEC on or prior to the Effectiveness Date or (B) notwithstanding that the Company has consummated or will consummate an Exchange Offer, the Company is required to file a Shelf Registration and such Shelf Registration is not declared effective by the SEC on or prior to the 90th day following the date 9 such Shelf Registration was filed, then, commencing on the day after either such required effective date, Additional Interest shall accrue on the principal amount of the Notes over and above any stated interest at a rate of 0.25% per annum for the first 90 days immediately following the Effectiveness Date, such Additional Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) the Company has not exchanged Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to 30 Business Days after the Effectiveness Date or (B) if applicable, a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time prior to the second anniversary of the Issue Date (other than such time as all Notes have been disposed of thereunder) and is not declared effective again within 30 days, then Additional Interest shall accrue on the Notes, over and above any stated interest, at a rate of 0.25% per annum of the principal amount of such Notes commencing on (x) the 31st Business Day after the Effectiveness Date, in the case of (A) above, or (y) the day such Shelf Registration ceases to be effective in the case of (B) above, such Additional Interest rate increasing by an additional 0.25% per annum at the beginning of each such subsequent 90-day period; provided, however, that Additional Interest will not accrue under more than one of the foregoing clauses (i), (ii) or (iii) at any one time; provided further, however, that the amount of Additional Interest accruing will not exceed 1.0% per annum; provided further, however, that (a) upon the filing of the Exchange Registration Statement or a Shelf Registration (in the case of clause (i) above), (b) upon the effectiveness of the Exchange Registration Statement or an Initial Shelf Registration (in the case of clause (ii) above), or (c) upon the exchange of Exchange Notes for all Notes tendered (in the case of clause (iii)(A) above), or upon the effectiveness of a Shelf Registration which had ceased to remain effective (in the case of clause (iii)(B) above), Additional Interest on the Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Company shall notify the Trustee within 3 Business Days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Any amounts of Additional Interest due pursuant to clause (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash, on the dates and in the manner provided in the Indenture and whether or not any cash interest would then be payable on such date, commencing with the first such semi-annual date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the 10 basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 5. REGISTRATION PROCEDURES In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall (and shall cause each Guarantor to) effect such registrations to permit the sale of such securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Company hereunder, the Company shall (and shall cause each Guarantor to): (a) If (1) a Shelf Registration is filed pursuant to Section 3 or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto the Company shall (and shall cause each Guarantor to), if requested, furnish to and afford the Holders of the Registrable Notes to be registered pursuant to such Shelf Registration Statement, each Participating Broker-Dealer, the managing underwriters, if any, and each of their respective counsel, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least 5 Business Days prior to such filing). The Company and each Guarantor shall not file any such Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must provide information for the inclusion therein without the Holders being afforded an opportunity to review such documentation if the holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, the managing underwriters, if any, or any of their respective counsel shall reasonably object in writing on a timely basis. A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Securities Act. (b) Provide an indenture trustee for the Registrable Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, and cause the Indenture (or other indenture relating to the Registrable Notes) to be qualified under the TIA not later than the effective date of the first Registration Statement; and in connection therewith, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause such trustee to execute, all documents as may be 11 required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (c) Prepare and file with the SEC such pre-effective amendments and post-effective amendments to each Shelf Registration or Exchange Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus. The Company and each Guarantor shall not, during the Applicable Period, voluntarily take any action that would result in selling Holders of the Registrable Notes covered by a Registration Statement or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period, unless such action is required by applicable law, rule or regulation or permitted by this Agreement. (d) Furnish to such selling Holders and Participating Broker-Dealers who so request in writing (i) upon the Company's receipt, a copy of the order of the SEC declaring such Registration Statement and any post effective amendment thereto effective, (ii) such reasonable number of copies of such Registration Statement and of each amendment and supplement thereto (in each case including any documents incorporated therein by reference and all exhibits), (iii) such reasonable number of copies of the Prospectus included in such Registration Statement (including each preliminary Prospectus) and each amendment and supplement thereto, and such reasonable number of copies of the final Prospectus as filed by the Company and each Guarantor pursuant to Rule 424(b) under the Securities Act, in conformity with the requirements of the Securities Act and each amendment and supplement thereto, and (iv) such other documents (including any amendments required to be filed pursuant to clause (c) of this Section), as any such Person may reasonably request in writing. Each of the Company and each Guarantor hereby consent to the use of the Prospectus by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers, if any, in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (e) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating 12 thereto, the Company shall notify in writing the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, the managing underwriters, if any, and each of their respective counsel promptly (but in any event within 2 Business Days) (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any Prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes the representations and warranties of the Company and any Guarantor contained in any agreement (including any underwriting agreement) contemplated by Section 5(n) hereof cease to be true and correct, (iv) of the receipt by the Company or any Guarantor of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition of any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in, or amendments or supplements to, such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement and the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (vi) of any reasonable determination by the Company or any Guarantor that a post-effective amendment to a Registration Statement would be appropriate and (vii) of any request by the SEC for amendments to the Registration Statement or supplements to the Prospectus or for additional information relating thereto. (f) Use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use its best efforts to obtain the withdrawal of any such order at the earliest possible date. 13 (g) If (A) a Shelf Registration is filed pursuant to Section 3, (B) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period or (C) reasonably requested in writing by the managing underwriters, if any, or the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information or revisions to information therein relating to such underwriters or selling Holders as the managing underwriters, if any, or such Holders or any of their respective counsel reasonably request in writing to be included or made therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplements or post-effective amendment. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes or Exchange Notes, as the case may be, for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer or any managing underwriter or underwriters, if any, reasonably request in writing; provided that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, each of the Company and each Guarantor agrees to cause its counsel to perform Blue Sky investigations and file any registrations and qualifications required to be filed pursuant to this Section 5(h), keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided that neither the Company nor any Guarantor shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in any such jurisdiction where it is not then so subject. (i) If (A) a Shelf Registration is filed pursuant to Section 3 or (B) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is requested to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, cooperate 14 with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company, and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request. (j) Use its best efforts to cause the Registrable Notes covered by any Registration Statement to be registered with or approved by such governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter, if any, to consummate the disposition of such Registrable Notes, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Company shall (and shall cause each Guarantor to) cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals; provided that neither the Company nor any existing Guarantor shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any jurisdiction where it is not then so subject or (C) subject itself to taxation in any such jurisdiction where it is not then so subject. (k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(e)(v) or 5(e)(vi) hereof, as promptly as practicable, prepare and file with the SEC, at the expense of the Company and the Guarantors, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, such Prospectus will not 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, in light of the circumstances under which they were made, not misleading, and, if SEC review is required, use its best efforts to cause such post-effective amendment to be declared effective as soon as possible. (l) Use its best efforts to cause the Registrable Notes covered by a Registration Statement to be rated with such appropriate rating agencies, if so requested in writing by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or the managing underwriter or underwriters, if any. 15 (m) Prior to the initial issuance of the Exchange Notes, (i) provide the Trustee with one or more certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Exchange Notes. (n) If a Shelf Registration is filed pursuant to Section 3, enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings of debt securities similar to the Notes, as may be appropriate in the circumstances) and take all such other actions in connection therewith (including those reasonably requested in writing by the managing underwriters, if any, or the Holders of a majority in aggregate principal amount of the Registrable Notes being sold) in order to expedite or facilitate the registration or the disposition of such Registrable Notes, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, (i) make such representations and warranties to the Holders and the underwriters, if any, with respect to the business of the Company and its subsidiaries as then conducted, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, as may be appropriate in the circumstances, and confirm the same if and when reasonably required; (ii) obtain an opinion of counsel to the Company and the Guarantors and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the Holders of a majority in aggregate principal amount of the Registrable Notes being sold), addressed to each selling Holder and each of the underwriters, if any, covering the matters customarily covered in opinions of counsel to the Company and the Guarantors requested in underwritten offerings of debt securities similar to the Notes, as may be appropriate in the circumstances; (iii) obtain "cold comfort" letters and updates thereof (which letters and updates (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters) from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Notes, as may be appropriate in the circumstances, and such other matters as reasonably requested in writing by the underwriters; and (iv) deliver such documents and certificates as may be reasonably requested in writing by the Holders of a majority in aggregate principal amount of the Registrable Notes being sold and the managing underwriters, if any, to evidence the continued validity of the representations and warranties of the Company and its subsidiaries made pursuant to clause (i) above and to evidence compliance with any conditions contained in the underwriting agreement or other similar agreement entered into by the Company or the Guarantor. 16 (o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records and pertinent corporate documents of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested in writing by any such Inspector in connection with such Registration Statement. Each Inspector shall agree in writing that it will keep the Records confidential and not disclose any of the Records unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) the information in such Records is public or has been made generally available to the public other than as a result of a disclosure or failure to safeguard by such Inspector or (iv) disclosure of such information is, in the reasonable written opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, related to, or involving this Agreement, or any transaction contemplated hereby or arising hereunder. Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public. Each Inspector, each selling Holder of such Registrable Notes and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and, to the extent practicable, use its reasonable best efforts to allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential at its expense. (p) Comply with all applicable rules and regulations of the SEC and make generally available to the security holders of the Company with regard to any Applicable Registration Statement earning statements satisfying the provisions of section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which 17 Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (q) Upon consummation of an Exchange Offer or Private Exchange, obtain an opinion of counsel to the Company and the Guarantors (in form, scope and substance reasonably satisfactory to the Initial Purchaser), addressed to the Trustee for the benefit of all Holders participating in the Exchange Offer or Private Exchange, as the case may be, to the effect that (i) the Company and the Guarantors have duly authorized, executed and delivered the Exchange Notes or the Private Exchange Notes, as the case may be, and the Indenture and (ii) the Exchange Notes or the Private Exchange Notes, as the case may be, and the Indenture constitute legal, valid and binding obligations of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with their respective terms, except as such enforcement may be subject to customary United States and foreign exceptions. (r) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by the Holders to the Company and the Guarantors (or to such other Person as directed by the Company and the Guarantors) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company and the Guarantors shall mark, or cause to be marked, on such Registrable Notes that the Exchange Notes or the Private Exchange Notes, as the case may be, are being issued as substitute evidence of the indebtedness originally evidenced by the Registrable Notes; provided that in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (s) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the NASD. (t) Use its best efforts to cause all Securities covered by a Registration Statement to be listed on each securities exchange, if any, on which similar debt securities issued by the Company are then listed. (u) Use its best efforts to take all other steps reasonably necessary to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. (v) The Company may require each seller of Registrable Notes or Participating Broker-Dealer as to which any registration is being effected to furnish to the Company such information regarding such seller or Participating Broker-Dealer and the distribution of such Registrable Notes as the Company may, from time to time, reasonably request in writing. The Company may exclude from such 18 registration the Registrable Notes of any seller who fails to furnish such information within a reasonable time (which time in no event shall exceed 45 days) after receiving such request. Each seller of Registrable Notes or Participating Broker-Dealer as to which any registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished by such seller not materially misleading. (w) Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(e)(2)(ii), 5(e)(2)(iii), 5(e)(2)(iv), 5(e)(2)(v), or 5(e)(2)(vi), such Holder will forthwith discontinue disposition of such Registrable Notes covered by a Registration Statement and such Participating Broker-Dealer will forthwith discontinue disposition of such Exchange Notes pursuant to any Prospectus and, in each case, forthwith discontinue dissemination of such Prospectus until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k), or until it is advised in writing (the "Advice") by the Company and the Guarantors that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto and, if so directed by the Company and the Guarantors, such Holder or Participating Broker-Dealer, as the case may be, will deliver to the Company all copies, other than permanent file copies, then in such Holder's or Participating Broker-Dealer's possession, of the Prospectus covering such Registrable Notes current at the time of the receipt of such notice. In the event the Company and the Guarantors shall give any such notice, the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each Participating Broker-Dealer shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) or (y) the Advice. 6. REGISTRATION EXPENSES (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company and the Guarantors shall be borne by the Company and the Guarantors, whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees, including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with any underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws as provided in Section 5(h) hereof (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the Holders are located, in the case of the Exchange Notes, 19 or (y) as provided in Section 5(h), in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriter or underwriters, if any, or by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses incurred in connection with the performance of their obligations hereunder, (iv) fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 6(b), the Holders, (v) fees and disbursements of all independent certified public accountants referred to in Section 5 (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees and the fees and expenses incurred in connection with the listing of the Securities to be registered on any securities exchange, (vii) Securities Act liability insurance, if the Company and the Guarantors desire such insurance, (viii) fees and expenses of all other Persons retained by the Company and the Guarantors, (ix) fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to Section 3 of Schedule E to the By-laws of the NASD, but only where the need for such a "qualified independent underwriter" arises due to a relationship with the Company and the Guarantors, (x) internal expenses of the Company and the Guarantors (including, without limitation, all salaries and expenses of officers and employees of the Company or the Guarantors performing legal or accounting duties), (xi) the expense of any annual audit, (xii) the fees and expenses of the Trustee and the Exchange Agent and (xiii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) The Company and the Guarantors shall reimburse the Holders for the reasonable fees and disbursements of not more than one counsel chosen by the Holders of a majority in aggregate principal amount of the Registrable Notes to be included in any Registration Statement. The Company and the Guarantors shall pay all documentary, stamp, transfer or other transactional taxes attributable to the issuance or delivery of the Exchange Notes or Private Exchange Notes in exchange for the Notes; provided that the Company shall not be required to pay taxes payable in respect of any transfer involved in the issuance or delivery of any Exchange Note or Private Exchange Note in a name other than that of the Holder of the Note in respect of which such Exchange Note or Private Exchange Note is being issued. The Company and the Guarantors shall reimburse the Holders for fees and expenses (including reasonable fees and expenses of counsel to the Holders) relating to any enforcement of any rights of the Holders under this Agreement. 20 7. INDEMNIFICATION (a) Indemnification by the Company and the Guarantors. The Company and the Guarantors jointly and severally agree to indemnify and hold harmless each Holder of Registrable Notes, Exchange Notes or Private Exchange Notes and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, each Person, if any, who controls each such Holder (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) and the officers, directors and partners of each such Holder, Participating Broker-Dealer and controlling person, to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and reasonable attorneys' fees as provided in this Section 7) and expenses (including, without limitation, reasonable costs and expenses incurred in connection with investigating, preparing, pursuing or defending against any of the foregoing) (collectively, "Losses"), as incurred, directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or form of prospectus, or in any amendment or supplement thereto, or in any preliminary prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only to the extent, that such Losses are finally judicially determined by a court of competent jurisdiction in a final, unappealable order, except insofar as such Losses are solely based upon information relating to such Holder or Participating Broker-Dealer and furnished in writing to the Company and the Guarantors (or reviewed and approved in writing) by such Holder or Participating Broker-Dealer or their counsel expressly for use therein; provided, however, that the Company and the Guarantors will not be liable to any Indemnified Party (as defined below) under this Section 7 to the extent Losses were solely caused by an untrue statement or omission or alleged untrue statement or omission that was contained or made in any preliminary prospectus and corrected in the Prospectus or any amendment or supplement thereto if (i) the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding, (ii) any such Losses resulted from an action, claim or suit by any Person who purchased Registrable Notes or Exchange Notes which are the subject thereof from such Indemnified Party and (iii) it is established in the related proceeding that such Indemnified Party failed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Registrable Notes or Exchange Notes sold to such Person if required by applicable law, unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by the Company with Section 5 of this Agreement. The Company and the Guarantors also agree to indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each Person who controls such Persons (within the meaning of 21 Section 5 of the Securities Act or Section 20(a) of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders or the Participating Broker-Dealer. (b) Indemnification by Holder. In connection with any Registration Statement, Prospectus or form of prospectus, any amendment or supplement thereto, or any preliminary prospectus in which a Holder is participating, such Holder shall furnish to the Company and the Guarantors in writing such information as the Company and the Guarantors reasonably request for use in connection with any Registration Statement, Prospectus or form of prospectus, any amendment or supplement thereto, or any preliminary prospectus and shall indemnify and hold harmless the Company, the Guarantors, their respective directors and each Person, if any, who controls the Company and the Guarantors (within the meaning of Section 15 of the Securities Act and Section 20(a) of the Exchange Act), and the directors, officers and partners of such controlling persons, to the fullest extent lawful, from and against all Losses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading to the extent, but only to the extent, that such losses are finally judicially determined by a court of competent jurisdiction in a final, unappealable order to have resulted solely from an untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact contained in or omitted from any information so furnished in writing by such Holder to the Company and the Guarantors expressly for use therein. Notwithstanding the foregoing, in no event shall the liability of any selling Holder be greater in amount than such Holder's Maximum Contribution Amount (as defined below). (c) Conduct of Indemnification Proceedings. If any proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify the party or parties from which such indemnity is sought (the "Indemnifying Party" or "Indemnifying Parties", as applicable) in writing; provided, that the failure to so notify the Indemnifying Parties shall not relieve the Indemnifying Parties from any obligation or liability except to the extent (but only to the extent) that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal) that the Indemnifying Parties have been prejudiced materially by such failure. The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Party, within 20 Business Days after receipt of written notice from such Indemnified Party of such proceeding, to assume, at its expense, the defense of any such proceeding, provided, that an Indemnified Party shall have the right to employ separate counsel in any such proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or parties unless: (1) the Indemnifying Party 22 has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnified Party; or (3) the named parties to any such proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party or any of its affiliates or controlling persons, and such Indemnified Party shall have been advised by counsel that there may be one or more defenses available to such Indemnified Party that are in addition to, or in conflict with, those defenses available to the Indemnifying Party or such affiliate or controlling person (in which case, if such Indemnified Party notifies the Indemnifying Parties in writing that it elects to employ separate counsel at the expense of the Indemnifying Parties, the Indemnifying Parties shall not have the right to assume the defense and the reasonable fees and expenses of such counsel shall be at the expense of the Indemnifying Party; it being understood, however, that, the Indemnifying Party shall not, in connection with any one such proceeding or separate but substantially similar or related proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such Indemnified Party). No Indemnifying Party shall be liable for any settlement of any such proceeding effected without its written consent, which 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 proceeding, each Indemnifying Party jointly and severally agrees, subject to the exceptions and limitations set forth above, to indemnify and hold harmless each Indemnified Party from and against any and all Losses by reason of such settlement or judgment. The Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to each Indemnified Party of a release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of such proceeding for which such Indemnified Party would be entitled to indemnification hereunder (whether or not any Indemnified Party is a party thereto). (d) Contribution. If the indemnification provided for in this Section 7 is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section 7 would otherwise apply by its terms (other than by reason of exceptions provided in this Section 7), then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have a joint and several obligation to contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party, on the one hand, and Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any such statement or omission. The amount paid or payable by an Indemnified Party as a result of any Losses shall be deemed to include any 23 legal or other fees or expenses incurred by such party in connection with any proceeding, to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 7(a) or 7(b) was available to such party. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 7(d), a selling Holder shall not be required to contribute, in the aggregate, any amount in excess of such Holder's Maximum Contribution Amount. A selling Holder's "Maximum Contribution Amount" shall equal the excess of (i) the aggregate proceeds received by such Holder pursuant to the sale of such Registrable Notes or Exchange Notes over (ii) the aggregate amount of damages that such Holder has otherwise been required to pay by reason of such 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 Holders' obligations to contribute pursuant to this Section 7(d) are several in proportion to the respective principal amount of the Registrable Securities held by each Holder hereunder and not joint. The Company's and the Guarantors' obligations to contribute pursuant to this Section 7(d) are joint and several. The indemnity and contribution agreements contained in this Section 7 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 8. RULES 144 AND 144A The Company covenants that it shall (a) file the reports required to be filed by it (if so required) under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Registrable Notes, make publicly available other information necessary to permit sales pursuant to Rule 144 and 144A and (b) take such further action as any Holder may reasonably request in writing, all to the extent required from time to time to enable such Holder to sell Registrable Notes without registration under the Securities Act pursuant to the exemptions provided by Rule 144 and Rule 144A. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such information and requirements. 9. UNDERWRITTEN REGISTRATIONS OF REGISTRABLE NOTES If any of the Registrable Notes covered by any Shelf Registration is to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering; provided, however, that such investment banker or investment bankers and manager or managers must be reasonably acceptable to the Company. 24 No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. MISCELLANEOUS (a) Remedies. In the event of a breach by either the Company or any of the Guarantors of any of their respective obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement, or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and the Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by either the Company or any of the Guarantors 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, the Company shall (and shall cause each Guarantor to) waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company and each of the Guarantors have not entered, as of the date hereof, and the Company and each of the Guarantors shall not enter, after the date of this Agreement, into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Securities in this Agreement or otherwise conflicts with the provisions hereof. The Company and each of the Guarantors have not entered and will not enter into any agreement with respect to any of its securities that will grant to any Person piggy-back rights with respect to a Registration Statement. (c) Adjustments Affecting Registrable Notes. The Company shall not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (d) 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, otherwise than with the prior written consent of the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes in circumstances that would adversely affect any Holders of Registrable Notes; provided, however, that Section 7 and this Section 10(d) may not be amended, modified or supplemented without the prior written consent of each Holder. 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 Holders of Registrable Notes whose securities are being tendered pursuant to the Exchange Offer or sold pursuant to a Notes 25 Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being tendered or being sold by such Holders pursuant to such Notes Registration Statement. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a Holder of Securities or to any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar of the Notes, with a copy in like manner to the Initial Purchaser as follows: Jefferies & Company, Inc. 520 Madison Avenue 12th Floor New York, NY 10022 with a copy to: Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, New York 10019 Facsimile No.: (212) 262-1910 Attention: Ronald S. Brody, Esq. (ii) if to the Initial Purchaser, at the address specified in Section 10(e)(1); (iii) if to the Company or the Guarantors as follows: Hawk Corporation 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attn: Vice President - Finance with a copy to: Kohrman Jackson & Krantz P.L.L. 1375 East Ninth Street One Cleveland Center 20th Floor Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the United 26 States mail, postage prepaid, if mailed, one business day after being deposited in the United States mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier guaranteeing overnight delivery; and when receipt is acknowledged by the addressee, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in such Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including, without limitation and without the need for an express assignment, subsequent Holders of Securities. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE COMPANY AND EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY; AND (II) WAIVES (A) ITS RIGHT TO A TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE INITIAL PURCHASER AND FOR ANY COUNTERCLAIM RELATED TO ANY OF THE FOREGOING AND (B) ANY OBLIGATION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS 27 IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR THE GUARANTORS IN ANY OTHER JURISDICTION. (j) Severability. 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 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. (k) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Securities is required hereunder, Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (l) Third Party Beneficiaries. Holders and Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. (m) Entire Agreement. This Agreement, together with the Purchase Agreement, the Notes and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understanding, correspondence, conversations and memoranda between the Initial Purchaser on the one hand and the Company and the Guarantors on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. 28 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. HAWK CORPORATION By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board, Chief Executive Officer and President FRICTION PRODUCTS CO. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer LOGAN METAL STAMPINGS, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HELSEL, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer REGISTRATION RIGHTS AGREEMENT S.K. WELLMAN HOLDINGS, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer S.K. WELLMAN CORP. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer ALLEGHENY CLEARFIELD, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HAWK MIM, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer HAWK MOTORS, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer REGISTRATION RIGHTS AGREEMENT HAWK PRECISION COMPONENTS GROUP, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer NET SHAPE TECHNOLOGIES LLC as a Guarantor HAWK MIM, INC., Sole Member By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer QUARTER MASTER INDUSTRIES, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer SINTERLOY CORPORATION as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer REGISTRATION RIGHTS AGREEMENT TEX RACING ENTERPRISES, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer WELLMAN PRODUCTS GROUP, INC. as a Guarantor By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer WELLMAN PRODUCTS, LLC as a Guarantor WELLMAN PRODUCTS GROUP, INC., Sole Member By: /s/ Ronald E. Weinberg -------------------------------- Name: Ronald E. Weinberg Title: Chairman of the Board and Chief Executive Officer Accepted and Agreed to: JEFFERIES & COMPANY, INC. By: /s/ Sean P. Sullivan ---------------------------- Name: Sean P. Sullivan Title: Managing Director REGISTRATION RIGHTS AGREEMENT EX-4.3 4 l10322aexv4w3.txt EX-4.3 FORM OF 8 3/4% SENIOR NOTE DUE 2014 Exhibit 4.3 HAWK CORPORATION FORM OF 8 3/4% SENIOR NOTE DUE 2014 CUSIP No. [___________] No. [___] $[_________] Hawk Corporation, a Delaware corporation, for value received promises to pay to [_________________] or registered assigns, the principal sum of [____________________] DOLLARS [($_________)] on November 1, 2014. Interest Rate: 8 3/4% per annum Interest Payment Dates: January 1 and July 1, commencing January 1, 2005 Record Dates: December 15 and June 15 Reference is made to the further provisions of this Note contained on the reverse side of this Note, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this 8 3/4% Senior Note due 2014 to be signed by its duly authorized officer. HAWK CORPORATION Dated: [_____________], 2004 By: -------------------------------------- Name: Title: TRUSTEE CERTIFICATE OF AUTHENTICATION This is one of the 8 3/4% Senior Notes due 2014 referred to in the within-mentioned Indenture. HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee Dated: [____________], 2004 By: -------------------------------------- Authorized Officer (REVERSE OF NOTE) 8 3/4% SENIOR NOTE DUE 2014 1. Interest. Hawk Corporation (the "Company", which term includes any Surviving Entity) promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Note will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from and including the date of issuance. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing January 1, 2005. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange after such Record Date, and on or before such Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall 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 ("U.S. Legal Tender"). However, the Company may pay principal and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, HSBC Bank USA, National Association (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. Neither the Company nor any Affiliate of the Company shall act as Paying Agent or Registrar. 4. Indenture. The Notes and the Guarantees were issued under an Indenture, dated as of November 1, 2004 (the "Indenture"), among the Company, the Guarantors named therein and the Trustee. The terms of the Notes 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. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. The Notes are senior obligations of the Company. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. 5. Redemption. (a) Optional Redemption on or after November 1, 2009. Except as described in Section 5(b), the Notes are not redeemable before November 1, 2009. Thereafter, the Company may on any one or more occasions redeem the Notes. The Notes will be redeemed at their option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the aggregate principal amount thereof) if redeemed during the twelve-month period commencing on November 1 of the year set forth below: Year Percentage - ---- ---------- 2009................................................................ 104.375% 2010................................................................ 103.281% 2011................................................................ 102.188% 2012................................................................ 101.094% 2013................................................................ 100.000% In addition, the Company must pay accrued and unpaid interest and Additional Interest, if any, on the aggregate principal amount of the Notes redeemed to the Redemption Date. (b) Optional Redemption upon Equity Offerings. At any time, or from time to time, on or prior to November 1, 2008, the Company may, at its option, use an amount not to exceed the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the aggregate principal amount of the Notes ever issued under this Indenture. The Notes will be redeemed at a redemption price of 108 3/4% of the aggregate principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, provided that: (1) at least 65% of the original principal amount of Notes ever issued under this Indenture remains outstanding immediately after any such redemption; and (2) the Company makes such redemption not more than 120 days after the consummation of any such Equity Offering. (c) 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 Notes to be redeemed at such Holder's registered address. If fewer than all of the Notes are to be redeemed, at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee deems to be fair and appropriate; provided that no partial redemption will reduce the principal amount of a Note not redeemed to a denomination of less than $1,000; and provided, further, that any such partial redemption made with the proceeds of an Equity Offering will be made only on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of the DTC or any other depository) unless such method is otherwise prohibited. Notes in denominations of $1,000 or more may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date sufficient to pay such redemption price plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, the Notes called for redemption will cease to bear interest from and after such Redemption Date, and the only remaining right of the Holders of such Notes will be to receive payment of the redemption price plus accrued and unpaid interest and Additional Interest, if any, as of the Redemption Date upon surrender to the Paying Agent of the Notes redeemed. 6. Offers to Purchase. Sections 4.10 and 4.19 of the Indenture provide that after certain Asset Sales, and upon the occurrence of a Change of Control and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 7. Registration Rights. Pursuant to the Registration Rights Agreement among the Company, the Guarantors and the Initial Purchaser of the Initial Notes, the Company will be obligated to consummate an exchange offer. Upon such exchange offering, the Holders of the Initial Notes shall have the right, subject to compliance with securities laws, to exchange such Initial Notes for 8 3/4% Senior Notes due 2014, which have been registered under the Securities Act, in like principal amount and having terms identical in all material respects to the Initial Notes. The Holders of the Initial Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 8. Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes, fees or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption. 9. Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it and the Notes of which it is composed for all purposes. 10. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent may pay the money without interest thereon back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 11. Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or Maturity and complies with the other provisions of the Indenture relating thereto, the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, except for the rights of Holders to receive payments in respect of the principal of, and premium, if any, interest and Additional Interest, if any, on the Notes when such payments are due from the deposits referred to above. 12. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture, the Notes or the Guarantees may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without consent of any Holder, the parties thereto may amend or supplement the Indenture, the Notes or the Guarantees to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes or Guarantees in addition to or in place of certificated Notes or Guarantees, comply with the TIA, or comply with Article Five or Section 10.04 of the Indenture or make any other change that does not adversely affect in any material respect the rights of any Holder of a Note. 13. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries to, among other things, incur additional Indebtedness or grant Liens, make payments in respect of their Capital Stock or certain Indebtedness, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries, merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 14. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes, the Guarantees and the Indenture, the predecessor will be released from those obligations. 15. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest. 16. Trustee Dealings with Company. Subject to the terms of the TIA and the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, the Subsidiaries or their respective Affiliates as if it were not the Trustee. 17. No Recourse Against Others. No past, present or future stockholder, director, officer, employee or incorporator, as such, of the Company or the Guarantors shall have any liability for any obligation of the Company under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of a Note by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 18. Guarantees. Payment of principal and interest and Additional Interest, if any (including interest on overdue principal and overdue interest, if lawful), is unconditionally guaranteed, jointly and severally, by each of the Guarantors. 19. Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. 20. Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS NOTE, THE GUARANTEES AND THE INDENTURE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 21. Waiver of Jury Trial. Each of the parties hereto and the holders (by their acceptance of the Note) hereby irrevocably waives, to the fullest extent permitted by law, any and all right to trial by jury in any action or proceeding arising out of or in connection with the Indenture, this Note, the Guarantees or the transactions contemplated by the Indenture. 22. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture. Requests may be made to: Hawk Corporation, 200 Public Square, Suite 1500, Cleveland, Ohio 44114-2301. ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint _______________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: _________________________ Signed: __________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: _________________________________________________ In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) November 1, 2006, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Note is being transferred: [CHECK ONE] --------- [_] (1) to the Company or a subsidiary thereof; or [_] (2) pursuant to and in compliance with Rule 144A under the Securities Act; or [_] (3) to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or [_] (4) outside the United States to a person other than a "U.S. person" in compliance with Rule 904 of Regulation S under the Securities Act; or [_] (5) pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or [_] (6) pursuant to an effective registration statement under the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided that if box (3), (4) or (5) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Notes, in its sole discretion, such legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or 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. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.15 of the Indenture shall have been satisfied. Dated: _________________________ Signed: __________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: _________________________________________________ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note 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 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 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.19 of the Indenture, check the appropriate box: [_] Section 4.10 [_] Section 4.19 If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.10 or 4.19 of the Indenture, state the amount you elect to have purchased: $____________________________________ Dated: _________________________ _________________________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed by the endorser's bank or broker. Signature Guarantee: EX-10.1 5 l10322aexv10w1.txt EX-10.1 CREDIT & SECURITY AGREEMENT EXHIBIT 10.1 EXECUTION COPY ================================================================================ CREDIT AND SECURITY AGREEMENT (U.S. $30,000,000) Dated as of November 1, 2004 among HAWK CORPORATION, ALLEGHENY CLEARFIELD, INC., FRICTION PRODUCTS CO., HAWK MIM, INC., HAWK MOTORS, INC., HAWK PRECISION COMPONENTS GROUP, INC., HELSEL, INC., LOGAN METAL STAMPINGS, INC., NET SHAPE TECHNOLOGIES LLC, QUARTER MASTER INDUSTRIES, INC., SINTERLOY CORPORATION, S.K. WELLMAN CORP., S.K. WELLMAN HOLDINGS, INC., TEX RACING ENTERPRISES, INC., WELLMAN PRODUCTS GROUP, INC. and WELLMAN PRODUCTS, LLC, as Borrowers, THE LENDERS WHICH ARE SIGNATORIES HERETO and KEYBANK NATIONAL ASSOCIATION as Administrative Agent and KEYBANK NATIONAL ASSOCIATION as LC Issuer ================================================================================ TABLE OF CONTENTS
Section Page - ------- ---- Section 1 DEFINITIONS; ACCOUNTING TERMS; GOVERNANCE............................................ 1 1.1 Certain Defined Terms............................................................. 1 1.2 Accounting Terms; Calculations.................................................... 1 1.3 Authorization of Borrower Representative.......................................... 1 1.4 Designation of Borrower Representative as Lead Borrower........................... 1 1.5 Construction of Terms Generally................................................... 2 1.6 USA Patriot Act Notification; Representations and Undertaking..................... 2 (a) Borrower's Notification and Representation............................... 2 (b) Lenders' Certification................................................... 2 Section 2 TERMS OF THE CREDIT FACILITIES....................................................... 2 2.1 Revolving Credit Facility......................................................... 2 (a) Revolving Credit Advances................................................ 2 (b) Revolving Credit Notes................................................... 3 (c) Lender Discretion; Establishment of Reserves............................. 3 2.2 Letter of Credit Facility......................................................... 3 (a) Issuance of Letters of Credit............................................ 3 (b) Reimbursement Agreement.................................................. 3 (c) Reimbursement; Interest.................................................. 4 (d) Failure to Reimburse Drawings............................................ 4 (e) Obligations Absolute..................................................... 4 (f) Liability of LC Issuer................................................... 4 (g) LC Issuer Indemnity...................................................... 5 (h) Termination of Letter of Credit Commitment............................... 5 Section 3 LOAN ADMINISTRATION.................................................................. 5 3.1 Credit Requests for Revolving Credit Advances..................................... 5 3.2 Requests and Conditions of Letters of Credit...................................... 5 3.3 Requests for Borrowing Deemed Given............................................... 6 3.4 Limitation on Number LIBOR Rate Advances.......................................... 6 3.5 Funding of Advances............................................................... 6 (a) Notice and Funding....................................................... 6 (b) Disbursement of Funds Received........................................... 6 (c) Availability of Funds.................................................... 7 3.6 Failure of Lender to Fund Revolving Credit Advances or Purchase Participations.... 7 (a) Continuing Obligation of Borrowers....................................... 7 (b) Treatment of Lender Failing To Fund...................................... 7 (c) Continuing Obligation of Lenders to Fund................................. 8 3.7 Affiliated Funding with respect to Lenders........................................ 8 3.8 Cash Control Event; Cash Dominion Funding......................................... 8 (a) Swing Line Advances...................................................... 8 (b) Settlement............................................................... 8 (c) Distributions of Payments Pending Settlement............................. 9 (d) Lender Participations.................................................... 9 (e) Records; Interest........................................................ 10 (f) Permitted Special Advances by the Administrative Agent................... 10
i Section 4 PAYMENT ADMINISTRATION............................................................... 10 4.1 Advance Account; Credits; Application of Payments and Collections................. 10 (a) Lender Maintenance of Advance Account.................................... 10 (b) Advance Account Charges\Credits; Reports................................. 11 (c) Crediting and Application of Specific Payments........................... 11 (d) Deposits in Cash Concentration Account after Cash Control Election; Application and Crediting........................................... 11 (e) Distribution of Payments................................................. 11 (f) Pro Rata Treatment of Lenders............................................ 12 (g) Payment not on Business Day.............................................. 12 (h) Presumption of Payment in Full by the Borrowers.......................... 12 4.2 Repayment and Prepayments......................................................... 12 (a) Scheduled Repayments..................................................... 12 (b) Mandatory Prepayments.................................................... 12 4.3 Reduction of Revolving Credit Commitment.......................................... 13 Section 5 CASH MANAGEMENT ADMINISTRATION....................................................... 13 5.1 Maintenance of Lockbox and Collection Account..................................... 13 5.2 Processing Collections; Cash Concentration Account................................ 13 5.3 Cash Concentration Account........................................................ 14 5.4 Costs of Collection............................................................... 14 5.5 Return of Funds................................................................... 15 5.6 Notice to Account Debtors......................................................... 15 Section 6 INTEREST AND FEES.................................................................... 15 6.1 Interest Rate on Advances......................................................... 15 (a) Alternate Base Rate Advances............................................. 15 (b) LIBOR Rate Advances...................................................... 15 (c) Default Interest......................................................... 15 (d) Failure of Borrower Representative to Elect Interest Period.............. 16 6.2 Rate Conversion and Rate Continuation............................................. 16 6.3 Computations of Interest and Fees................................................. 17 6.4 Fees.............................................................................. 17 (a) Unused Commitment Fee.................................................... 17 (b) Annual Fee............................................................... 17 (c) Bank Product Fees........................................................ 17 (d) Early Termination Fee.................................................... 17 (e) Letter of Credit Fees.................................................... 17 (f) Payment of Fees; Nonrefundable........................................... 18 6.5 LIBOR Rate Advances: Unascertainable Rate; Illegality; Increased Costs............ 18 (a) Unascertainable Rate; Illegality; Increased Costs........................ 18 Section 7 CONDITIONS OF LENDING................................................................ 19 7.1 Conditions Precedent to Initial Advances.......................................... 19 7.2 Conditions Precedent to all Advances.............................................. 20 (a) Representation Bringdown................................................. 20 (b) No Default; Compliance with Terms........................................ 20 (c) No Material Adverse Change............................................... 20 (d) Confirmation of Borrowing Base........................................... 20

ii Section 8 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS............................. 20 8.1 Grant of Security Interest........................................................ 20 8.2 Perfection........................................................................ 21 (a) Perfection by Filing; Authorization by Debtor............................ 21 (b) Other Perfection Methods................................................. 21 8.3 Changes Affecting Perfection...................................................... 21 8.4 Reinstatement..................................................................... 22 8.5 Further Assurances................................................................ 22 8.6 Termination of Security Interest; Release of Collateral........................... 22 8.7 Partial Releases.................................................................. 22 Section 9 COLLATERAL ADMINISTRATION: REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO COLLATERAL................................................................... 23 9.1 General Representations as to Collateral.......................................... 23 9.2 Protection of Collateral; Reimbursement........................................... 23 9.3 Maintenance of Insurance with respect to Collateral............................... 23 9.4 Collateral Audit; Inspection; Appraisals; Verification............................ 23 9.5 Borrowing Base Certificates....................................................... 24 9.6 Reporting Regarding Accounts...................................................... 25 9.7 Disputes and Claims Regarding Accounts............................................ 25 9.8 Inventory Maintenance Covenants................................................... 25 9.9 Reporting Regarding Inventory..................................................... 25 9.10 Reporting Regarding Accounts Payable............................................. 26 9.11 Status of Collateral............................................................. 26 9.12 Lien Waivers, Landlord Waivers, Warehouse Receipts............................... 26 9.13 Deposit Accounts................................................................. 26 9.14 Delivery of Instruments and Chattel Paper........................................ 26 9.15 Compliance with Terms of Accounts; General Intangibles........................... 27 9.16 Representations and Warranties Regarding Pledged Collateral...................... 27 Section 10 GENERAL REPRESENTATIONS AND WARRANTIES.............................................. 27 10.1 Existence........................................................................ 27 10.2 Authorization.................................................................... 27 10.3 Enforceability................................................................... 27 10.4 Title to Collateral; Liens; Transfers............................................ 28 10.5 Lien Perfection and Priority..................................................... 28 10.6 Litigation; Proceedings.......................................................... 28 10.7 Taxes............................................................................ 28 10.8 Consents; Approvals.............................................................. 28 10.9 Lawful Operations................................................................ 29 10.10 Environmental Compliance........................................................ 29 10.11 Environmental Laws and Permits.................................................. 29 10.12 ERISA........................................................................... 29 10.13 Agreements; Adverse Obligations; Labor Disputes................................. 30 10.14 Financial Statements; Projections............................................... 30 (a) Financial Statements..................................................... 30 (b) Financial Projections.................................................... 30 10.15 Intellectual Property........................................................... 31 10.16 Structure; Capitalization....................................................... 31 10.17 Value; Solvency................................................................. 31 10.18 Investment Company Act Status................................................... 31

iii 10.19 Blocked Person.................................................................. 31 10.20 Regulation U/Regulation X Compliance............................................ 32 10.21 Full Disclosure................................................................. 32 10.22 Excess Availability............................................................. 32 Section 11 COVENANTS OF THE BORROWER........................................................... 32 11.1 Reporting and Notice Covenants................................................... 32 (a) Monthly Financial Statements............................................. 32 (b) Quarterly Financial Statements........................................... 32 (c) Annual Financial Statements.............................................. 33 (d) Officer's Certificate.................................................... 33 (e) Company Reports.......................................................... 33 (f) Annual Projections....................................................... 33 (g) Other Information........................................................ 33 (h) Notices.................................................................. 34 (i) Notice of Default under ERISA............................................ 34 (j) Environmental Reporting.................................................. 34 (k) Multiemployer Plan Withdrawal Liability.................................. 34 11.2 Affirmative Covenants............................................................ 34 (a) Existence................................................................ 34 (b) Financial Records........................................................ 35 (c) Financial Examinations and Review........................................ 35 (d) Compliance with Law...................................................... 35 (e) Compliance with Environmental Laws....................................... 35 (f) Properties............................................................... 35 (g) Use of Proceeds.......................................................... 36 (h) Compliance with Terms of All Material Contracts.......................... 36 (i) Taxes.................................................................... 36 (j) Insurance................................................................ 36 (k) Licenses to Third Parties and Subsidiaries............................... 36 (l) Coverage for Untendered Notes............................................ 36 (m) Additional Borrowers..................................................... 36 (n) Notice to Account Debtors and Replacement of Lockbox Bank................ 36 11.3 Negative Covenants............................................................... 37 (a) Consolidation, Merger, Sale and Purchase of Assets....................... 37 (b) Credit Extensions; Prepayments........................................... 38 (c) Indebtedness............................................................. 39 (d) Liens; Leases............................................................ 40 (e) Investments.............................................................. 42 (f) Distributions............................................................ 43 (g) Change in Nature of Business............................................. 43 (h) Charter Amendments....................................................... 43 (i) Compliance with ERISA.................................................... 43 (j) Regulation U Compliance.................................................. 44 (k) Accounting Changes....................................................... 44 (l) Arm's-Length Transactions................................................ 44 11.4 Financial Covenants.............................................................. 44 (a) Minimum Shareholder Equity............................................... 44 (b) Minimum Consolidated Cash Flow Coverage Ratio............................ 45 Section 12 EVENTS OF DEFAULT................................................................... 45 12.1 Payment.......................................................................... 45 12.2 Representations and Warranties................................................... 45

iv 12.3 Reporting and Notice Provisions; Violation of Certain Affirmative Covenants...... 45 12.4 Violation of Negative Covenants, Financial Covenants and Certain Affirmative Covenants.................................................................... 45 12.5 Cross-Default.................................................................... 45 12.6 Destruction of Collateral........................................................ 46 12.7 Material Adverse Effect; Change of Control....................................... 46 12.8 Termination of Existence......................................................... 46 12.9 Failure of Enforceability of this Agreement, Loan Document; Security............. 46 12.10 ERISA........................................................................... 47 12.11 Judgments....................................................................... 47 12.12 Forfeiture Proceedings.......................................................... 47 12.13 Financial Impairment............................................................ 47 Section 13 REMEDIES............................................................................ 47 13.1 Acceleration; Termination........................................................ 47 13.2 Automatic Acceleration and Termination........................................... 47 13.3 General Rights and Remedies of the Administrative Agent and the Lenders.......... 48 13.4 Additional Remedies.............................................................. 48 (a) Possession of Collateral................................................. 48 (b) Foreclosure of Liens..................................................... 48 (c) Disposition of Collateral................................................ 48 (d) Application of Collateral; Application of Liquidation Proceeds........... 48 13.5 Set-off.......................................................................... 49 13.6 Actions in Respect of the Letters of Credit Upon Default......................... 49 13.7 Authority to Execute Transfers................................................... 50 13.8 Limited License to Liquidate..................................................... 50 13.9 Equalization..................................................................... 50 13.10 Remedies Cumulative............................................................. 50 13.11 Appointment of Attorney-in-Fact................................................. 50 Section 14 THE ADMINISTRATIVE AGENT............................................................ 51 14.1 The Administrative Agent......................................................... 51 14.2 Nature of Appointment............................................................ 52 14.3 Administrative Agent as Lenders; Other Transactions.............................. 52 14.4 Instructions from Lenders........................................................ 52 14.5 Lender's Diligence............................................................... 52 14.6 No Implied Representations....................................................... 52 14.7 Sub-Administrative Agents........................................................ 52 14.8 Administrative Agent's Diligence................................................. 53 14.9 Notice of Default................................................................ 53 14.10 Administrative Agent's Liability................................................ 53 14.11 Administrative Agent's Indemnity................................................ 53 14.12 Resignation of Administrative Agent............................................. 54 Section 15 BORROWER GUARANTY................................................................... 54 15.1 Borrower Cross-Guaranty; Maximum Liability....................................... 54 15.2 Guaranty Unconditional........................................................... 55 15.3 Discharge; Reinstatement......................................................... 55 15.4 Waiver........................................................................... 55

v 15.5 Stay of Acceleration............................................................. 56 15.6 Subrogation and Contribution Rights.............................................. 56 15.7 Guaranteed Obligation and Contribution Payments.................................. 56 (a) Pro Rata Sharing......................................................... 56 (b) Deficiency............................................................... 56 Section 16 TRANSFERS AND ASSIGNMENTS........................................................... 56 16.1 Successors and Assigns........................................................... 56 16.2 Transfer of Revolving Credit Commitments......................................... 57 16.3 Maintenance of Register.......................................................... 57 16.4 Sale of Participations........................................................... 58 16.5 Pledge of Interests.............................................................. 58 16.6 Replacement of Lenders........................................................... 58 16.7 USA Patriot Act.................................................................. 59 16.8 Replacement of Non-consenting Lenders............................................ 59 Section 17 CONFIDENTIALITY..................................................................... 59 Section 18 INDEMNITIES......................................................................... 60 18.1 Increased Costs.................................................................. 60 18.2 Risk-Based Capital............................................................... 60 18.3 Taxes............................................................................ 60 (a) Taxes; Withholding; Indemnification of Taxes Paid........................ 60 (b) Stamp Taxes.............................................................. 61 (c) IRS Certificates of Lenders.............................................. 61 (d) Refunds of Taxes......................................................... 62 (e) Avoiding Negative Tax Consequences....................................... 63 (f) Application of These Tax Provisions...................................... 63 18.4 Losses........................................................................... 63 18.5 Indemnification for Requests..................................................... 63 18.6 General Indemnity................................................................ 63 18.7 Certificate for Indemnification.................................................. 64 Section 19 GENERAL............................................................................. 64 19.1 Amendments and Waivers........................................................... 64 19.2 Effective Agreement; Binding Effect.............................................. 64 19.3 Costs and Expenses............................................................... 65 19.4 Survival of Provisions........................................................... 65 19.5 Sharing of Information........................................................... 65 19.6 Interest Rate Limitation......................................................... 65 19.7 Limitation of Liability.......................................................... 65 19.8 Illegality....................................................................... 66 19.9 Notices.......................................................................... 66 19.10 Governing Law................................................................... 66 19.11 Entire Agreement................................................................ 66 19.12 Execution in Counterparts; Execution by Facsimile............................... 66

vi EXHIBITS AND SCHEDULES Exhibit A (Form of Revolving Credit Note) Exhibit B-1 (Form of Credit Request) Exhibit B-2 (Form of Letter of Credit Request) Exhibit C (Form of Rate Conversion/Continuation Request) Exhibit D-1 (Form of Stock Pledge - Borrower) Exhibit D-2 (Form of Joinder Agreement) Exhibit E-1 (Form of Collateral Assignment in Patents) Exhibit E-2 (Form of Collateral Assignment in Trademarks) Exhibit E-3 (Form of Collateral Assignment in Copyright) Exhibit F (Form of Mortgage/Deed of Trust -- intentionally omitted) Exhibit G (Form of Existing Lender Payout) Exhibit H (Form of Borrowing Base Certificate) Exhibit I (Form of Advertising Permission Letter) Exhibit J (Form of Assignment and Assumption Agreement) Exhibit K-1 (Form of Landlord Waiver) Exhibit K-2 (Form of Bailee Waiver) Exhibit K-3 (Form of Mortgagee Waiver -- Landlord Mortgagee) Exhibit K-4 (Form of Consignee Waiver) Exhibit L-1 (Form of Limited License Agreement - Borrower) Exhibit L-2 (Form of Limited License Agreement - Third Party) Exhibit M (Form of Securities Account Control Letter) Exhibit N (Form of Deposit Account Control Letter) Exhibit O (Form of Cash Collateral Account Control Letter) Annex I Commitments Annex II Definitions Annex III Closing Conditions to Initial Advances Annex IV Disclosure Schedule Annex V Perfection Certificate vii CREDIT AND SECURITY AGREEMENT U.S. $30,000,000 DATED AS OF NOVEMBER 1, 2004 HAWK CORPORATION, a Delaware corporation, ALLEGHENY CLEARFIELD, INC., a Pennsylvania corporation, FRICTION PRODUCTS CO., an Ohio corporation, HAWK MIM, INC., an Ohio corporation, HAWK MOTORS, INC., a Delaware corporation, HAWK PRECISION COMPONENTS GROUP, INC., an Ohio corporation, HELSEL, INC., a Delaware corporation, LOGAN METAL STAMPINGS, INC., an Ohio corporation, NET SHAPE TECHNOLOGIES LLC, a Delaware limited liability company, QUARTER MASTER INDUSTRIES, INC., a Delaware corporation, SINTERLOY CORPORATION, a Delaware corporation, S.K. WELLMAN CORP., a Delaware corporation, S.K. WELLMAN HOLDINGS, INC., a Delaware corporation, TEX RACING ENTERPRISES, INC., a Delaware corporation, WELLMAN PRODUCTS GROUP, INC., an Ohio corporation, and WELLMAN PRODUCTS, LLC, an Ohio limited liability company, each as a Borrower and collectively as the Borrowers, the LENDERS listed on the signature pages of this Agreement, KEYBANK NATIONAL ASSOCIATION, a national banking association, as Administrative Agent, and KEYBANK NATIONAL ASSOCIATION, a national banking association, as LC Issuer, hereby agree as follows: SECTION 1 DEFINITIONS; ACCOUNTING TERMS; GOVERNANCE. 1.1 CERTAIN DEFINED TERMS. Certain capitalized terms used in this Agreement and not otherwise defined herein are defined on Annex II attached hereto and incorporated herein by reference. 1.2 ACCOUNTING TERMS; CALCULATIONS. All accounting and financial terms not specifically defined herein shall be construed in accordance with GAAP as in effect from time to time. In all cases, such accounting and financial terms shall be applied on a basis consistent with those applied in the preparation of consolidated audited financial statements of Hawk Corporation and its consolidated Subsidiaries for the fiscal year ending December 31, 2003 (audited by Ernst & Young LLP); provided, however, if any change in GAAP in itself affects the calculation of any financial covenant set forth in this Agreement, the Borrower Representative may by written notice to the Administrative Agent, or the Administrative Agent may, by written notice to the Borrower, require that such covenant thereafter be calculated in accordance with GAAP as in effect (and applied by the Borrower) immediately before such change in GAAP occurs. If any such notice is given, compliance certificates delivered pursuant this Agreement after such change shall be accompanied by reconciliations of the difference between the calculation set forth therein and a calculation made in accordance with GAAP as in effect from time to time after such change occurs. 1.3 AUTHORIZATION OF BORROWER REPRESENTATIVE. For purposes of this Agreement, each of the Borrowers hereby: (i) authorizes the Borrower Representative to make such requests, give such notices or furnish such certificates as may be required or permitted by this Agreement for the benefit of such Borrower and (ii) authorizes the Administrative Agent to treat such requests, notices, certificates or consents made, given or furnished by the Borrower Representative as having been made, given or furnished by such Borrower for purposes of this Agreement. Each of the Borrowers agrees to be bound by all such requests, notices, certificates and consents and other such actions by the Borrower Representative and agrees that all notices to and demands upon the Borrower Representative in respect of any Borrower shall constitute effective notice to and demand upon such Borrower for all purposes hereof. 1.4 DESIGNATION OF BORROWER REPRESENTATIVE AS LEAD BORROWER. For purposes of this Agreement, each of the Borrowers hereby: (i) designates and appoints the Borrower Representative to act as the Borrowers' agent to obtain Revolving Credit Advances and Letters of Credit under this Agreement, the proceeds of which shall be available to each Borrower for those uses set forth in Section 11.2(g) (in S-1 such capacity the "Lead Borrower"). As the disclosed principal for its agent, each Borrower shall be obligated to the Lenders on the account of the Revolving Credit Advances so made and the Letters of Credit so issued as if made directly by the Lenders to that Borrower, notwithstanding the manner by which such Revolving Credit Advances and Letters of Credit are recorded on the books and records of the Lead Borrower and of any Borrower. The proceeds of each Revolving Credit Advance which is requested by the Borrower Representative shall be deposited into the Operating Account of the Lead Borrower. The Lead Borrower shall cause the transfer of the proceeds thereof to the (those) Borrower(s) on whose behalf such Advance was obtained. The Administrative Agent shall not be obligated to see to the application of such proceeds. 1.5 CONSTRUCTION OF TERMS GENERALLY. In this Agreement, for the purpose of computing periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". Unless the context otherwise requires, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented or otherwise modified, (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein," "hereof," and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not any particular provision hereof, and (d) any reference to payment, repayment, or prepayment shall be construed as referring to payment of immediately available funds in Dollars. 1.6 USA PATRIOT ACT NOTIFICATION; REPRESENTATIONS AND UNDERTAKING. (a) BORROWER'S NOTIFICATION AND REPRESENTATION. The Borrowers are hereby notified that federal Law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. Each Borrower agrees to provide such documentary and other evidence of such Borrower's identity as may be reasonably requested by the Administrative Agent at any time to enable the Administrative Agent to verify such Borrower's identity or to comply with any applicable Law or regulation, including, without limitation, the USA Patriot Act. (b) LENDERS' CERTIFICATION. Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA Patriot Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Administrative Agent the certification, or, if applicable, recertification, certifying that such Lender, assignee or participant, as applicable, is not a "shell" and certifying to other matters as required by Section 313 of the USA Patriot Act and the applicable regulations: (1) within ten (10) days after the request by the Administrative Agent, and (2) at such other times as are required under the USA Patriot Act. SECTION 2 TERMS OF THE CREDIT FACILITIES. 2.1 REVOLVING CREDIT FACILITY. (a) REVOLVING CREDIT ADVANCES. Subject to the terms and conditions set forth in this Agreement, each of the Lenders severally agrees to make, from time to time on and after the Closing Date until and including the Business Day immediately preceding the Revolving Credit Termination Date, advances denominated in Dollars to or for the account of the Borrowers on a revolving credit basis (each a "Revolving Credit Advance"); provided, however, that the outstanding principal amount of Revolving Credit Advances by such Lender shall not at any time exceed the lesser of: (x) an amount equal to such Lender's Pro Rata Share of the Borrowing Base at such time minus the aggregate LC Exposure of such S-2 Lender at such time or (y) the Revolving Credit Commitment of such Lender in effect at such time minus the LC Exposure of such Lender at such time. The Revolving Credit Advances shall be comprised of one or more Revolving Credit Borrowings as the Borrowers may elect from time to time by delivery to the Administrative Agent by the Borrower Representative of a Borrowing Request or a Rate Conversion/Continuation Request in accordance with this Agreement. Each Revolving Credit Borrowing comprised of LIBOR Rate Advances shall be in an aggregate amount of not less than Five Hundred Thousand Dollars ($500,000) or an integral multiple of Five Hundred Thousand Dollars ($500,000) in excess thereof. (b) REVOLVING CREDIT NOTES. Each Lender's Revolving Credit Advances shall be evidenced at all times by a Revolving Credit Note which shall: (i) be executed and delivered by the Borrowers and payable to the order of such Lender and (ii) be in a stated principal amount equal to the Revolving Credit Commitment of such Lender and payable for the unpaid principal amount of the Revolving Credit Advances evidenced thereby, (iii) mature on the Revolving Credit Termination Date, (iv) bear interest as provided in this Agreement, (v) be subject to mandatory prepayment as provided in this Agreement, and (vi) be entitled to the benefits of this Agreement and the other Loan Documents. (c) LENDER DISCRETION; ESTABLISHMENT OF RESERVES. Each Lender may, but shall not be obligated to, rely on each Borrowing Base Certificate and any other schedules or reports in determining the eligibility of Accounts and Inventory. The Administrative Agent shall have the right, from time to time, in the good faith exercise of its reasonable credit judgment (consistent with the asset-based nature of this credit), to establish reserves against the Borrowing Base in such amounts and with respect to such matters as the Administrative Agent deems necessary or appropriate and to increase or decrease such reserves. In exercising such reasonable credit judgment, the Administrative Agent may take into account factors which: (a) will or could reasonably be expected to affect adversely in any material respect the value of any Collateral, the enforceability or priority of the Administrative Agent's Liens or the amount which the Lenders would be likely to receive in the liquidation of such Collateral or (b) may demonstrate that any collateral report or financial information concerning the Borrowers is incomplete, inaccurate or misleading in any material respect. In the exercise of such reasonable credit judgment, the Administrative Agent may also establish reserves against anticipated obligations, contingencies or conditions affecting the Borrowers or their Subsidiaries including: (a) tax liabilities and other obligations owing to governmental entities, (b) asserted litigation liabilities, (c) anticipated remediation for compliance with Environmental Laws, or (d) obligations owing to any lessor of real property, any warehouseman or mortgagor on third party mortgaged sites. Prior to any Event of Default which is continuing, the Administrative Agent shall provide five (5) Business Days' advance written notice to the Borrower Representative prior to the effectiveness of any actions taken under this Section, but shall not be liable for any failure to so notify the Borrower Representative . 2.2 LETTER OF CREDIT FACILITY. (a) ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and conditions set forth in this Agreement, the LC Issuer agrees to issue Letters of Credit for the account of the Borrowers; provided, however, that, the aggregate LC Exposure shall not at any time exceed the lesser of: (x) Five Million Dollars ($5,000,000), (y) an amount equal to the Borrowing Base at such time minus the aggregate outstanding Revolving Credit Advances to the Borrowers at such time or (z) the Revolving Credit Commitments of the Lenders at such time, minus the sum of the aggregate outstanding Revolving Credit Advances to the Borrowers at such time. (b) REIMBURSEMENT AGREEMENT. Concurrently with each Letter of Credit Request, the applicable Borrower shall execute and deliver to the LC Issuer in respect of such requested Letter of Credit an application for and reimbursement agreement with respect to letters of credit (such documents being hereinafter collectively referred to as a "Reimbursement Agreement"), in the LC Issuer's then standard form; provided, however, that in the event of any conflict between the provisions of any such Reimbursement Agreement and this Agreement, the provisions of this Agreement shall govern. S-3 (c) REIMBURSEMENT; INTEREST. Each of the Borrowers agrees that whenever there is a drawing on a Letter of Credit issued by the LC Issuer for the account of the Borrowers, the Borrowers shall pay to the Administrative Agent on the date of such drawing an amount equal to such drawing. The Administrative Agent shall promptly remit any such payment to the LC Issuer. If there is a drawing on a Letter of Credit, then the Borrowers shall reimburse such amount in full no later than the next Business Day after the date of such drawing and the unpaid amount thereof shall bear interest for the account of the LC Issuer for each day from and including the date of such drawing until the earlier of: (i) the date of reimbursement by the Borrowers and (ii) on the date on which such drawing is reimbursed by Revolving Credit Advances, at the rate per annum that would apply to such amount if such amount were a Revolving Credit Borrowing. (d) FAILURE TO REIMBURSE DRAWINGS. In the event that the Borrowers fail to make a timely reimbursement, together with any interest thereon, to the Administrative Agent on the date of any drawing on a Letter of Credit, such failure shall constitute a Deemed Credit Request requesting an Alternate Base Rate Advance to be made to the Borrowers in an aggregate amount equal to the amount reimbursable to the LC Issuer plus any interest thereon. The Administrative Agent shall disburse all such loan proceeds directly to the LC Issuer to satisfy the aforesaid reimbursement liability. In the event that one or more of the Lenders shall determine that such Lenders are legally prohibited from making such a Revolving Credit Advance, each such Lender so prohibited shall be obligated to consummate the purchase, on the date the Revolving Credit Advance would have been made pursuant to this Section 2.2(d), of its undivided participating interest in the outstanding unpaid reimbursement obligation owing to the LC Issuer in an amount equal to the Revolving Credit Advance that such Lender would otherwise have been obligated to fund. On the purchase date, each Lender shall pay to the Administrative Agent, for the benefit of the LC Issuer, in immediately available funds, at the account of the Administrative Agent maintained at the Payment Office of the Administrative Agent not later than the time such Lender would have been obligated to fund such Revolving Credit Advance pursuant to this Section, a participation purchase price for such participating interest in amount equal to such Revolving Credit Advance. (e) OBLIGATIONS ABSOLUTE. The obligation of the Borrowers to reimburse the LC Issuer shall be absolute and unconditional and shall be performed under all circumstances including, without limitation: (i) any lack of validity or enforceability of any Letter of Credit, (ii) the existence of any claim, offset, defense or other right that the Borrowers may have against the beneficiary of any Letter of Credit or any successor in interest thereto, (iii) the existence of any claim, offset, defense or other right that any Lender or the Administrative Agent may have against the Borrowers or against the beneficiary of any Letter of Credit or against any successor in interest thereto, (iv) the existence of any fraud or misrepresentation in the presentment of any draft or other item drawn and paid under any Letter of Credit by any Person other than the LC Issuer, (v) any payment of any draft or other item by a LC Issuer which does not strictly comply with the terms of any Letter of Credit issued by such LC Issuer, (vi) any statement or any other documents presented under any Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever, or (vii) any act, error, neglect or default, omission, insolvency or failure of business of any of the correspondents of the LC Issuer; provided that no Borrower shall be deemed to have waived any claim, offset, defense or other right that Borrower may have against the beneficiary of any Letter of Credit, any successor in interest thereto or any other Person. (f) LIABILITY OF LC ISSUER. It is expressly understood and agreed that the absolute and unconditional obligation of the Borrowers to reimburse disbursements in respect of Letters of Credit issued by the LC Issuer shall not be construed to excuse the LC Issuer from liability to the Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by each of the Borrowers to the extent permitted by applicable Law) suffered by the Borrowers that are caused by the gross negligence, willful misconduct or bad faith of such LC Issuer in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties agree that each LC Issuer may accept documents that appear on their face to be in S-4 order, without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit. Any action, inaction or omission on the part of the LC Issuer or any of its correspondents, under or in connection with any Letter of Credit issued by the LC Issuer or any renewal or extension thereof or the related instruments or documents, if taken in good faith and in conformity with applicable Laws and regulations governing Letters of Credit generally and the terms of this Section, shall be binding upon the Borrowers and shall not place the LC Issuer or any of its correspondents under any liability to the Borrowers. (g) LC ISSUER INDEMNITY. The Borrowers shall indemnify the LC Issuer issuing such Letter of Credit from and against any loss, liability or out-of-pocket expenses (other than any caused by the LC Issuer's gross negligence, willful misconduct or bad faith as determined by the final judgment of a court of competent jurisdiction and other than any with respect to taxes, levies, imposes, deductions, charges or withholdings, or any liability with respect thereto, the indemnification for which shall be governed solely and exclusively by Section 18.3 of this Agreement) incurred by the LC Issuer in respect of this Agreement and the Letters of Credit issued by the LC Issuer for the account of any of the Borrowers, including, without limitation, reasonable fees and expenses of legal counsel incurred by such LC Issuer in the defense of any claim against it or in the prosecution of its rights and remedies. (h) TERMINATION OF LETTER OF CREDIT COMMITMENT. If: (i) any restriction is imposed on the LC Issuer which in the judgment of the LC Issuer would prevent the LC Issuer from issuing Letters of Credit or maintaining its commitment to issue Letters of Credit or (ii) there shall have occurred, at any time during the term of this Agreement: (A) any outbreak of hostilities or other national or international crisis or change in economic conditions if the effect of such outbreak, crisis or change would make the issuance of Letters of Credit impracticable, (B) the enactment, publication, decree or other promulgation of any Law which would materially and adversely affect the ability of the Borrowers to perform its obligations under this Agreement or any Reimbursement Agreement, or (C) the taking of any action by any government or agency in respect of its monetary or fiscal affairs which would have a material adverse effect on the issuance of Letters of Credit, then the LC Issuer shall give written notice of the occurrence of such event to the Borrower Representative and the Administrative Agent whereupon the commitment of the LC Issuer to issue or extend any Letter of Credit shall be suspended on the effective date of such notice and shall continue to be suspended until the effect of such event shall cease to exist. SECTION 3 LOAN ADMINISTRATION. 3.1 CREDIT REQUESTS FOR REVOLVING CREDIT ADVANCES. Requests for Revolving Credit Advances shall be given by the Borrower Representative to the Administrative Agent not later than 2:00 p.m. (Cleveland time): (i) on the Business Day which is the requested date of a proposed Revolving Credit Borrowing comprised of Alternate Base Rate Advances and (ii) on the Business Day which is three (3) Business Days before the requested date of a proposed Revolving Credit Borrowing comprised of LIBOR Rate Advances (all Revolving Credit Advances advanced on the Closing Date shall be Alternate Base Rate Advances). Each such request ("Credit Request") shall be a written or telephonic notice (in the case of a telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent). Each written Credit Request or written confirmation shall be substantially in the form of Exhibit B-1 attached hereto, signed or otherwise acceptably authenticated by the Borrower Representative and transmitted by the Borrower Representative to the Administrative Agent by telecopier or electronic mail. Each Credit Request shall be irrevocable and binding on the Borrowers and be subject to the indemnification provisions of this Agreement. 3.2 REQUESTS AND CONDITIONS OF LETTERS OF CREDIT. Requests for Letters of Credit for the account of the Borrowers, or the amendment, renewal, or extension of an outstanding Letter of Credit, shall be given by the Borrower Representative to the Administrative Agent and LC Issuer not later than 12:00 noon (Cleveland time) three (3) Business Days prior to the specified date for the issuance of the requested Letter of Credit. Each such request (a "Letter of Credit Request") shall be a written notice or S-5 telephonic notice (in the case of a telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent). Such request shall be substantially in the form of Exhibit B-2 attached hereto, signed or otherwise acceptably authenticated by the Borrower Representative and transmitted by the Borrower Representative to the Administrative Agent by telecopier or electronic mail. Each such request shall specify the proposed issuance date of the requested Letter of Credit, (which shall be a Business Day), the amount thereof, the expiry date thereof (which shall not be later than 364 days from the date of issuance and not later than ten (10) days prior to the Revolving Credit Termination Date), the name and address of the beneficiary, the name of the Borrower which is the account party for such Letter of Credit and such other matters as the LC Issuer may require. 3.3 REQUESTS FOR BORROWING DEEMED GIVEN. The Borrowers shall be deemed to have made a request for a Revolving Credit Borrowing (a "Deemed Credit Request"), which Deemed Credit Request shall be irrevocable: (x) in the event of an unreimbursed drawing under a Letter of Credit, for a Revolving Credit Borrowing comprised of Alternate Base Rate Advances in an amount equal to the amount necessary to reimburse the LC Issuer for such drawing and (y) upon any interest, fee or other payment Obligation of the Borrowers hereunder becoming due without payment within the applicable grace period set forth in Section 12.1(b), for a Revolving Credit Borrowing comprised of Alternate Base Rate Advances in an amount necessary to pay such interest, fee or payment obligation. Each Lender agrees that its obligation to make or participate in Revolving Credit Advances pursuant to a Deemed Credit Request is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence of any Potential Default or Event of Default or the failure of any condition precedent. 3.4 LIMITATION ON NUMBER LIBOR RATE ADVANCES. The Borrowers shall not be entitled to have an aggregate of more than six (6) LIBOR Rate Advances outstanding at any one time. 3.5 FUNDING OF ADVANCES. (a) NOTICE AND FUNDING. On the Closing Date, (i) the Administrative Agent shall use reasonable efforts to notify each Lender required to fund a Revolving Credit Borrowing by telecopy, telephone or similar form of transmission of the Credit Request of the Borrower Representative not later 1:30 p.m. (Cleveland time). Prior to the later of 2:30 p.m. (Cleveland time) on the Closing Date or one hour after such notification from the Administrative Agent, each Lender will make available to the Administrative Agent, in Dollars in immediately available funds, at the account of the Administrative Agent maintained at such Payment Office, such Lender's Pro Rata Share of the amount of the requested Revolving Credit Borrowing of such Lender specified in Annex I. After the Closing Date, the Administrative Agent shall notify each Lender promptly after receipt of a Credit Request or the occurrence of a Deemed Credit Request no later than 12:30 p.m. (Cleveland time) on the date received by telecopy, telephone or similar form of transmission. Before 3:00 p.m. (Cleveland time) on the date of each such Credit Request or Deemed Credit Request, each Lender will make available to the Administrative Agent, in immediately available funds at such account of the Administrative Agent maintained at the Payment Office, such Lender's Pro Rata Share of the Revolving Credit Advances. (b) DISBURSEMENT OF FUNDS RECEIVED. On the Closing Date, upon the Administrative Agent's receipt of funds representing a Lender's Revolving Credit Advance, and subject to the terms and conditions set forth in this Agreement, the Administrative Agent shall make the Revolving Credit Advance of such Lender available to the Borrowers, in Dollars in immediately available funds, by wire transfer or intrabank transfer: (A) to the Operating Account of the Borrower Representative or (B) such other account of the Borrowers as the Administrative Agent and the Borrower Representative shall have agreed upon from time to time. From and after the Closing Date, on the date specified by the Borrower Representative in any Credit Request (or, in the case of a Deemed Credit Request, on the earliest date permitted after such Deemed Credit Request), after the Administrative Agent's receipt of the funds representing a Lender's Pro Rata Share of the requested Revolving Credit Borrowing and subject to the terms of this Agreement, the Administrative Agent will make such S-6 Revolving Credit Advance of such Lender available to the Borrowers in immediately available funds in Dollars, by wire transfer or intrabank transfer: (A) to such Operating Account or (B) to such other account. (c) AVAILABILITY OF FUNDS. Unless the Administrative Agent shall have received notice from a Lender on the Closing Date that such Lender will not make available to the Administrative Agent such Lender's Pro Rata Share of Revolving Credit Borrowing being advanced to the Borrowers on the Closing Date, the Administrative Agent may assume prior to receipt of funds from such Lender that such Lender has made such Pro Rata Share available to the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the time of any Revolving Credit Borrowing that such Lender will not make available to the Administrative Agent such Lender's Pro Rata Share of the Revolving Credit Borrowing, the Administrative Agent may assume that such Lender has made its Pro Rata Share of such Revolving Credit Borrowing available to the Administrative Agent on the date specified for such Revolving Credit Borrowing in accordance with Section 3.5 of this Agreement. In each case, and in reliance upon such assumption, the Administrative Agent may, but shall not be obligated to, make available to the Borrowers funds in the amount of such Lender's Pro Rata Share. Any disbursement by the Administrative Agent in reliance on such assumption shall be deemed to be a Revolving Credit Advance by such Lender. 3.6 FAILURE OF LENDER TO FUND REVOLVING CREDIT ADVANCES OR PURCHASE PARTICIPATIONS. If any Lender has not made available to the Administrative Agent funds for such Lender's Pro Rata Share of any Revolving Credit Borrowing or such Lender's participation payment, such Lender shall pay such amount to the Administrative Agent immediately upon demand by the Administrative Agent. If any such Lender does not pay such amount to the Administrative Agent forthwith upon such demand by the Administrative Agent, the Administrative Agent shall promptly request payment thereof from the Borrowers, and the Borrowers shall immediately pay such amount to the Administrative Agent. Such Lender and the Borrowers shall be severally liable to pay interest to the Administrative Agent on such amount for each day from the date such amount should otherwise have been made available to the Administrative Agent until the date any such amount is paid to the Administrative Agent at a per annum rate of interest equal to: (x) if paid by such Lender, as the case may be, the Federal Funds Effective Rate or (y) if paid by the Borrowers, the interest rate applicable to such Revolving Credit Borrowing. (a) CONTINUING OBLIGATION OF BORROWERS. Failure of any Lender to fund its Pro Rata Share of any Revolving Credit Borrowing or to pay any participation purchase price shall not excuse the performance by the Borrowers of any of the Borrowers' duties or obligations hereunder. If any such Lender funds such Lender's Pro Rata Share of such Revolving Credit Borrowing or participation purchase price prior to repayment of such amount by the Borrowers, the amount so repaid shall constitute such Lender's share or participation payment and the Borrowers shall have no further obligation to pay. (b) TREATMENT OF LENDER FAILING TO FUND. If any Lender fails to make available such Lender's Pro Rata Share of Borrowings or such Lender's participation purchase price, the Administrative Agent shall not be obligated to transfer to such Lender any payments made by the Borrowers for the benefit of such Lender until such Lender has cured its failure. Until the earlier of such Lender's cure of its failure to fund or the termination of the Revolving Credit Commitments, all amounts repaid to the Administrative Agent by the Borrowers which would otherwise be required to be applied to such Lender's Revolving Credit Advances, or participation purchase price, as the case may be, shall be advanced to the Borrowers by the Administrative Agent on behalf such Lender to cure, in full or in part, the failure by such Lender to fund, but shall nevertheless be deemed to have been paid to such Lender in satisfaction of the Obligations to which such payment would otherwise have been applied. No Lender failing to fund shall have any voting or consent rights under this Agreement and shall not constitute a "Lender" (or be included in the calculation of "Required Lenders") for any voting or consent rights under this Agreement. The terms of this Section shall remain effective with respect to such Defaulting Lender until such time as such Lender shall no longer be in default of any of its obligations under this Agreement. S-7 (c) CONTINUING OBLIGATION OF LENDERS TO FUND. It is understood that: (i) a Lender shall not be responsible for any failure by any other Lender to perform its obligation to make any Revolving Credit Advances hereunder or pay any participation purchase price for its participating interests hereunder, (ii) the Revolving Credit Commitment of a Lender shall not be increased or decreased as a result of any failure by any other Lender to perform its obligation to make any Revolving Credit Advances or pay such participation purchase price hereunder, (iii) failure by any Lender to perform its obligation to make any Revolving Credit Advances or pay any participation purchase price hereunder shall not excuse any other Lender from its obligation to make any Revolving Credit Advances hereunder or pay any participation purchase price for its participating interests hereunder and (iv) the obligations of each Lender hereunder shall be individual and several, not joint and several. 3.7 AFFILIATED FUNDING WITH RESPECT TO LENDERS. All or any part of an Revolving Credit Advance that any Lender (the "Obligated Lender") may be obligated to fund pursuant to this Agreement: (i) may be funded by such Lender on behalf of such Lender's Lending Installation or (ii) may be funded on such Lender's behalf by such Lender by and through any such Lending Installation; provided, however, that, (a) if any Lending Installation fails to fund all or any part of such Revolving Credit Advance, the Obligated Lender shall be obligated to fund such Revolving Credit Advance pursuant to the terms hereof, (b) in no event shall any such funding by any Lending Installation increase the costs or expenses for which the Borrowers are liable under this Agreement and (c) in no event shall any such funding on behalf of or through any such Lending Installation subject the Borrowers to any Taxes or Other Taxes without such Obligated Lender's being subject to the exercise by the Borrowers of their rights under Section 18.3 of this Agreement. The funding of a Revolving Credit Advance by a Lending Installation hereunder shall utilize the Revolving Credit Commitment of the Obligated Lender to the same extent, and as if, such Revolving Credit Advance were funded by such Obligated Lender, and for purposes of this Agreement, such Revolving Credit Advance shall be deemed to have been made directly by such Obligated Lender. 3.8 CASH CONTROL EVENT; CASH DOMINION FUNDING. (a) SWING LINE ADVANCES. In order to fund Borrowings in an efficient manner and minimize fund transfers, the Borrowers and the Lenders hereby authorize the Administrative Agent, upon the occurrence of a Cash Control Event and notice to Borrower Representative and the Lenders of a Cash Control Election, to cause the Swing Line Lender to make available on behalf of the Lenders in accordance with the terms hereof the full amount of the Revolving Credit Advances requested or deemed requested (any such advance, a "Swing Line Advance"), without requirement of prior notice to the Lenders of the proposed Revolving Credit Advances. Each Swing Line Advance shall be considered for all purposes hereof as a Revolving Credit Advance hereunder and shall be subject to all the terms and conditions applicable to other Revolving Credit Advances except that all payments thereon shall be payable to the Administrative Agent solely for its own account. Except for Swing Line Advances or Permitted Special Advances pending settlement, each Lender's funded portion of outstanding Revolving Credit Advances is intended to be equal at all times to such Lender's Pro Rata Share of such outstanding Revolving Credit Advances. (b) SETTLEMENT. With respect to settlement of Swing Line Advances made by the Swing Line Lender (and such Permitted Special Advances for which settlement is requested by the Administrative Agent), the amount of each Lender's Pro Rata Share of the outstanding Revolving Credit Advances shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Revolving Credit Advances as of 5:00 p.m. (Cleveland time) on the Business Day immediately preceding the date of each settlement computation; provided, that, the Administrative Agent retains the absolute right at any time or from time to time to settle more frequently than weekly. The Administrative Agent shall deliver to each of the Lenders after the end of each week, or at such lesser period or periods as the Administrative Agent shall determine, a summary statement of the amount of outstanding Revolving Credit Advances for such period (each such period, a "Settlement Period"). If the summary statement is sent by the Administrative Agent and received by a Lender prior to 12:30 p.m. S-8 (Cleveland time), then each Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m. (Cleveland time) on the same Business Day and if received by a Lender after 12:30 p.m. (Cleveland time) or on a day that is not a Business Day, then each Lender shall make the settlement transfer by not later than 3:00 p.m. (Cleveland time) on the next Business Day following the date of receipt (each, a "Settlement Date"). If a Lender's Pro Rata Share of the outstanding Revolving Credit Advances as of the end of any Settlement Period is more than such Lender's Pro Rata Share of the outstanding Revolving Credit Advances as of the end of the previous Settlement Period, then such Lender shall no later than the time set forth in the preceding sentence transfer to the Administrative Agent by wire transfer in immediately available funds an amount corresponding to such increase. Alternatively, if a Lender's Pro Rata Share of the outstanding Revolving Credit Advances as of the end of any Settlement Period is less than such Lender's Pro Rata Share of the outstanding Revolving Credit Advances as of the end of the previous Settlement Period, the Administrative Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds an amount corresponding to such decrease. The obligation of each of the Lenders to transfer such funds and effect such settlement shall be irrevocable and unconditional and without recourse to or warranty by the Administrative Agent. (c) DISTRIBUTIONS OF PAYMENTS PENDING SETTLEMENT. Until the settlement described above has occurred, the Administrative Agent may apply any payments by or on behalf of Borrowers and any Collections directly to any outstanding Swing Line Advances and any outstanding Permitted Special Advances (for which settlement is requested) as the Administrative Agent deems appropriate. Until such settlement, if any such amounts are received by the Administrative Agent, and no Swing Line Advances are then outstanding as to which such amounts can be applied, the Administrative Agent may pay over such amounts to the Swing Line Lender for application to the Swing Line Lender's Pro Rata Share of the outstanding Revolving Credit Advances. As of any Settlement Date, if payments or Collections received since the then immediately preceding Settlement Date have been applied to the Swing Line Lender's Pro Rata Share of the Revolving Credit Advances (other than Swing Line Advances) as provided for in the immediately preceding sentence, then the Swing Line Lender shall pay to the Administrative Agent, for the accounts of the Lenders to any outstanding Revolving Credit Advances of the Lenders, to be applied ratably to the outstanding Revolving Credit Advances of such Lenders, an amount such that each Lender shall have outstanding after giving effect to such payments by the Swing Line Lender, its Pro Rata Share of such Revolving Credit Advances; provided, however, that the Administrative Agent may net such payments due from the Swing Line Lender against payments due to the Swing Line Lender hereunder, and require either the Swing Line Lender or the other Lenders, as applicable, to make only the amount of the payment due after such netting. (d) LENDER PARTICIPATIONS. If a Lender determines that such Lender is legally prohibited from making a Revolving Credit Advance available to the Administrative Agent with respect to outstanding Swing Line Advances or Permitted Special Advances, such prohibited Lender shall irrevocably and unconditionally purchase and receive from the Swing Line Lender or the Administrative Agent, as applicable, without recourse or warranty, an undivided interest and participation in such Swing Line Advance or Permitted Special Advance to the extent of such Lender's Pro Rata Share thereof by paying to the Administrative Agent, in immediately available funds in Dollars, at the account of the Administrative Agent maintained at the Payment Office of the Administrative Agent not later than the time for funding such Revolving Credit Advance, an amount equal to such Lender's Pro Rata Share of such Revolving Credit Advances on the date such Lender's Revolving Credit Advance would have been made pursuant to Section 3.8(b) above. If such amount is not in fact made available to the Administrative Agent by any Lender, the Administrative Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Rate for the first three (3) days from and after such demand and thereafter at the interest rate then applicable to the Alternate Base Rate Advances. Upon purchase of an undivided interest in any Swing Line Advance or Permitted Special Advance pursuant to this Section, such Lender shall be entitled to payments credited to such Swing Line Advance or Permitted Special Advance and such Lender shall be entitled to its Pro Rata Share of all payments credited to such Swing Line Advance or Permitted Special Advance. S-9 (e) RECORDS; INTEREST. Each Lender agrees to mark its books and records at the end of each Settlement Period to show at all times the dollar amount of its Pro Rata Share of the outstanding Revolving Credit Advances and LC Exposure. Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Revolving Credit Advances to the extent such Revolving Credit Advances have been funded by such Lender. Because the Swing Line Lender on behalf of the Lenders may be advancing and/or may be repaid Swing Line Advances and the Administrative Agent may be advancing and/or may be repaid Permitted Special Advances prior to the time when the Lenders will actually advance and/or be repaid such Revolving Credit Advances, (x) interest with respect to Swing Line Advances and Permitted Special Advances shall be allocated by the Administrative Agent in accordance with the amount of Advances actually advanced by and repaid to each Lender, the Swing Line Lender and the Administrative Agent and (y) such interest shall accrue from and including the date such Swing Line Advances or Permitted Special Advances are so advanced to but excluding the date such Revolving Credit Advances are either repaid by Borrowers or actually settled with the applicable Lender as described in this Section. (f) PERMITTED SPECIAL ADVANCES BY THE ADMINISTRATIVE AGENT. Notwithstanding any provision in this Agreement to the contrary, upon the occurrence of a Cash Control Event, the Administrative Agent is hereby authorized by the Borrowers and the Lenders, to the extent the Administrative Agent, in its sole discretion, deems necessary or desirable to protect or preserve the interests of the Lenders, to make additional advances ("Permitted Special Advances") from time to time to Borrower on behalf of the Lenders holding Revolving Credit Commitments; provided, however, that: (A) the aggregate amount of such Permitted Special Advances outstanding shall not at any time exceed One Million Dollars ($1,000,000), (B) the aggregate amount of such Permitted Special Advances shall not at any time exceed an amount equal to the aggregate Revolving Credit Advance Commitments minus the sum of outstanding Revolving Credit Advances (inclusive of outstanding Swing Line Advances) at such time and the aggregate LC Exposure of the Lenders at such time, (C) such Permitted Special Advances shall not remain outstanding for more than thirty (30) days in any period of ninety (90) consecutive days, (D) upon the request of the Administrative Agent, the Permitted Special Advances shall be subject to periodic settlement between the Administrative Agent and the Lenders holding Revolving Credit Advance Commitments pursuant to Section 3.8(b), (E) the Required Lenders may at any time revoke the Administrative Agent's authorization contained in this Section 3.8(f) to make additional Permitted Special Advances, any such revocation to be in writing and to become effective prospectively upon the Administrative Agent's receipt thereof and (F) Permitted Special Advances shall be repayable on demand or otherwise as required by this Section 3.8(f), shall be secured by the Collateral, and shall for all purposes of this Agreement constitute Revolving Credit Advances and Obligations hereunder bearing interest at the Default Rate otherwise applicable at the time. SECTION 4 PAYMENT ADMINISTRATION. 4.1 ADVANCE ACCOUNT; CREDITS; APPLICATION OF PAYMENTS AND COLLECTIONS. (a) LENDER MAINTENANCE OF ADVANCE ACCOUNT. The Administrative Agent shall maintain on its books and records an Advance Account (the "Advance Account") in respect of the Borrowers which shall reflect: (i) with respect to Revolving Credit Borrowings: (x) the outstanding Revolving Credit Advances to the Borrowers, (y) the Pro Rata Share of each Lender in the outstanding Revolving Credit Borrowings to the Borrowers, and (z) accrued interest on the Revolving Credit Advances payable by the Borrowers, (ii) all Letter of Credit drawings and (iii) all other Obligations of the Borrowers that have become payable hereunder. Each entry by the Administrative Agent in the Advance Account shall be, to the extent permitted by applicable Law and absent manifest error, prima facie evidence of the data entered. Such entries by the Administrative Agent shall not be a condition to the Borrowers' obligation to repay the Obligations. To the extent applicable pursuant to Treasury Regulation Section 5f.103-1(c), the Administrative Agent shall maintain on the Advance Account, for the benefit of the Borrowers, a record of any Foreign Lenders. S-10 (b) ADVANCE ACCOUNT CHARGES\CREDITS; REPORTS. The Borrowers hereby authorize the Administrative Agent to charge the Advance Account of the Borrowers with all Revolving Credit Advances (including Permitted Special Advances), and all other Obligations of the Borrowers under this Agreement or any other Loan Document. The Advance Account of the Borrowers will be credited in accordance with the provisions of this Agreement with all payments received by the Administrative Agent directly from the Borrowers or otherwise for the account of the Borrowers pursuant to this Agreement. The Administrative Agent shall send the Borrower Representative statements in accordance with the Administrative Agent's standard procedures. Any and all such periodic or other statements or reconciliations of the Advance Account shall be final, binding and conclusive upon the Borrowers in all respects, absent manifest error, unless the Administrative Agent receives specific written objection thereto from the Borrower Representative within forty-five (45) Business Days after such statements or reconciliation shall have been sent to the Borrower Representative by the Administrative Agent. (c) CREDITING AND APPLICATION OF SPECIFIC PAYMENTS. Except for the crediting to the Borrowers' Advance Account for Collections deposited to the Cash Concentration Account as provided below, the Borrowers shall make all other payments to be made by the Borrowers under this Agreement with respect to the Obligations not later than 2:00 p.m. (Cleveland time) on the day when due, without setoff, counterclaim, defense or deduction of any kind, to the Administrative Agent's account maintained at the Payment Office of the Administrative Agent. Payments received after 2:00 p.m. (Cleveland time) shall be deemed to have been received on the next succeeding Business Day. Prior to the occurrence of an Event of Default which is continuing, the Borrower Representative may specify to the Administrative Agent, at the time of the Borrowers' making any such payment hereunder, the Obligations of the Borrowers to which such payment is to be applied. If the Borrower Representative does not specify an application for such payment or if an Event of Default has occurred which is continuing, the Administrative Agent shall apply such payment to such Obligations as provided in Section 4.1(d) and 13.4(d) of this Agreement, as applicable. Prior to the occurrence of a Cash Control Event and a Cash Control Election, the Borrower Representative may specify to Administrative Agent, at the time of the Borrowers' making any such payment hereunder, the Obligations of the Borrowers to which such payment is to be applied. If the Borrower Representative does not specify an application for such payment or if an Event of Default has occurred and is continuing, the Administrative Agent shall apply such payment to such Obligations as provided in Section 4.1(d) and Section 13.4(d) of this Agreement, as applicable. (d) DEPOSITS IN CASH CONCENTRATION ACCOUNT AFTER CASH CONTROL ELECTION; APPLICATION AND CREDITING. Upon the occurrence of a Cash Control Event and notice to the Borrower Representative and the Lenders of a Cash Control Election, and until such Cash Control Election ceases to be effective in accordance with the terms of this Agreement, deposits of items of payment with respect to Collections shall be deposited to the Cash Concentration Account as provided in Section 5.2 of this Agreement. Such items of payment and proceeds shall be credited to the Loan Account of the Borrowers. For the purpose of calculating interest on the Obligations and determining the aggregate Revolving Credit Advances outstanding and resulting Borrowing Base of the Borrowers for additional Revolving Credit Advances hereunder, all Collections shall be credited to the account of Borrowers on the Business Day on which the Lender has received notice of the deposit of the proceeds of such Collections into the Cash Concentration Account prior to 2:00 p.m. (Cleveland time) In so crediting items to the Loan Account of the Borrowers, Administrative Agent may apply such credit to reduce the outstanding principal amount of such of the outstanding Obligations of the Borrowers Upon full and final payment in immediately available funds of all Obligations and the termination of the Revolving Credit Commitment and all LC Exposure, deposits of Collections to the Cash Concentration Account shall be credited as directed by the Borrowers. (e) DISTRIBUTION OF PAYMENTS. Subject to periodic settlement of accounts among the Lenders as provided for in this Agreement, after receipt of any payment by the Administrative Agent, the Administrative Agent will cause to be distributed, on the day of receipt of any payment, like funds relating to such payment (other than amounts payable solely to the Administrative Agent or solely to the S-11 applicable LC Issuer pursuant to Section 6.4) ratably to each of the Lenders at such Lender's Lending Office. (f) PRO RATA TREATMENT OF LENDERS. Except as set forth in Sections 6.4 and 13.5 of this Agreement, each Revolving Credit Borrowing and participating interest hereunder, each payment or prepayment of principal of any Revolving Credit Borrowing, any reduction of commitments, each payment of interest on the Revolving Credit Advances, and each payment of the fees provided for hereunder shall be allocated among the Lenders ratably in accordance with each Lender's Pro Rata Share thereof. (g) PAYMENT NOT ON BUSINESS DAY. Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment may be made either on the next succeeding Business Day or on the immediately preceding Business Day. Any such extension or reduction of time shall in such case be included in the computation of payment of interest, fees or other compensation, as the case may be. (h) PRESUMPTION OF PAYMENT IN FULL BY THE BORROWERS. Unless the Administrative Agent shall have received notice from the Borrower Representative prior to the date on which any payment is due to the Lenders hereunder that the Borrowers will not make such payment in full, the Administrative Agent may assume that the Borrowers have made such payment in full to the Administrative Agent on such date. In reliance upon such assumption, the Administrative Agent may, but shall not be obligated to, distribute to each Lender on such due date the amount then due such Lender. If and to the extent the Borrowers shall not have made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent promptly upon demand the amount distributed to such Lender, together with interest thereon (except to the extent otherwise paid by the Borrowers) for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent at the Federal Funds Effective Rate. 4.2 REPAYMENT AND PREPAYMENTS. (a) SCHEDULED REPAYMENTS. Except for the required crediting to the Borrowers' Advance Account of Collections deposited to the Cash Concentration Account, the Borrowers shall repay to the Administrative Agent the outstanding principal amount of the aggregate Revolving Credit Advances on the Revolving Credit Termination Date. Reimbursements of drawings on Letters of Credit shall be made as provided in this Agreement. (b) MANDATORY PREPAYMENTS. (i) MANDATORY PREPAYMENT OF REVOLVING CREDIT ADVANCES. If, on any Business Day, the aggregate Revolving Credit Advances then outstanding exceeds the lesser of: (x) the Borrowing Base minus the aggregate LC Exposure then existing or (y) the aggregate Revolving Credit Commitments of the Lenders then applicable minus the aggregate LC Exposure then existing, the Borrowers shall on such day prepay to the Administrative Agent an amount sufficient to eliminate such excess ratably in accordance with each Lender's Pro Rata Share thereof . (ii) MANDATORY PREPAYMENT OF PERMITTED SPECIAL ADVANCES. Subject to Section 3.8(f) of this Agreement, the aggregate outstanding amount of each Permitted Special Advance shall be prepaid by the Borrowers to the Administrative Agent for the benefit of the Lenders (or, to the extent not yet settled with the Lenders at such time, for the sole account of the Administrative Agent): (x) on demand by the Administrative Agent or, if no demand is made, on or before the thirtieth (30th) Business Day after the Administrative Agent shall have made such Permitted Special Advance and (y) if, on any Business Day, the aggregate Permitted Special Advances then outstanding exceeds One S-12 Million Dollars ($1,000,000), then the Borrowers shall on such day prepay to the Administrative Agent for the account of the Lenders (or, to the extent not yet settled with the Lenders at such time, for the sole account of the Administrative Agent) an amount sufficient to eliminate such excess. 4.3 REDUCTION OF REVOLVING CREDIT COMMITMENT. Upon five (5) Business Days prior written notice from the Borrower Representative to the Administrative Agent, the Borrowers shall be permitted to reduce permanently the Revolving Credit Commitment, in whole or in part, as provided in such notice. Each reduction shall be subject to the following: (i) each such reduction shall be in an aggregate principal amount of not less than One Million Dollars ($1,000,000) or a multiple of One Hundred Thousand Dollars ($100,000) in excess thereof, (ii) such reductions shall be subject to the early termination fee set forth in Section 6.4(d) based on the amount so reduced and (iii) no reduction shall be permitted to reduce the aggregate Revolving Credit Commitment unless, concurrently with such reduction, the Borrowers shall make a principal payment of the then outstanding Revolving Credit Advances to the extent required by Section 4.2(b)(i) of this Agreement. Each reduction in the Revolving Credit Commitment hereunder shall be a permanent reduction thereof. SECTION 5 CASH MANAGEMENT ADMINISTRATION. 5.1 MAINTENANCE OF LOCKBOX AND COLLECTION ACCOUNT. The Borrowers have established and shall maintain one or more Lockboxes in the name of the Borrowers with one or more Lockbox Banks that are acceptable to the Administrative Agent, in its reasonable discretion. The Borrowers have established and will maintain Collections Accounts in the name of Borrowers with the Administrative Agent and each Lockbox Bank. The Collection Account established with the Administrative Agent shall function as the Cash Concentration Account for all purposes of this Section. Each Lockbox Bank shall have entered into agreements with the Borrowers establishing the Lockboxes controlled by such Lockbox Bank (a "Lockbox Agreement") and agreements with respect to the Collection Account maintained at such Lockbox Bank (a "Deposit Account Agreement"), each such Lockbox Agreement and Deposit Account Agreement to be in form and substance reasonably satisfactory to the Administrative Agent. Each Lockbox Bank shall have entered into a letter agreement with the Borrowers relating to rights of the Administrative Agent with respect to the Lockboxes maintained with the Lockbox Bank by Borrowers and with respect to the Collection Account (a "Deposit Account Control Letter"), substantially in the form of Exhibit N and otherwise in form and substance reasonably satisfactory to the Administrative Agent. In the case of the Cash Concentration Account, KeyBank and the Borrowers shall have entered into a letter agreement (a "Cash Collateral Account Control Letter"), substantially in the form of Exhibit O hereto and otherwise in form and substance reasonably satisfactory to the Administrative Agent. The Disclosure Schedule shall set forth a list of: (i) all present Lockboxes, the Collection Accounts, and any other bank accounts maintained by Borrowers, (ii) the name and address of each Lockbox Bank, (iii) the account number of the Collection Account, (iv) a contact at such Lockbox Bank, and (v) a list describing all Lockbox Agreements, Deposit Account Agreements, Deposit Account Control Letters, and the Cash Collateral Account Control Letter and all other agreements establishing each Lockbox, Collection Account, the Cash Concentration Account and Permitted Account. 5.2 PROCESSING COLLECTIONS; CASH CONCENTRATION ACCOUNT. In accordance with the terms of the applicable Cash Collateral Account Control Letter, each Lockbox Bank shall be instructed to deposit on a daily basis all Collections sent to the Lockbox maintained by such Lockbox Bank directly into the applicable Collection Account of the Borrowers in the identical form in which each such Collections was made (except for any necessary endorsements) whether by cash or check. All funds deposited into any Collection Account shall be Collateral in which Administrative Agent has been granted a security interest on behalf of the Lenders pursuant to the terms of this Agreement and shall be subject to the sole and exclusive control of Administrative Agent and only to such signing authority designated from time to time by Administrative Agent. The Borrowers shall have no control over such funds; provided, however that, anything contained herein to the contrary notwithstanding, prior to the occurrence of a Cash Control S-13 Event and a Cash Control Election by the Administrative Agent, the Borrowers shall have the unlimited right to withdraw funds from each Collection Account and to direct the Administrative Agent or direct the applicable Lockbox Bank, as the case may be, to remit funds from such Collection Account to the Operating Account of the Borrowers or as otherwise directed by the Borrower Representative. No Collection Account shall be subject to any deduction, set off, banker's lien or any other right in favor of any Person (other than as may be expressly set forth in the applicable Deposit Account Control Letter). The Borrowers shall notify all of their customers and Account Debtors to forward all Collections of every kind due the Borrowers to a Lockbox or to wire all Collections due the Borrowers to a Collection Account (such notices to be in such form and substance as Administrative Agent may reasonably require from time to time). The Borrowers will use commercially reasonable efforts to notify all remitters of Collections to forward such Collections to a Lockbox or Collection Account. 5.3 CASH CONCENTRATION ACCOUNT. In accordance with the terms of the applicable Deposit Account Control Letter, each Lockbox Bank shall be instructed to deposit on a daily basis all collected and available funds from Collections deposited into a Collection Account to the Cash Concentration Account. Prior to the occurrence of a Cash Control Event and a Cash Control Election by the Administrative Agent, the Borrowers shall have the unlimited right to withdraw funds from the Cash Concentration Account and to direct the Administrative Agent to remit funds from the Cash Concentration Account to the Operating Account of the Borrowers or as otherwise directed by the Borrower Representative. After the occurrence of a Cash Control Event and notice to the Borrowers and the Lenders of a Cash Control Election, and until such Cash Control Election ceases to be effective in accordance with the terms of this Agreement, all Collections and Remittances shall be credited to the Loan Account of the Borrowers and applied to the outstanding Obligation in accordance with Section 4.1(d). After the occurrence of a Cash Control Event and notice to the Borrowers and the Lenders of a Cash Control Election, and until such Cash Control Election ceases to be effective in accordance with the terms of this Agreement, the Cash Concentration Account shall not be subject to any deduction, set off, banker's lien or any other right in favor of any Person. After the occurrence of a Cash Control Event and notice to the Borrowers and the Lenders of a Cash Control Election, and until such Cash Control Election ceases to be effective in accordance with the terms of this Agreement, (i) all funds deposited into the Cash Concentration Account shall be the exclusive property of Administrative Agent on behalf of the Lenders, (ii) shall be subject to the sole and exclusive control of Administrative Agent and only to such signing authority designated from time to time by Administrative Agent and (iii) the Borrowers shall have no further rights to withdraw funds form the Cash Concentration Account. Upon the occurrence of a Cash Control Event and a Cash Control Election, and until such Cash Control Election ceases to be effective in accordance with the terms of this Agreement, any Collections received directly by a Borrower shall be deemed held by such Borrower in trust and as fiduciary for the Lenders. The Borrowers agree not to commingle any such Collections with any of the Borrowers' other funds or property, but to hold such funds separate and apart in trust and as fiduciary for the Lenders until deposit is made into the applicable Collection Account or the Cash Concentration Account. Upon the occurrence of a Cash Control Event and a Cash Control Election, and until such Cash Control Election ceases to be effective in accordance with the terms of this Agreement, the Borrowers hereby agree to deposit immediately such directly received Collections into the Collection Account maintain by or on behalf of such Borrowers or into the Cash Concentration Account. 5.4 COSTS OF COLLECTION. All reasonable costs of collection of the Borrowers' Accounts, including actual out-of-pocket expenses, administrative and record-keeping costs, reasonable attorney's fees, and all service charges and costs related to the establishment and maintenance of the Lockbox, the Collection Account, and the Cash Concentration Account shall be the sole responsibility of the Borrowers, whether the same are incurred by the Administrative Agent or the Borrowers. The Administrative Agent, in its sole discretion, may charge such costs, fees and charges against the Advance Account as an Obligation. The Borrowers hereby indemnify and hold the Administrative Agent harmless from and against any loss or damage with respect to any Collection deposited in the Collection Account S-14 or Cash Concentration Account which is dishonored or returned for any reason. If any Collection deposited in the Collection Account is dishonored or returned unpaid for any reason, the Administrative Agent, in its sole discretion, may charge the amount thereof against the Advance Account as an Obligation (but only if such amount was credited to the Advance Account prior thereto). The Administrative Agent shall not be liable for any loss or damage resulting from any error, omission, failure or negligence on the part of the Administrative Agent, except losses or damages resulting from the Administrative Agent's gross negligence, willful misconduct or bad faith as determined by a final judgment of a court of competent jurisdiction. 5.5 RETURN OF FUNDS. Upon the payment in full of all Obligations (other than continuing Indemnification Obligations) and the termination of the aggregate Revolving Credit Commitments and LC Exposure hereunder: (a) the Administrative Agent's security interests and other rights in funds in the Collection Account shall terminate, (b) all rights to such funds shall revert to the Borrowers as applicable and (c) the Administrative Agent will, at the Borrowers' expense, take such steps as the Borrower Representative may reasonably request to evidence the termination of such security interests and to effect the return to the Borrowers of such funds, and all pledged stock certificates and related stock powers. 5.6 NOTICE TO ACCOUNT DEBTORS. The Borrowers hereby authorize the Administrative Agent, upon the occurrence of a Cash Control Event and a Cash Control Election, and until such Cash Control Election ceases to be effective in accordance with the terms of this Agreement, to: (a) notify any or all Account Debtors that the Accounts have been assigned to the Administrative Agent, for the ratable benefit of the Administrative Agent, the Lenders and the other holders of Obligations, and that the Administrative Agent has a security interest therein; and (b) direct such Account Debtors to make all payments due from them to the Borrowers upon the Accounts directly to the Administrative Agent or to a Lockbox designated by the Administrative Agent; provided, however, that the Administrative Agent shall not exercise any of such rights unless the Administrative Agent concurrently notifies the Borrower Representative of its exercise of such rights. SECTION 6 INTEREST AND FEES. 6.1 INTEREST RATE ON ADVANCES. The Borrowers shall pay interest on the unpaid principal amount of each Revolving Credit Advance made by the Lenders from the date such Revolving Credit Advance is advanced until the principal amount thereof shall have been paid in full as follows: (a) ALTERNATE BASE RATE ADVANCES. During such periods as any Alternate Base Rate Advances are outstanding, the Borrowers shall pay interest on such Alternate Base Rate Advances at a rate per annum equal to the sum of the Alternate Base Rate plus the Applicable Margin then in effect and applicable to the Revolving Credit Borrowings comprised of such Revolving Credit Advances, payable: (A) monthly, in arrears, on the first day of each calendar month, (B) on the date such Revolving Credit Advances comprising any such Revolving Credit Borrowing shall be paid in full (whether at maturity, by reason of acceleration or otherwise) and (C) after maturity, on demand. (b) LIBOR RATE ADVANCES. During such periods as any LIBOR Rate Advances are outstanding, the Borrowers shall pay interest on such LIBOR Rate Advances at a rate per annum equal to the sum of the London Interbank Offered Rate plus the Applicable Margin then in effect and applicable to Revolving Credit Borrowings comprised of such Revolving Credit Advances, payable: (A) on the last day of each Interest Period and (B) if such Interest Period has a duration of more than three months, on the last day of the third month of such Interest Period and (C) on the date such Revolving Credit Advances shall be converted into Alternate Base Rate Advances or paid in full (whether at maturity, by reason of acceleration or otherwise) and (D) after maturity, on demand. (c) DEFAULT INTEREST. If any principal, interest or fees due under this Agreement shall not be paid when due or if any Revolving Credit Note or any amounts due under any Revolving Credit Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by S-15 operation of any provision of acceleration of maturity therein contained, or if there shall otherwise occur an Event of Default which is continuing, then the principal of each outstanding Revolving Credit Advance and, to the extent permitted by law, the unpaid interest thereon shall, upon the Lender's written election, bear interest, payable on demand, at a rate per annum equal at all times to two percent (2.00%) per annum in excess of the interest rate otherwise then payable pursuant to the terms of this Agreement. (d) FAILURE OF BORROWER REPRESENTATIVE TO ELECT INTEREST PERIOD. If no Interest Period is specified in any Credit Request or any Rate Conversion/Continuation Request for any LIBOR Rate Advance, the Borrower Representative shall be deemed to have requested such Revolving Credit Advance to be an Alternate Base Rate Advance. If the Borrower Representative shall not have given notice in accordance with Section 6.2 of this Agreement to continue any LIBOR Rate Advance into a subsequent Interest Period (and shall not have otherwise delivered a Rate Conversion/Continuation Request in accordance with Section 6.2 of this Agreement to convert such Revolving Credit Advance), then, at the end of the Interest Period applicable to such LIBOR Rate Advance, such Revolving Credit Advance shall convert into an Alternate Base Rate Advance. 6.2 RATE CONVERSION AND RATE CONTINUATION. The Borrowers shall have the right to convert all or any portion of the Revolving Credit Advances comprising a Revolving Credit Borrowing into, or continue all or any portion of the Revolving Credit Advances comprising a Revolving Credit Borrowing as, LIBOR Rate Advances or Alternate Base Rate Advances, as the case may be, upon request delivered by the Borrower Representative to the Administrative Agent not later than 2:00 p.m. (Cleveland time) as follows: (a) on the Business Day that the Borrowers desire to convert all or a portion of the LIBOR Rate Advances into Alternate Base Rate Advances, (b) three (3) Business Days prior to the Business Day on which the Borrowers desire to convert all or a portion of the outstanding Alternate Base Rate Advances into a LIBOR Rate Borrowing for a given permissible Interest Period, or (c) three (3) Business Days prior to the Business Day on which the Borrowers desire to continue any LIBOR Rate Advance comprising a LIBOR Rate Borrowing as a LIBOR Rate Borrowing for an additional Interest Period of the same duration or as a LIBOR Rate Borrowing having a different permissible Interest Period; provided, however, that each such Rate Conversion or Rate Continuation shall be subject to the following: (a) if less than all of the outstanding principal amount of a Revolving Credit Borrowing is converted or continued, the aggregate principal amount of such Revolving Credit Borrowing converted or continued shall be not less than Five Hundred Thousand Dollars ($500,000), or an integral multiple of Five Hundred Thousand Dollars ($500,000) in excess thereof; (b) LIBOR Rate Advances shall not be converted or continued at a time other than the end of an Interest Period applicable thereto unless the Borrowers shall pay, upon demand, any amounts due to the Lenders pursuant to Section 18.5 of this Agreement; (c) After the occurrence of an Event of Default which is continuing, Revolving Credit Advances may not be converted into or continued (at the expiration of the Interest Period applicable thereto) as LIBOR Rate Advances; (d) Revolving Credit Advances may not be converted into or continued as LIBOR Rate Advances so as to comprise a Revolving Credit Borrowing if the Interest Period applicable thereto will expire on or after the Revolving Credit Termination Date; (e) Revolving Credit Advances that cannot be converted into or continued as LIBOR Rate Advances by reason of clause (c) or (d) of this Section shall be automatically converted at the end of the Interest Period in effect for such LIBOR Rate Advances into Alternate Base Rate Advances. S-16 Each request for conversion or continuation (a "Rate Conversion/Continuation Request") shall be a written or telephonic notice (in the case of a telephonic notice, promptly confirmed in writing if so requested by the Lender). Each written Rate Conversion/Continuation Request or written confirmation thereof shall be substantially in the form of Exhibit C attached hereto, signed or otherwise acceptable authenticated by the Borrower Representative and transmitted to the Administrative Agent by telecopier or electronic mail. 6.3 COMPUTATIONS OF INTEREST AND FEES. All computations of interest on Revolving Credit Advances hereunder and of fees and other compensation hereunder shall be made in all cases by the Lender on the basis of a year of 360 days (except computations of interest on Alternate Base Rate Advances shall be made on the basis of a year of 365/366 days) in each case for the actual number of days elapsed (commencing on the day such Revolving Credit Advance was advanced but excluding the day such Revolving Credit Advance shall be paid in full) occurring in the period for which such interest or fees are payable. Each determination by the Lender of interest, fees or other amounts of compensation due hereunder shall be rebuttably presumed to be correct. 6.4 FEES. The following fees shall be payable as set forth below: (a) UNUSED COMMITMENT FEE. The Borrowers agree to pay to the Administrative Agent for the ratable benefit of the Lenders an unused commitment fee (the "Unused Commitment Fees") on the average daily unused portion of the Revolving Credit Commitment (including LC Exposure as usage for purposes of calculating such unused portion and excluding the Reserve Amount) of the Lenders from the Closing Date until the Revolving Credit Termination Date at a rate per annum equal to the Applicable Margin with respect to unused commitment fees, payable monthly in arrears on the first day of each calendar month, commencing November 1, 2004, and on the Revolving Credit Termination Date. (b) ANNUAL FEE. The Borrowers agree to pay to the Administrative Agent an annual administration fee of Fifteen Thousand Dollars ($15,000) payable on the Closing Date and each anniversary thereof. (c) BANK PRODUCT FEES. The Borrowers agree to pay to the Administrative Agent when due any other fees owing to the Administrative Agent with respect to services or facilities which may be extended to the Borrowers, including, without limitation, credit cards, cash management and related services such automatic clearing house transfer of funds. (d) EARLY TERMINATION FEE. The Borrowers agrees to pay to the Administrative Agent for the ratable benefit of the Lenders, allocable to the Lenders in accordance with each Lender's Pro Rata Share, an early termination fee of: (i) one and one half percent (1.50%) of the average Revolving Credit Commitment hereunder in the case of termination of such Commitment hereunder prior to the first anniversary of the Closing Date; (ii) one percent (1.00%) of the average Revolving Credit Commitment hereunder in the case of termination of the such Commitment hereunder prior to the second anniversary of the Closing Date; or (iii) one half of one percent (0.50%) of the average Revolving Credit Commitment hereunder in the case of termination of the such Commitment hereunder prior to the third anniversary of the Closing Date; provided, however, if such Commitment hereunder is terminated as a result of a transfer or payoff provided by an affiliate of KeyBank, then no such early termination fee shall be due and payable. For purposes hereof, average Revolving Credit Commitment shall mean the average of the most recent twelve month-end Revolving Credit Commitment levels prior to the date of the termination of the Commitment or, if this Agreement has been in place less than twelve months, the average Revolving Credit Commitment levels for such shorter period. (e) LETTER OF CREDIT FEES. The Borrowers shall pay the following fees with respect to Letters of Credit: S-17 (i) The Borrowers agree to pay to the Administrative Agent for the ratable benefit of the Lenders with respect to each Letter of Credit, a fee accruing in dollars at a rate per annum equal to the then current Applicable Margin of LIBOR Rate Advances applicable to Revolving Credit Borrowings multiplied by the maximum undrawn face amount of such Letter of Credit, payable in arrears (A) on the first Business Day of each Fiscal Quarter commencing on the first such Business Day following the issuance of such Letter of Credit and (B) on the Revolving Credit Termination Date. (ii) To the extent that there is more than one Lender under this Agreement, the Borrowers agree to pay the LC Issuer, for its own account as issuing bank, a fronting fee equal to fifteen basis points (15 bps) multiplied by the issued face amount of each Letter of Credit issued, payable on the date each such Letter of Credit is issued and on the date such Letter of Credit is renewed. (iii) The Borrowers agree to pay to the LC Issuer, with respect to the issuance, amendment, or transfer of each Letter of Credit and each drawing made thereunder, customary administrative, documentary and processing charges in accordance with the LC Issuer's standard schedule for such charges in effect at the time of issuance, amendment, transfer or drawing, as the case may be. (f) PAYMENT OF FEES; NONREFUNDABLE. All fees set forth in this Section 6.4 shall be paid on the date due to the Administrative Agent for distribution, if appropriate to the Lenders or the LC Issuer. Once paid, to the extent permitted by applicable Law and absent error on the part of the Administrative Agent, none of such fees shall be refundable. 6.5 LIBOR RATE ADVANCES: UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS. (a) UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS. In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Lender, shall have determined on a reasonable basis (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the London Interbank Offered Rate for LIBOR Rate Advances for any Interest Period that, by reason of any changes arising after the Closing Date affecting the London interbank market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of the "London Interbank Offered Rate", or (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder in an amount which such Lender deems material with respect to any LIBOR Rate Advance to the Borrowers because of any change since the Closing Date in any applicable Law, governmental rule, regulation, guideline, order or request (whether or not having the force of Law), or in the interpretation or administration thereof and including the introduction of any new Law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves includable in the "London Interbank Offered Rate" pursuant to the definition thereof), or (iii) at any time, that the making or continuance of any LIBOR Rate Advance has become unlawful by compliance by such Lender in good faith with any change since the Closing Date in any Law, governmental rule, regulation, guideline or order, or the interpretation or application thereof, or would conflict with any thereof not having the force of Law but with which such Lender customarily complies; S-18 THEN, the Administrative Agent, in the case of and on the date of determination specified in clause (i) above, or such Lender, in the case of and as promptly as practical after the date of determination specified in clause (ii) and (iii) above, shall give notice by telephone confirmed in writing to the Borrower Representative (and to the Administrative Agent in the case of a Lender notice) of such determination. The Administrative Agent shall promptly transmit such notice to each of the other applicable Lenders. Thereafter (A) in the case of clause (i) above, LIBOR Rate Advances shall no longer be available until such time as the Administrative Agent gives prompt notice to the Borrower Representative and the applicable Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Credit Request or Rate Conversion/Continuation Request given by the Borrower Representative with respect to LIBOR Rate Advances which have not yet been incurred or converted shall be deemed rescinded by the Borrower Representative or, in the case of a Credit Request, shall, at the option of the Borrower Representative, be deemed converted into a Credit Request for Alternate Base Rate Advances, (B) in the case of clause (ii) above, the Borrowers shall pay to such Lender, upon written demand to the Borrower Representative, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender shall determine) as shall be required to compensate such Lender, for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing the basis for the calculation thereof and that such Lender is generally charging all of its customers for comparable amounts, submitted to the Borrower Representative by such Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (C) in the case of clause (iii) above, the Borrower Representative on behalf of the Borrowers shall take one of the actions specified in the next paragraph of this Section. At any time that any LIBOR Rate Advance is affected by the circumstances described in Section 6.5(a)(ii) above, the Borrowers may, and, in the event any LIBOR Rate Advance is affected by the circumstances described in Section 6.5(a) (iii) above, the Borrowers shall, either (i) if the affected LIBOR Rate Advance is then being made pursuant to a Credit Request for a LIBOR Rate Borrowing, by causing the Borrower Representative to give the Administrative Agent telephonic (confirmed promptly in writing if requested) notice thereof on the same date that the Borrower Representative was notified by a Lender pursuant to Section 6.5(a) (ii) or (iii) above, cancel said LIBOR Rate Borrowing or convert such Credit Request to a request for a Revolving Credit Borrowing of Alternate Base Rate Advances, or (ii) if the affected LIBOR Rate Advance is then outstanding, upon at least one Business Day's notice from the Borrower Representative to the Administrative Agent, require the affected Lender to convert each such LIBOR Rate Advance into an Alternate Base Rate Advance with such conversion to be effective on the last day of the Interest Period currently applicable to such LIBOR Rate Advance, if affected Lender may lawfully continue to maintain such LIBOR Rate Advance until such last day, or immediately, if affected Lender is not legally permitted to maintain such Revolving Credit Advance until such last day, and subject to payment to such affected Lender of any amount required under Section 18.6 provided that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section. SECTION 7 CONDITIONS OF LENDING. 7.1 CONDITIONS PRECEDENT TO INITIAL ADVANCES. The effectiveness of this Agreement, the obligation of each Lender to make a Revolving Credit Advance on the occasion of each Borrowing hereunder, and the obligation of the LC Issuer to issue any Letters of Credit, are subject to the condition precedent that: (i) the conditions set forth in Annex III, attached hereto and incorporated herein by reference, shall have been satisfied, as determined by the Administrative Agent, in its sole discretion, on or before the Closing Date of this Agreement and (ii) the Administrative Agent shall have received on or before the Closing Date of this Agreement the documents and deliveries set forth on said Annex III (which, in the case of exhibits to this Agreement, shall be in the forms attached hereto, with blanks completed). S-19 7.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of each Lender to make an Advance on the occasion of each Borrowing hereunder and the obligation of the LC Issuer to issue or renew any Letter of Credit are subject to the conditions precedent that: (a) REPRESENTATION BRINGDOWN. As of the date of any Credit Event, and before and after giving effect thereto, the representations and warranties contained in this Agreement and all other Loan Documents are 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; and (b) NO DEFAULT; COMPLIANCE WITH TERMS. As of the date of any Credit Event, and before and after giving effect thereto, no Potential Default or Event of Default shall have occurred and be continuing; and (c) NO MATERIAL ADVERSE CHANGE. As of the date of any Credit Event, and before and after giving effect thereto, there shall have been no event which has had, or could reasonably be expected to have, a Material Adverse Effect; and (d) CONFIRMATION OF BORROWING BASE. The Borrower Representative shall have delivered to the Administrative Agent each Borrowing Base Certificate required to have been delivered for the period immediately preceding the occurrence of such Credit Event. Each Credit Event shall constitute a representation and warranty by the Borrowers that on the date of such Credit Event, the statements in clauses (a) through (c) above are true and correct as of such date and that the actions required under clause (d) above have in fact been taken as of such date. SECTION 8 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS. 8.1 GRANT OF SECURITY INTEREST. To secure the prompt payment and performance of Obligations, each of the Borrowers hereby grants to the Administrative Agent, for itself in its capacity as Administrative Agent hereunder and for the benefit of the Lenders, the LC Issuer, and any Hedge Creditor, a continuing security interest in and a pledge of all of the tangible and intangible personal property and assets of such Borrower, whether now owned or existing or hereafter acquired or arising and wheresoever located including, without limitation: (a) all Accounts, (b) all Inventory, (c) all General Intangibles and Intellectual Property, (e) all Investment Property, (f) all Deposit Accounts and any and all monies credited by or due from the Lenders or any other depository to such Borrower, whether in the Collection Account, any Cash Concentration Account, any other depository account or other account, or any Lockbox, (g) all Pledged Collateral and any Additional Pledged Collateral (arising after the date hereof), (h) all Instruments, Documents, documents of title, policies and certificates of insurance, securities, goods, choses in action, Chattel Paper, cash or other property, to the extent owned by such Borrower or in which such Borrower has an interest, (i) all Collateral of such Borrower which now or hereafter is at any time in the possession or control of any of the Lenders or in transit by mail or carrier to or from any of the Lenders or in the possession of any Person acting in a Lender's behalf, without regard to whether such Lender received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether such Lender had conditionally released the same, and any and all balances, sums, proceeds and credits of such Borrower with such Lender, (j) all accessions to, substitutions for, and all replacements, Products and Proceeds of the herein above-referenced property of the Borrowers described in this Section including, but not limited to, proceeds of insurance policies insuring such property, and proceeds of any insurance, indemnity, warranty or guaranty payable to the Borrowers and (k) all books, records, and other property (including, but not limited to, credit files, programs, printouts, computer software, and disks, magnetic tape and other magnetic media, and other materials and records) of Borrowers pertaining to any such above-referenced property of such Borrower; provided, however, that in no event shall any Borrower be required to pledge more than sixty-five (65%) of voting power of all classes of the capital stock of a Subsidiary that is not a Domestic Subsidiary; and S-20 provided, further, that the foregoing grant of a security interest and pledge shall not include a security interest in or pledge of Excluded Property and provided, finally, that if and when the prohibition which prevents the granting by such Borrower or such Subsidiary to the Lender of a security interest in clause (a) of the definition of Excluded Property, the Lender will be deemed to have, and at all times from and after the date hereof to have had, a security interest in and pledge of such Excluded Property, as the case may be, and that, notwithstanding anything set forth herein to the contrary, the Lender will be deemed to have, and at all times from and after the date hereof to have had, a security interest in and pledge of the proceeds of such Excluded Property. 8.2 PERFECTION. (a) PERFECTION BY FILING; AUTHORIZATION BY DEBTOR. Each Borrower (i) hereby authorizes the Administrative Agent, at any time and from time to time, to file initial financing statements, financing statements, continuation statements, and amendments thereto that comply with and contain any other information required by the UCC for the sufficiency of filing office acceptance of any such initial financing statement, financing statement, continuation statement, or amendment and (ii) otherwise agrees to take such other action and execute such assignments or other instruments or documents, in each case as the Administrative Agent may request, to evidence, perfect, or record the Administrative Agent's security interest in the Collateral, now existing or hereafter arising, or to enable the Administrative Agent to exercise and enforce its rights and remedies under this Agreement with respect to any Collateral. Any such initial financing statement, financing statement, continuation statement, or amendment may be filed by the Administrative Agent on behalf of the Borrowers. (b) OTHER PERFECTION METHODS. The Borrowers shall, at any time and from time to time, take such steps as the Administrative Agent may reasonably request for the Administrative Agent: (i) to obtain a perfected security interest in any Pledged Collateral existing on the date hereof or any Additional Pledged Collateral hereafter arising, (ii) to use commercially reasonable efforts to obtain an acknowledgment, in form and substance reasonably satisfactory to the Administrative Agent, of any bailee, warehouseman or consignee having possession of any of the Collateral, stating that such Person holds such Collateral for the Administrative Agent as secured party, (iii) to obtain "control" of any Investment Property, Deposit Accounts, "letter-of-credit rights", or "electronic chattel paper" (as such terms are defined by the UCC with corresponding provisions thereof defining what constitutes "control" for such items of Collateral), with any agreements establishing control to be in form and substance reasonably satisfactory to the Administrative Agent, and (iv) otherwise to assure the continued perfection and priority of the Administrative Agent's security interest in any of the Collateral and of the preservation of its rights therein. If any Borrower shall at any time acquire a "commercial tort claim" (as such term is defined in the UCC) in excess of One Hundred Thousand Dollars ($100,000), the Borrower Representative shall promptly notify the Administrative Agent thereof in a writing, therein providing a reasonable description and summary thereof, and upon delivery thereof to the Administrative Agent, such Borrower shall be deemed to thereby grant to the Administrative Agent (and such Borrower hereby grants to the Administrative Agent) a security interest and lien in and to such commercial tort claim and all proceeds thereof, all upon the terms of and governed by this Agreement. Nothing contained in this Section shall be construed to narrow the scope of the Administrative Agent's security interests or the perfection or priority thereof or to impair or otherwise limit any of the rights, powers, privileges, or remedies of the Administrative Agent under the Loan Documents. In addition, no Borrower shall maintain any Securities Account or Commodity Account that is not a Control Account and nor shall it grant "control" over any Investment Property to any Person other than the Administrative Agent, except as otherwise expressly permitted hereunder. 8.3 CHANGES AFFECTING PERFECTION. No Borrower shall nor shall it permit any Domestic Subsidiary thereof to, without giving the Administrative Agent at least ten (10) days prior notice thereof: (a) make any change in any location where Inventory of such Borrower or any of its Domestic Subsidiaries valued at more than Five Hundred Thousand Dollars ($500,000) is maintained, or locate any S-21 of such Inventory or at any new locations (other than in connection with sales of Inventory in the ordinary course of business or Inventory in transit), (b) change its state of incorporation or make any change in the location of its chief executive office, principal place of business or the office where its records pertaining to its Accounts and General Intangibles are kept, (c) add any new places of business and (d) make any change in its name or corporate structure. 8.4 REINSTATEMENT. The provisions of this Section 8 and Section 9 of this Agreement shall remain in full force and effect in respect of a Borrower should any petition be filed by or against such Borrower for liquidation or reorganization, should such Borrower become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any part of such Borrower's assets or should any other Financial Impairment relating to such Borrower occur. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall, to the extent permitted by applicable law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 8.5 FURTHER ASSURANCES. Each Borrower will, and will cause each of its Domestic Subsidiaries to, at the expense of the Borrowers, make, execute, endorse, acknowledge, file and/or deliver to the Administrative Agent from time to time such conveyances, financing statements, transfer endorsements, powers of attorney, certificates, and other assurances or instruments and take such further steps relating to the Collateral, now existing or hereafter arising, covered by this Agreement and the other Loan Documents as the Administrative Agent may reasonably require. Each Borrower will execute or cause to be executed and shall deliver the Administrative Agent any and all documents and agreements reasonably deemed necessary by the Administrative Agent to give effect to or carry out the terms or intent of the Loan Documents. The Administrative Agent, in the reasonable exercise of its credit judgment, may order and obtain at the Lender's expense or, if an Event of Default has occurred and is continuing, at the Borrowers' expense, such new or updated title, lien, judgment, patent, trademark and UCC financing statement searches or reports as to the Borrowers or any Collateral as the Administrative Agent may deem reasonably appropriate. The Administrative Agent is authorized to (i) enter into any modification of any Loan Documents which the Administrative Agent reasonably believes is required to conform to the mandatory requirements of local law, or to local customs followed by financial institutions with respect to similar collateral documents involving property located in any particular jurisdiction and (ii) permit the Borrowers to update the Disclosure Schedule; provided, however that any such update must be in substance reasonably acceptable to the Administrative Agent. 8.6 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL. Upon the payment in full of all of the Obligations hereunder, the termination of the LC Exposure of the Lenders hereunder, and the termination of the Revolving Credit Commitments: (a) the security interests and the other Liens and licenses granted to the Administrative Agent shall terminate, (b) all rights to the Collateral shall revert to the Borrower with rights therein, (c) the Administrative Agent will at the sole reasonable cost and expense of the Borrowers, (x) execute and deliver to the Borrowers all documents as the Borrowers may reasonably request to evidence the termination of such security interests and the release of such Collateral, and (y) take such other actions with respect to this Agreement, the other Loan Documents, the Liens created thereby as the Borrowers shall reasonably request, and (d) this Agreement and all of the other Loan Documents will be terminated, and the Borrowers will have no further liabilities or obligations thereunder (except any liabilities and/or obligations which under the terms of this Agreement or any Loan Document survive termination thereof). 8.7 PARTIAL RELEASES. Each of the Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by the Administrative Agent upon any property covered by this Agreement or the other Loan Documents which: (i) constitutes property being sold or disposed of and the Borrower Representative certifies to the Administrative Agent that the sale or disposition is made in compliance with the provisions of this Agreement (and the Administrative Agent may rely in good faith conclusively on any such certificate, without further inquiry), (ii) constitutes property leased to a Borrower or a Subsidiary thereof under a lease which has S-22 expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by such Borrower or such Subsidiary to be renewed or extended, or (iii) constitutes property covered by Permitted Liens with lien priority superior to those Liens in favor of the Administrative Agent hereunder or constitutes property as to which the Required Lenders have otherwise consented in writing to the sale thereof. SECTION 9 COLLATERAL ADMINISTRATION: REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO COLLATERAL. 9.1 GENERAL REPRESENTATIONS AS TO COLLATERAL. Each Borrower represents that the Disclosure Schedule sets forth: (a) the place of incorporation of each Borrower and its Subsidiaries, the principal place of business of each Borrower and the office where the chief executive offices and accounting offices of each Borrower are located, (b) the office where each Borrower keeps its records concerning the Accounts and General Intangibles, (c) the location of each Borrower's registered office and all locations of their respective operations and whether such locations are owned or leased, (d) all locations at which any Inventory or other tangible Collateral of each Borrower are located (other than Inventory in transit), including, without limitation, the location and name of any warehousemen, bailee, processor or consignee at which Collateral is located and good faith estimated dollar value of the Collateral located at each such location, (e) the locations and addresses of all owned or leased real property of each Borrower, (f) the locations of each Borrower's registered offices, other offices and places of business and any locations of Collateral during the five (5) years prior to the Closing Date and (g) Securities Accounts and Commodity Accounts maintained by such Borrower. 9.2 PROTECTION OF COLLATERAL; REIMBURSEMENT. All reasonable expenses of protecting, storing, warehousing, insuring, handling, maintaining, and shipping any Collateral, any and all excise, property, sales, use, or other taxes imposed by any Federal, state, or local authority on any of the Collateral, or in respect of the sale thereof, or otherwise in respect of the Borrowers' business operations shall be borne and paid by the Borrowers. If the Borrowers fail to pay any portion thereof promptly when due, the Administrative Agent, at its option, may, but shall not be required to, pay the same. All sums so paid or incurred by the Administrative Agent for any of the foregoing shall be repayable on demand. Unless otherwise provided by Law, the Administrative Agent shall not be liable or responsible in any way for the safekeeping of any of the Collateral or for any loss or damage thereto or for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency, or other Person whomsoever. 9.3 MAINTENANCE OF INSURANCE WITH RESPECT TO COLLATERAL. Each Borrower will maintain, and shall cause each Subsidiary thereof to maintain, with financially sound and reputable companies reasonably satisfactory to the Administrative Agent, insurance policies: (a) insuring the Inventory and other tangible personal property of the Borrowers, and all equipment subject to any lease, against loss by fire, explosion, theft and such other casualties as are usually insured against by companies engaged in the same or similar businesses, (b) insuring the Borrowers against liability for personal injury, property damage relating to such Inventory, other tangible personal property and equipment covered by any equipment lease, and business interruption, such policies to be in such form and in such amounts and coverage as may be reasonably satisfactory to the Administrative Agent (but in any event be upon such terms as are usual for companies engaged in the same or similar businesses as the Borrowers), (c) naming the Administrative Agent as additional insured and loss payee (as applicable) with respect to such insurance and (d) providing that no cancellation, reduction in amount, change in coverage or expiration shall be effective until at least thirty (30) days after written notice to the Administrative Agent. 9.4 COLLATERAL AUDIT; INSPECTION; APPRAISALS; VERIFICATION. During regular business hours and after reasonable notice to the Borrower Representative, the Administrative Agent or its designee shall have the right (x) to conduct collateral audits of all books, records, journals, orders, receipts, or other correspondence related thereto (and to make extracts or copies thereof as the Administrative Agent may reasonably request), (y) to inspect the Collateral and premises upon which any of the Collateral is located S-23 for the purpose of appraising or verifying the amount, quality, quantity, value, and condition of, or any other matter relating to, the Collateral, and (z) to examine and make copies of each Borrower's financial records and to consult with such Borrower's and its Subsidiaries' officers, directors, accountants, actuaries, trustees and plan administrators, as the case may be, in respect of such Borrower's and its Subsidiaries' financial condition, each of which parties is hereby authorized by the Borrowers to make such information available to the Administrative Agent, to the same extent that it would to the Borrower. The Administrative Agent shall be permitted to require that the Borrower Representative deliver or cause to be delivered to Administrative Agent at the Borrowers' expense written reports or appraisals as to the Collateral of each Borrower and in form, scope and methodology reasonably acceptable to the Administrative Agent and by an appraiser reasonably acceptable to Administrative Agent, addressed to the Administrative Agent and upon which the Administrative Agent is expressly permitted to rely. The Borrowers shall pay for all customary fees and reasonable out-of-pocket expenses incurred by the Administrative Agent with respect to such audits and appraisals up to three times and one time, respectively, during any calendar year; provided, however, that upon the occurrence of an Event of Default which is continuing, the Administrative Agent may exercise such access and other rights, at the Borrowers' expense, at any time (with or without advance notice) and as often as the Administrative Agent deems such action necessary or desirable. In connection with such collateral audits, inspections, and appraisals as outlined above, the Administrative Agent or its designee shall have the right to make test verifications of the validity, amount or any other matter relating to any Accounts and other Collateral and physical verifications of the Inventory and other tangible items of the Collateral at the expense of the Borrowers and in any manner and through any commercially reasonable medium that the Administrative Agent considers advisable, and each Borrower and each Subsidiary thereof agrees to furnish all such assistance and information as the Administrative Agent may require in connection therewith; provided, however, that, unless an Event of Default is then in existence, (i) prior to conducting each set of verifications, Administrative Agent shall consult with the Borrower Representative about the verification process, (ii) such verifications shall not be conducted in the name of the Administrative Agent or otherwise identify the Administrative Agent, and (iii) such verifications shall be conducted in the context of audits conducted pursuant to the terms of this Agreement. 9.5 BORROWING BASE CERTIFICATES. The Borrower Representative shall provide Administrative Agent with the following documents in a form reasonably satisfactory to Administrative Agent: (i) No later than 5:00 p.m. on the 20th day of each calendar month (or on the next Business Day if the 20th is not a Business Day) the Borrower Representative shall deliver to the Administrative Agent a certificate reflecting the calculation of the Borrowers' Eligible Accounts (the calculation of Eligible Accounts reflecting the then most recent month end balance pursuant to Section 9.6 hereof) and Eligible Inventory (the calculation of Eligible Inventory reflecting the then most recent month end balance pursuant to Section 9.9 hereof) as of the last Business Day of the immediately preceding month, satisfactory to the Administrative Agent and substantially in the form attached hereto as Exhibit H (each a "Borrowing Base Certificate"). (ii) In addition, during any period in which the Excess Availability of the Borrowers is less than $15,000,000, the Borrower Representative shall deliver to the Administrative Agent an interim Borrowing Base Certificate no later than 5:00 p.m. on each Wednesday (or the next Business Day if such Wednesday is not a Business Day), reflecting all activity (sales, collections, credits, etc.) impacting the Accounts of the Borrowers for all Business Days of the immediately preceding week. The amount derived as being excluded from Eligible Accounts used on such interim Borrowing Base Certificate shall be the amount that is calculated and updated monthly pursuant to Section 9.5(i) and which is satisfactory to the Administrative Agent. The amount of S-24 Eligible Inventory to be included on such interim Borrowing Base Certificate shall calculated and updated monthly pursuant to Section 9.5(i) and which is satisfactory to the Administrative Agent. (iii) During any period in which the Excess Availability of the Borrowers is less than $15,000,000 or after the occurrence and continuance of an Event of Default, the Administrative Agent may require in good faith credit judgment more frequent delivery of Borrowing Base Certificates. 9.6 REPORTING REGARDING ACCOUNTS. Each Borrower shall keep accurate and complete records of its Accounts and all payments and collections thereon. On or before the twentieth (20th) calendar day of each month, the Borrower Representative shall deliver to the Administrative Agent, in form and substance acceptable to the Administrative Agent, (x) a summary trial balance aged by original invoice date of the Borrowers' Accounts prepared as of the last day of the preceding month reconciled to the period end balance sheet and the Borrowing Base Certificate delivered pursuant to Section 9.5(i) and (y) upon the Administrative Agent's request, a detailed trial balance aged by original invoice date of all then existing Accounts specifying the names, face value and dates of invoices for each Account Debtor obligated on a listed Account), and (z) any other information the Administrative Agent shall reasonably request with respect to such Accounts and its evaluation of such reports. 9.7 DISPUTES AND CLAIMS REGARDING ACCOUNTS. Each Borrower shall use commercially reasonable efforts to settle or adjust promptly all disputes and claims regarding Accounts at no expense to the Administrative Agent, but no discount, credit or allowance outside the ordinary course of business or adverse extension, compromise or settlement shall be granted to any customer or Account Debtor outside the ordinary course of business, and no returns of merchandise outside the ordinary course of business shall be accepted by such Borrower without the Administrative Agent's consent which consent shall not be unreasonably withheld or delayed. 9.8 INVENTORY MAINTENANCE COVENANTS (a) Each Borrower shall at all times maintain, and shall cause each Domestic Subsidiary thereof to maintain, inventory records reasonably satisfactory to the Administrative Agent, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, such Borrower's cost therefor and daily withdrawals therefrom and additions thereto, (b) no Borrower shall, nor shall it permit any Subsidiary thereof to, sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate such Borrower to repurchase such Inventory except for the right of return given to retail customers of such Borrower in the ordinary course of the business of such Borrower in accordance with the then current return policy of such Borrower; (c) each Borrower shall keep the Inventory in good and marketable condition; (d) no Borrower shall, without prior written notice to the Administrative Agent or the specific identification of such Inventory in a report with respect thereto provided by the Borrower Representative to the Administrative Agent, acquire or accept any Inventory on consignment or approval. 9.9 REPORTING REGARDING INVENTORY. The Borrower Representative shall deliver to the Administrative Agent a summary Inventory listing in detail and scope reasonably satisfactory to the Administrative Agent no later than the twentieth (20th) calendar day after the end of each month based upon month-end balances reconciled to the period end balance sheet and the Borrowing Base Certificate delivered pursuant to Section 9.5(i) and accompanied by an Inventory certification in form and substance acceptable to the Administrative Agent, and the Borrower Representative will make available to the Administrative Agent a perpetual Inventory listing (and any reconciliations thereof to period end balance sheets performed by the Borrower Representative) upon request. The Borrower Representative shall deliver monthly to the Administrative Agent Inventory records, broken down into such detail and with such categories as the Administrative Agent shall deem necessary to determine the level of Eligible Inventory and Inventory which is deemed ineligible). The values shown on reports of Inventory shall be at the lower of cost or market value determined in accordance with the Borrowers' usual cost accounting system, consistently applied. During any period in which the Excess Availability of the Borrowers is less S-25 than $15,000,000 or after the occurrence and continuance of an Event of Default, the Borrower Representative shall provide such other reports as to the Inventory as the Administrative Agent shall reasonably request from time to time. 9.10 REPORTING REGARDING ACCOUNTS PAYABLE. The Borrower Representative shall furnish the Administrative Agent with, on or before the twentieth (20th) day of each month from and after the date of this Agreement, in form and substance consistent with customary practice for transactions of this type as determined by the Administrative Agent, a summary accounts payable aging of the Borrowers' accounts payable dated as of the last day of the preceding month (and upon the Administrative Agent's request, detail on all then existing accounts payable specifying the names, face value and dates of invoices for each account payable). 9.11 STATUS OF COLLATERAL. The Borrower Representative agrees to advise the Administrative Agent promptly, in sufficient detail, upon becoming aware of: (a) any substantial change relating to the type, quantity or quality of the Collateral (other than the ordinary course purchase and sale of Inventory consistent with past practice), or (b) any event which, singly or in the aggregate with other such events, could reasonably be expected to have an adverse effect on Collateral values in excess of Two Hundred Fifty Thousand Dollars ($250,000), or (c) any event which, singly or in the aggregate with other such events, could reasonably be expected to adversely effect the security interests granted to the Administrative Agent herein in excess of Two Hundred Fifty Thousand Dollars ($250,000). 9.12 LIEN WAIVERS, LANDLORD WAIVERS, WAREHOUSE RECEIPTS. In the event any Inventory of a Borrower is at any time located on any real property not owned by such Borrower, such Borrower will use commercially reasonable efforts to obtain and maintain in effect at all times while any such Inventory is so located valid and effective lien waivers in form and substance reasonably satisfactory to the Administrative Agent, whereby each owner, or landlord having an interest in such real property shall disclaim any interest in such Inventory and shall agree to allow the Administrative Agent reasonable access to such real property in connection with any enforcement of the security interest granted hereunder. In the event that a Borrower stores any Inventory with a bailee, warehouseman or similar party, such Borrower will concurrently therewith use commercially reasonable efforts to cause any such bailee, warehouseman or similar party to issue and deliver to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, warehouse receipts therefor in the Administrative Agent's name. 9.13 DEPOSIT ACCOUNTS. Other than (a) the Lockboxes, Collection Accounts and the Cash Concentration Accounts and (b) those other operating accounts (whether checking or deposit accounts) disclosed on the Disclosure Schedule (which the Borrowers shall use solely for the purpose of disbursing monies of the Borrowers or any Domestic Subsidiary thereof and not for collecting or depositing Collections) which have been consented to by the Administrative Agent from time to time (such payroll, medical, and other operating accounts being referred to herein as "Permitted Accounts"), no Borrower shall maintain nor permit any other Person to maintain a post office box, Deposit Account or checking account receiving Collections or otherwise holding monies of the Borrowers or any Domestic Subsidiary thereof. 9.14 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount in excess of One Hundred Thousand Dollars ($100,000) in the aggregate payable under or in connection with any of the Collateral owned by any Borrower or any Domestic Subsidiary thereof shall be or become evidenced by an Instrument or Chattel Paper, such Borrower or such Domestic Subsidiary shall immediately deliver such Instrument or Chattel Paper to the Administrative Agent, duly endorsed in a manner reasonably satisfactory to the Administrative Agent, or, if consented to by the Administrative Agent, shall mark all such Instruments and Chattel Paper with the following legend: "This writing and the obligations evidenced or secured hereby are subject to the security interest of KeyBank National Association, as Administrative Agent" S-26 9.15 COMPLIANCE WITH TERMS OF ACCOUNTS; GENERAL INTANGIBLES. The Borrowers will perform and comply in all material respects with all obligations in respect of Accounts, Chattel Paper, General Intangibles and under all other contracts and agreements to which it is a party or by which it is bound relating to the Collateral where failure to so comply would result in a Material Adverse Effect, unless the validity thereof is being contested in good faith by appropriate proceedings and such proceedings do not involve the material danger of the sale, forfeiture or loss of the Collateral which is the subject of such proceedings or the priority of the lien in favor of the Administrative Agent thereon. 9.16 REPRESENTATIONS AND WARRANTIES REGARDING PLEDGED COLLATERAL. With respect to the Pledged Collateral: (a) except for the Liens permitted to exist on the Collateral pursuant to this Agreement, each Borrower is the record and beneficial owner of the Pledged Collateral pledged by it hereunder constituting Instruments or Certificated Securities and is the entitlement holder of all such Pledged Collateral constituting Investment Property held in a Securities Account, (b) all of the Pledged Stock, Pledged Partnership Interests and Pledged LLC Interests have been duly and validly issued and are fully paid and nonassessable; (c) all Pledged Stock, Pledged Partnership Interests and Pledged LLC Interests of each Borrower as of the Closing Date are listed on the Disclosure Schedule; (e) all Pledged Collateral consisting of Certificated Securities or Instruments has been delivered to the Administrative Agent; (f) all Pledged Collateral held by a Securities Intermediary in a Securities Account is in a Control Account; (h) other than the Pledged Partnership Interests and the Pledged LLC Interests that constitute General Intangibles, there is no Pledged Collateral other than that represented by Certificated Securities or Instruments in the possession of the Administrative Agent or that consisting of Financial Assets held in a Control Account; (i) no Person other than the Administrative Agent has Control over any Investment Property of any Borrower; and (j) the LLC Agreement governing any Pledged LLC Interests and the Partnership Agreement governing any Pledged Partnership Interests provides that, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall be entitled to exercise all of the rights of the Borrowers granting the security interest therein, and that a transferee or assignee of a membership interest or partnership interest of such LLC or Partnership, as the case may be, shall become a member or partner, as the case may be, of such LLC or Partnership. SECTION 10 GENERAL REPRESENTATIONS AND WARRANTIES. Each Borrower represents and warrants to the Administrative Agent, the Lenders and the LC Issuer as follows: 10.1 EXISTENCE. Each Borrower and each Subsidiary are duly organized, validly existing and in good standing under the laws of their respective states of incorporation. As of the Closing Date, no Borrower has any Subsidiaries other than as listed in the Disclosure Schedule. Each Borrower and each Subsidiary are duly qualified or licensed to transact business in their respective jurisdictions of organization and in each additional jurisdiction where such qualification or licensure is necessary, except where failure to do so will not have a Material Adverse Effect. 10.2 AUTHORIZATION. The execution, delivery and performance of this Agreement and the other Loan Documents to which any Borrower is a party: (a) are within such Borrower's corporate or limited liability company powers and (b) have been duly authorized, and are not in contravention of Law or the terms of such Borrower's Charter Documents or, except as set forth on the Disclosure Schedule thereto, of any indenture or other document or instrument evidencing borrowed money or any other material agreement or undertaking to which such Borrower is a party or by which it or its property is bound. 10.3 ENFORCEABILITY. This Agreement and the other Loan Documents constitute the legal, valid and binding obligations of any Borrower and any Domestic Subsidiary thereof which is a party, enforceable against such Borrower and such Domestic Subsidiary in accordance with the terms thereof, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles including principles of S-27 commercial reasonableness, good faith and fair dealing (whether enforcement is sought by proceedings in equity or at law). 10.4 TITLE TO COLLATERAL; LIENS; TRANSFERS. Each Borrower has good and indefeasible title to and ownership of the Collateral, free and clear of all Liens, except for Liens permitted under Section 11.3(d). 10.5 LIEN PERFECTION AND PRIORITY. From and after the Closing Date, by reason of the filing of financing statements, assignments of financing statements and termination statements in all requisite governmental offices, this Agreement and the other Loan Documents will create and constitute a valid and perfected first priority security interest (except as permitted by this Agreement or the other Loan Documents) in and Lien on that portion of the Collateral which can be perfected by such filing and by the execution and delivery of this Agreement and the other Loan Documents, which security interest will be enforceable against the Borrowers and all third parties as security for payment of all Obligations. From and after the Closing Date, by reason of the delivery to the Administrative Agent of all Collateral consisting of Instruments and Certificated Securities, in each case properly endorsed for transfer to the Administrative Agent or in blank and assuming the Administrative Agent had no notice of an adverse claim, this Agreement and the other Loan Documents will create and constitute a valid and perfected first priority security interest (except as permitted by this Agreement or the other Loan Documents) in and Lien on that portion of the Collateral which can be perfected by such possession and endorsement and by the execution and delivery of this Agreement and the other Loan Documents, which security interest will be enforceable against the Borrowers and all third parties as security for payment of all Obligations. 10.6 LITIGATION; PROCEEDINGS. As of the Closing Date, except as set forth in the Disclosure Schedule, there are no actions, suits, investigations or proceedings, and no orders, writs, injunctions, judgments or decrees, now pending, existing or, to the knowledge of any Borrower, threatened against such Borrower or any of its Subsidiaries affecting any property of such Borrower or any Subsidiary thereof, this Agreement or any other Loan Document, whether at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any federal, state, local or foreign government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators. There is no action, suit, investigation, proceeding, order, writ, injunction, or decree against any Borrower or any Subsidiary thereof that, if adversely determined, when taken singly or with all other actions, suits, investigations, proceedings, orders, writs, injunctions or decrees currently pending, could reasonably be expected to result in a Material Adverse Effect. 10.7 TAXES. Each Borrower has, and each Subsidiary thereof has, filed all federal, state, local and foreign tax returns which are required to be filed by any of them, and, except to the extent permitted by Section 11.2(i) of this Agreement, have paid all taxes and assessments due and payable as shown on such returns, including interest, penalties and fees; provided, however, that no such tax, assessment, charge or levy need be paid so long as and to the extent that: (i) it is contested in good faith and by timely and appropriate proceedings effective, during the pendency of such proceedings, to stay the enforcement of such taxes, assessments and governmental charges and levies and (x) such stay prevents the creation of any Lien (other than inchoate Liens for property taxes) or (y) a bond has been provided which prevents the creation of any Lien (other than inchoate Liens for property taxes) and (ii) appropriate reserves, as required by GAAP, are made on the books of each Borrower and its Subsidiaries, as applicable. 10.8 CONSENTS; APPROVALS. Except as set forth on the Disclosure Schedule, no action, consent or approval of, registration or filing with or any other action by any governmental authority or other Person is or will be required in connection with the transactions contemplated by this Agreement and the other Loan Documents, except such as have been made or obtained and are in full force and effect and except for the filings required to create or perfect the Liens in favor of the Administrative Agent that are contemplated hereby and by the other Loan Documents. S-28 10.9 LAWFUL OPERATIONS. The operations of each Borrower and each Subsidiary thereof are in compliance in all material respects with applicable requirements imposed by Law, including without limitation, occupational safety and health laws, and zoning ordinances, except to the extent any such noncompliance, when taken singly or with all other such noncompliance, has not resulted, and could not reasonably be expected to result in a Material Adverse Effect. 10.10 ENVIRONMENTAL COMPLIANCE. Except as disclosed on the Disclosure Schedule, (a) each Borrower and each Subsidiary thereof are in compliance with Environmental Laws except for any noncompliance, when taken singly or with all other such noncompliance, has not resulted, and could not reasonably be expected to result, in a Material Adverse Effect; (b) with respect to any real property owned or leased by each Borrower or each Subsidiary thereof (the "Properties"), there is no pending or, to the knowledge of such Borrower, threatened Environmental Claim against such Borrower or such Subsidiary, or any other environmental condition with respect to any Property which Environmental Claim or condition, when taken singly or with all other such Environmental Claims or conditions, has not resulted, and could not reasonably be expected to result, in a Material Adverse Effect; (c) each Borrower and each Subsidiary thereof are in compliance with all Environmental Permits, except to the extent any such noncompliance, when taken singly or together with all other instances of such noncompliance, has not resulted, and could not reasonably be expected to result, in a Material Adverse Effect; (d) no Property is listed or to the knowledge of any Borrower, formally proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or state list of sites requiring investigation or clean-up and to the knowledge of the Borrowers, no Borrower has, nor has any Subsidiary thereof, directly transported or directly arranged for the transportation of any Hazardous Material to any such listed location or location which is proposed for such listing, which could reasonably be expected to result in such Borrower or such Subsidiary incurring liabilities under Environmental Laws in excess of Five Hundred Thousand Dollars ($500,000). 10.11 ENVIRONMENTAL LAWS AND PERMITS. Without limiting the representations made in Section 10.10 above, to the best knowledge of the Borrowers, there are no circumstances with respect to the Property or operations of any Borrower or any Subsidiary thereof that could reasonably be expected to: (i) form the basis of an Environmental Claim against such Borrower or such Subsidiaries which would constitute a violation of Section 11.2(e) hereof, or (ii) cause any Property owned, leased or funded by any Borrower or any such Subsidiaries to be subject to any material restrictions on ownership, occupancy, use or transferability under any applicable Environmental Law. 10.12 ERISA. The Disclosure Schedule sets forth a list of all of the Employee Benefit Plans of each Borrower, each Subsidiary thereof, and each ERISA Affiliate thereof as of the Closing Date. Each Employee Benefit Plan of each Borrower and each Subsidiary thereof which is intended to qualify under Section 401 of the Code does so qualify, and any trust created thereunder is exempt from tax under the provision of Section 501 of the Code, except where such failures in the aggregate would not have a Material Adverse Effect. No Accumulated Funding Deficiency exists in respect of any Employee Benefit Plan that is subject to Code Section 412 and no Reportable Event has occurred in respect of any Employee Benefit Plan that is subject to Title IV of ERISA which is continuing and which, in the case of such Accumulated Funding Deficiency or Reportable Event, when taken singly or with all other such Reportable Events or Accumulated Funding Deficiencies, has resulted, or could reasonably be expected to result, in a Material Adverse Effect, or has otherwise resulted, or could reasonably be expected to result, in liabilities or claims against any Borrower or any Subsidiary thereof in an amount exceeding Five Hundred Thousand Dollars ($500,000). No "prohibited transactions" (as defined in Section 406 of ERISA or Section 4975 of the Code), have occurred which, when taken singly or with all other such "prohibited transactions," has resulted, or could reasonably be expected to result, in a Material Adverse Effect, or has otherwise resulted, or could reasonably be expected to result, in liabilities or claims against any Borrower or any Subsidiary in an amount exceeding Five Hundred Thousand Dollars ($500,000). No Borrower, nor any Subsidiary thereof, nor any ERISA Affiliate thereof, has: (i) had an obligation to contribute to any Multiemployer Plan except as disclosed in the Disclosure Schedule or (ii) incurred or reasonably expects to incur any liability for the withdrawal from such a Multiemployer Plan which S-29 withdrawal liability, when taken singly or with all other such withdrawal liabilities, has resulted, or could reasonably be expected to result, in a Material Adverse Effect, or has otherwise resulted, or could reasonably be expected to result, in liabilities or claims against any Borrower or any Subsidiary thereof in an amount exceeding Five Hundred Thousand Dollars ($500,000). 10.13 AGREEMENTS; ADVERSE OBLIGATIONS; LABOR DISPUTES. The Disclosure Schedule sets forth a list of all Material Business Agreements of each Borrower and each Subsidiary thereof as of the Closing Date. As of the Closing Date, the Material Business Agreements of such Borrower and such Subsidiary are in full force and effect and have not been revoked or otherwise modified since the execution thereof, except as disclosed on the Disclosure Schedule. Such Borrower and such Subsidiary are in material compliance with the terms of the Material Business Agreements. No Borrower is, nor is any Subsidiary, subject to any contract, agreement, or corporate or limited liability company restriction which could reasonably be expected to have a Material Adverse Effect. No Borrower is, nor is any Subsidiary thereof, to the knowledge of such Borrower or such Subsidiary, party to any labor dispute (including any strike, slowdown, walkout or other concerted interruptions by its employees, but excluding grievance disputes) which could, individually or in the aggregate, be reasonably expected to result in a Material Adverse Effect. There are no material strikes, slow downs, walkouts or other concerted interruptions of operations by employees of any Borrower or any Subsidiary thereof whether or not relating to any labor contracts. 10.14 FINANCIAL STATEMENTS; PROJECTIONS. (a) FINANCIAL STATEMENTS. The Borrower Representative has furnished to the Administrative Agent and the Lenders complete and correct copies of (i) the audited balance sheets of Hawk Corporation and its consolidated Subsidiaries for the Fiscal Year ending December 31, 2003, and the related statements of income, shareholder's equity, and cash flows, and, as applicable, changes in financial position or cash flows for such Fiscal Year, and the notes to such financial statements, reported upon by Ernst & Young LLP, Independent Registered Public Accounting Firm, and (ii) the internal unaudited balance sheets of Hawk Corporation and its consolidated Subsidiaries for the Fiscal Month ending August 31, 2004, and the related statements of income and shareholder's equity for the eight (8) months ended August 31, 2004, certified by an executive officer of the Borrower Representative. All such financial statements: (a) have been prepared in accordance with GAAP, applied on a consistent basis (except as stated therein), with Hawk Corporation's financial statements from prior Fiscal Years and (b) fairly present in all material respects the financial condition of the Hawk Corporation and its consolidated Subsidiaries as of the respective dates thereof and the results of operations for the respective fiscal periods then ending, subject in the case of any such financial statements which are unaudited, to the absence of any notes to such financial statements, to the absence of information on discontinued operations in such financial statements, and to normal audit adjustments, none of which are known to or could reasonably be expected to involve a Material Adverse Effect. No Borrower has experienced, nor has any Subsidiary thereof experienced, an event or circumstance that would have a Material Adverse Effect since the August 31, 2004 financial statements, nor has there been any material change in a Borrower's or any of its Subsidiaries' accounting procedures used therein. Hawk Corporation and its consolidated Subsidiaries did not as of December 31, 2003, and will not as of the Closing Date, after giving effect to the Advances made on the Closing Date, have any material contingent liabilities, material liabilities for taxes, unusual and material forward or long-term commitments or material unrealized or anticipated losses from any unfavorable commitments, except those reflected in such financial statements or the notes thereto in accordance with GAAP or, to the extent not required to be reflected by GAAP, are disclosed in the Disclosure Schedule. (b) FINANCIAL PROJECTIONS. The Borrower Representative has delivered to the Administrative Agent and the Lenders prior to the execution and delivery of this Agreement a copy of financial and business projections for Hawk Corporation and its consolidated Subsidiaries (including balance sheet, income and cash flow and other forecasts) prepared by the Borrower Representative (the S-30 "Financial Projections") with respect to Hawk Corporation and its Subsidiaries for the fiscal years therein covered. Such Financial Projections for Hawk Corporation and its Subsidiaries submitted to the Administrative Agent were prepared in good faith and were based upon assumptions which the Borrower Representative believed to be reasonable (as of the dates the Financial Projections were prepared). No facts are known to the executive officers of the Borrower Representative at the date hereof which, if reflected in the Financial Projections, would result in a material adverse change in the projected assets, liabilities, results of operations, or cash flows reflected therein. 10.15 INTELLECTUAL PROPERTY. Each Borrower and each Subsidiary thereof own or have the legal and valid right to use, sell, and license all Intellectual Property necessary for the operation of its business as presently conducted, free from any Lien not permitted under Section 11.3(d) hereof and free of any restrictions which could reasonably be expected to have a Material Adverse Effect on the operation of its business as presently conducted. Except as set forth in the Disclosure Schedule, no Borrower nor any Subsidiary thereof: (a) owns any Intellectual Property, (b) licenses any Intellectual Property (as licensor) necessary for the operation of its business, or (c) is a party to any Material License Agreement with respect to such Intellectual Property. 10.16 STRUCTURE; CAPITALIZATION. The Borrower Representative has delivered to the Lender true and correct copies of Charter Documents relating to each of the Borrower and their Subsidiaries. As of the Closing Date, the record and beneficial owners of the equity interests of each Borrower are as described in the Disclosure Schedule. As of the Closing Date, no Borrower has any Subsidiaries other than as described in the Disclosure Schedule. Except as set forth in the Disclosure Schedule, there are no options, warrants or other rights issued or granted by any Borrower or any Subsidiary to acquire any of the capital stock of any Borrower. Each Borrower has and will continue to have a Fiscal Year end on the last day of December in each calendar year. 10.17 VALUE; SOLVENCY. Each of the Borrowers has received fair consideration and reasonably equivalent value for the Obligations and liabilities incurred to the Lenders hereunder. Hawk Corporation is Solvent as of the Closing Date and after giving effect to the transactions contemplated hereby. The Borrowers, taken as a whole, are Solvent as of the Closing Date and after giving effect to the transactions contemplated hereby, the Borrowers, taken as a whole, are Solvent. 10.18 INVESTMENT COMPANY ACT STATUS. No Borrower is, nor is any Subsidiary thereof, an "investment company", or an "affiliated person" of, or a "promoter" or "principal underwriter" for an "investment company" (as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C.Section 80(a)(1), et seq.). 10.19 Blocked Person. No Borrower, nor any Affiliate of any Borrower, is any of the following (each a "Blocked Person"): (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224; (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order No. 13224; (e) a Person that is named as a "specially designated national" on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official S-31 website or any replacement website or other replacement official publication of such list; or (f) a Person who is affiliated or associated with a Person listed above. No Borrower or any Affiliate thereof (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224. 10.20 REGULATION U/REGULATION X COMPLIANCE. The proceeds of Advances made to the Borrowers pursuant to this Agreement will be used only for the purposes contemplated by Section 11.2(g) hereof. No part of the proceeds of Advances made to the Borrowers pursuant to this Agreement will be used for a purpose which violates any applicable law, rule, or regulation including, without limitation, the provisions of Regulation U or X of the Board of Governors of the Federal Reserve System, as amended. 10.21 FULL DISCLOSURE. None of the written information, exhibits or reports taken as a whole furnished by the Borrowers to the Administrative Agent and the Lenders hereunder contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained therein not materially misleading in light of the circumstances and purposes for which such information was provided. 10.22 EXCESS AVAILABILITY. The Borrowers shall have Excess Availability on the Closing Date of Ten Million Dollars ($10,000,000) after taking into account (i) all Revolving Credit Advances advanced on the Closing Date and LC Exposure of the Borrower on the Closing Date plus (ii) payment of transaction fees and expenses. SECTION 11 COVENANTS OF THE BORROWER. So long as any of the Obligations hereunder remain outstanding, or any LC Exposure hereunder remains outstanding, or the Lenders have any Revolving Credit Commitment or LC Issuer has any obligation to issue Letters of Credit hereunder, the Borrowers will comply, and will cause each of its Subsidiaries to comply, with the following provisions: 11.1 REPORTING AND NOTICE COVENANTS. (a) MONTHLY FINANCIAL STATEMENTS. The Borrower Representative shall furnish to the Administrative Agent and each Lender, as soon as practicable and in any event within twenty (20) days after the end of each Fiscal Month of the Borrowers, internal unaudited consolidated balance sheets of Hawk Corporation and its consolidated Subsidiaries as of the end of that Fiscal Month and the related statements of income, shareholder's equity for such Fiscal Month each prepared in accordance with GAAP, all in reasonable detail and certified, subject to normal year-end audit adjustments, absence of notes and absence of information on discontinued operations, by a Responsible Officer or the non-officer controller of the Borrower Representative. (b) QUARTERLY FINANCIAL STATEMENTS. The Borrower Representative shall furnish to the Administrative Agent and each Lender, as soon as practicable and in any event within forty-five (45) days after the end of each Fiscal Quarter of the Borrowers, unaudited consolidated balance sheets of Hawk Corporation and its consolidated Subsidiaries as of the end of that Fiscal Quarter and the related statements of income, shareholder's equity and cash flow for such Fiscal Quarter each prepared on an comparative basis with the comparable period during the prior year and in accordance with GAAP, all in reasonable detail and certified, subject to normal year-end audit adjustments and absence of notes, by a Responsible Officer or the non-officer controller of the Borrower Representative. S-32 (c) ANNUAL FINANCIAL STATEMENTS. The Borrower shall furnish to the Administrative Agent and each Lender, as soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year of the Borrowers, a complete copy of the annual audit report of Hawk Corporation and its consolidated Subsidiaries (including, without limitation, all consolidated financial statements thereof and the notes thereto) for that Fiscal Year: (i) audited and certified (without qualification as to GAAP), by Ernst & Young LLP or other independent public accountants of recognized national standing selected by Hawk Corporation and reasonably acceptable to the Required Lenders, and (ii) accompanied by the accountants' management report and any management letters relating thereto, if any, and an opinion of such accountants, which opinion shall be unqualified as to scope or as to Hawk Corporation being a going concern and shall (A) state that such accountants audited such consolidated financial statements in accordance with generally accepted auditing standards, that such accountants believe that such audit provides a reasonable basis for their opinion, and that in their opinion such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Hawk Corporation and its consolidated Subsidiaries as at the end of such Fiscal Year and the consolidated results of their operations and cash flows for such Fiscal Year in conformity with generally accepted accounting principles, and (B) contain such statements as are customarily included in unqualified reports of independent accountants in conformity with the recommendations and requirements of the American Institute of Certified Public Accountants (or any successor organization). (d) OFFICER'S CERTIFICATE. The Borrower Representative shall furnish to the Administrative Agent and each Lender, concurrently with the financial statements delivered in connection with Sections 11.1(b)and 11.1(c), a certificate of a Responsible Officer or the non-officer controller of the Borrower Representative, in his or her capacity as a Responsible Officer, setting forth the computations necessary to determine whether the Borrowers and their consolidated Subsidiaries are in compliance with the financial covenants set forth in Section 11.4 of this Agreement and certifying, concurrently with the financial statements delivered in connection with Sections 11.1(a), 11.1(b)and 11.1(c), that: (A) those financial statements fairly present in all material respects the financial condition and results of operations of the Borrowers and their consolidated Subsidiaries (to the knowledge of the Responsible Officer with respect to Section 11.1(a))subject in the case of interim financial statements, to routine year-end audit adjustments, absence of notes and absence of information on discontinued operations (with respect to Sections 11.1(a) and 11.1(b)) and (B) no Potential Default or Event of Default then exists or, if any Potential Default or Event of Default does exist, a brief description of the Potential Default or Event of Default and the Borrowers' intentions in respect thereof. (e) COMPANY REPORTS. The Borrower Representative shall deliver to the Administrative Agent, no later than the date of the sending or filing thereof, copies of all proxy statements, financial statements and reports that Hawk Corporation or any of its Subsidiaries send to their respective stockholders generally, and copies of all regular, periodic and special reports, and all registration statements, and amendments thereto, that Hawk Corporation or any of its Subsidiaries file with the Securities and Exchange Commission (or any foreign national or provincial securities commission) or any governmental authority that may be substituted therefor, or with any national securities exchange. (f) ANNUAL PROJECTIONS. On or before the end of the first month of each Fiscal Year of the Borrowers, the Borrower Representative shall furnish to the Administrative Agent and each Lender projected monthly consolidated balance sheets, income statements, cash flow statements and calculation of Excess Availability for such Fiscal Year with respect to Hawk Corporation and its consolidated Subsidiaries. (g) OTHER INFORMATION. During any period in which the Excess Availability of the Borrowers is less than $15,000,000 or after the occurrence and continuance of an Event of Default, the Borrower Representative shall furnish to the Administrative Agent and each Lender, promptly upon the Administrative Agent's written request, such other information about the financial condition, properties S-33 and operations of the Borrower and each of its Subsidiaries and any of their Employee Benefit Plans as the Administrative Agent or any Lender may from time to time reasonably request. (h) NOTICES. The Borrowers will cause a Responsible Officer of the Borrower Representative to give the Administrative Agent and each Lender prompt written notice whenever (and in any event within ten (10) Business Days after a Responsible Officer of the Borrower Representative knows or should have known ): (i) any Borrower or any of its Subsidiaries receives notice from any court, agency or other governmental authority of any alleged non-compliance with any Law or order which would reasonably be expected to have or result in, if such noncompliance is found to exist, a Material Adverse Effect, (ii) the Internal Revenue Service or any other federal, state or local taxing authority shall allege any default by any Borrower or any of its Subsidiaries in the payment of any tax material in amount or shall threaten or make any assessment in respect thereof which, if resulting in a determination adverse to such Borrower or such Subsidiary, would reasonably be expected to have or result in a Material Adverse Effect, (iii) any litigation or proceeding shall be brought against any Borrower or any of its Subsidiaries before any court or administrative agency which would reasonably be expected to have or result in a Material Adverse Effect, (iv) any material adverse change or development in connection with any such litigation proceeding, (v) such Responsible Officer reasonably believes that any Potential Default or Event of Default has occurred or that any other representation or warranty made herein shall for any reason have ceased to be true and complete in any material respect or (vi) any notice required by Section 12.5 of this Agreement. (i) NOTICE OF DEFAULT UNDER ERISA. If any Borrower shall receive notice from any ERISA Regulator or otherwise have actual knowledge that a Default under ERISA exists with respect to any Employee Benefit Plan, the Borrower Representative shall notify the Administrative Agent and each Lender of the occurrence of such Default under ERISA, within ten (10) Business Days after receiving such notice or obtaining such knowledge (the disclosures contained in the Disclosure Schedule being such notice of each Default under ERISA disclosed therein to the extent of the disclosure therein) and shall: (i) so long as the Default under ERISA has not been corrected to the satisfaction of, or waived in writing by the party giving notice, the Borrowers shall thereafter treat as a current liability (if not otherwise so treated) all liability of such Borrower or its Subsidiaries that would arise by reason of the termination of or withdrawal from such Employee Benefit Plan if such plan was then terminated, and (ii) within forty-five (45) days of the receipt of such notice or obtaining such knowledge, furnish to the Administrative Agent and each Lender a current consolidated balance sheet of the Borrowers with the amount of the current liability referred to above. (j) ENVIRONMENTAL REPORTING. The Borrower Representative shall promptly deliver to the Administrative Agent and each Lender, and in any event within fifteen (15) Business Days after receipt or transmittal by any Borrower or any Subsidiary thereof, as the case may be, copies of all material communications with any government or governmental agency relating to Environmental Claims and all material communications with any other Person relating to Environmental Claims brought against such Person which could, in either case, if successfully brought against such Borrower or such Subsidiary, reasonably be expected to result in a Material Adverse Effect. (k) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY. The Borrower Representative shall (i) once in each calendar year beginning in January, 2005, request a current statement of withdrawal liability from each Multiemployer Plan to which any Borrower or any ERISA Affiliate thereof is or has been obligated to contribute during such year and (ii) within fifteen (15) days after such Borrower receives such current statement, transmit a copy of such statement to the Administrative Agent and each Lender. 11.2 AFFIRMATIVE COVENANTS. (a) EXISTENCE. Each Borrower shall, and shall cause each of its Subsidiaries to, at all times maintain its corporate or limited liability company existence, rights and franchises, except as S-34 permitted under Section 11.3(a), maintain its good standing in the jurisdiction of its organization, and qualify as a foreign corporation or limited liability company in each jurisdiction where failure to qualify could reasonably be expected to result in a Material Adverse Effect. (b) FINANCIAL RECORDS. Each Borrower shall maintain at all times, true and complete financial records with respect to such Borrower and its Subsidiaries in accordance with GAAP, consistently applied, and, without limiting the generality of the foregoing, make appropriate accruals to reserves for estimated and contingent losses and liabilities as required under GAAP. (c) FINANCIAL EXAMINATIONS AND REVIEW. Each Borrower shall, at the Lenders expense, or if an Event of Default has occurred and is continuing, at the Borrowers' expense, upon reasonable prior written notice from the Administrative Agent or any Lender to such Borrower permit, and shall cause each of its Subsidiaries to permit, the Administrative Agent or such Lender, during normal business hours in the presence of an officer of such Borrower: (i) to examine, with the guidance and supervision of such Borrower, such Borrower's financial records and to make copies of and extracts from such records and (ii) to consult with such Borrower's and its Subsidiaries' officers, directors, accountants, actuaries, trustees and plan administrators, as the case may be, in respect of such Borrower and its Subsidiaries' financial condition, each of which parties is hereby authorized by such Borrower to make such information available to the Administrative Agent or such Lender, to the same extent that it would to such Borrower. (d) COMPLIANCE WITH LAW. Each Borrower will comply, and will cause each Subsidiary to comply, in all respects with all applicable provisions of all Laws (whether statutory, administrative, judicial or other and whether federal, state or local and excluding Environmental Laws to the extent addressed in Section 11.2(e) of this Agreement) and every lawful governmental order; provided, however, that any alleged noncompliance shall not be deemed to be a violation of this Section 11.2(d) so long as: (i) such noncompliance by such Borrower or such Subsidiaries has not resulted or would not reasonably be expected to result in a Material Adverse Effect and the alleged non-compliance is contested in good faith by timely and appropriate proceedings effective to stay, during the pendency of such proceedings, any enforcement action, and (ii) such Borrower or such Subsidiary has established appropriate reserves and taken such other appropriate measures as may be required under GAAP. (e) COMPLIANCE WITH ENVIRONMENTAL LAWS. Each Borrower will use and operate its facilities and properties, and cause each of its Subsidiaries to use and operate its respective facilities and properties, in compliance with Environmental Laws which when taken singly or with all other such obligations, has resulted or could reasonably be expected to result in a Material Adverse Effect. Each Borrower will keep, and will cause each of its Subsidiaries to keep, all necessary Environmental Permits in effect and remain in compliance therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, except to the extent that any such lack of effectiveness or non-compliance, when taken singly or with all other instances lack of effectiveness or non-compliance, has not resulted and could not reasonably be expected to result in a Material Adverse Effect. No Borrower shall suffer to exist, nor shall it permit any of its Subsidiaries to suffer to exist, an environmental condition which, when taken singly or with all other such conditions, has resulted or could reasonably be expected to result in a Material Adverse Effect. No Borrower shall suffer or permit the aggregate of all liabilities or claims against such Borrower and its Subsidiaries referenced in this Section and Section 10.10, to result or reasonably be expected to result in a Material Adverse Effect. (f) PROPERTIES. Subject to Section 11.3(a) of this Agreement, each Borrower shall maintain, in all material respects, and shall cause each of its Subsidiaries to maintain, in all material respects, all assets necessary to its continuing operations in good working order and condition, ordinary wear and tear excepted, and shall refrain, and shall cause each of its Subsidiaries to refrain, from wasting or destroying any such assets or any part thereof. S-35 (g) USE OF PROCEEDS. The proceeds of the Loans shall be used: (i) to fund working capital and other general business purposes of the Borrowers (other than to repurchase, prepay, defease, redeem, or otherwise acquire any of the Senior Notes), (ii) to reimburse drawings under Letters of Credit issued for the account of the Borrowers, (iii) to refinance the Borrowers' existing credit facilities, (iii) to fund redemptions of the Untendered Notes as expressly permitted by Section 11.3(f) of this Agreement and (v) to pay the transaction costs and expenses in connection with the transactions contemplated hereby. (h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS. Each Borrower shall perform and observe, and shall cause each of its Subsidiaries to perform and observe, all the material terms and provisions of each of the Material Business Agreements and the Material License Agreements to which it is a party except those which are subject to a good faith dispute provided such dispute shall not reasonably be expected to result in a Material Adverse Effect. Each Borrower and each of its Subsidiaries shall maintain each such Material Business Agreement and Material License Agreement in full force and effect, and enforce, to the extent that such Borrower or such Subsidiary, in its reasonable judgment, determines to be appropriate, each such Material Business Agreement and Material License Agreement in accordance with its terms. (i) TAXES. Each Borrower shall pay in full, and shall cause each of its Subsidiaries to pay in full, prior in each case to the date when penalties for the nonpayment thereof would attach, all taxes, assessments and governmental charges and levies for which it may be or become subject and all lawful claims therefor which, if unpaid, could reasonably be expected to result in a Lien upon its property; provided, however, that no such tax, assessment, charge or levy need be paid so long as and to the extent that: (i) it is contested in good faith and by timely and appropriate proceedings effective, during the pendency of such proceedings, to stay the enforcement of such taxes, assessments and governmental charges and levies and (x) such stay prevents the creation of any Lien (other than inchoate Liens for property taxes) or (y) a bond has been provided which prevents the creation of any Lien (other than inchoate Liens for property taxes) and (ii) appropriate reserves, as required by GAAP, are made on the books of each Borrower and its Subsidiaries, as applicable. (j) INSURANCE. The Borrower Representative shall, on the Closing Date and within five (5) Business Days of the request by the Administrative Agent thereafter, provide evidence satisfactory to the Administrative Agent that each Borrower and its Subsidiaries have personal and real property, casualty, liability, business interruption and product liability insurance as required by Section 9.3 hereof, with the Administrative Agent listed as an additional insured and, with respect to all Collateral, as loss payee (as applicable). (k) LICENSES TO THIRD PARTIES AND SUBSIDIARIES. Except as disclosed in the Disclosure Schedule, no Borrower or any Subsidiary thereof has any existing license agreement as licensor with respect to Intellectual Property of such Borrower or such Subsidiary. (l) COVERAGE FOR UNTENDERED NOTES. Until the Untendered Notes are redeemed, the Borrowers shall maintain either cash on deposit at HSBC and/or Excess Availability which when taken together have an aggregate amount greater than the amount required to redeem the Untendered Notes. (m) ADDITIONAL BORROWERS. Each Domestic Subsidiary of each Borrower created, acquired or held on or subsequent to the Closing Date shall immediately execute and deliver a Joinder Agreement in order to become a Borrower hereunder and shall deliver such corporate governance and authorization documents and an opinion of counsel as may be deemed reasonably necessary or advisable by Administrative Agent. (n) NOTICE TO ACCOUNT DEBTORS AND REPLACEMENT OF LOCKBOX BANK. Within fifteen (15) Business Days from the Closing Date, the Borrowers agree to notify each their respective Account Debtors of the new lockbox addresses at KeyBank. The Borrowers agree that the existing lockbox arrangements with JPMorgan Chase will terminate no later than January 31, 2005. S-36 11.3 NEGATIVE COVENANTS. (a) CONSOLIDATION, MERGER, SALE AND PURCHASE OF ASSETS. No Borrower shall, nor shall it permit any Subsidiary thereof to: (i) merge or consolidate with or into, or enter into any agreement to merge or consolidate with or into, any other Person or otherwise be a party to any merger or consolidation; (ii) purchase all or substantially all of the assets and business of another Person; or (iii) except as set forth in the Disclosure Schedule, lease as lessor, sell, sell-leaseback, license or otherwise transfer (whether in one transaction or a series of transactions) any of its assets (whether now owned or hereafter acquired); provided, however, that: (A) a Borrower or any Subsidiary thereof may sell or otherwise dispose of Inventory in the ordinary course of its business; (B) a Borrower or any Subsidiary thereof may sell or otherwise dispose of its Equipment that (x) is obsolete, worn out, unnecessary or no longer used or useful in such Borrower's or such Subsidiary's business or (y) is sold or otherwise disposed of in the ordinary course of business; (C) any Wholly-Owned Subsidiary of a Borrower may merge or consolidate with or into, or dispose of its assets to, the Borrower or any other Wholly-Owned Subsidiary (whether such disposal is by means of lease, sale, sale-leaseback, license or another type of transfer); (D) any Borrower or any Subsidiary thereof may enter into sale and leaseback transactions, provided, however, that (A) the aggregate proceeds of all such sale-leaseback transactions by all of the Borrowers and the Subsidiaries thereof shall not exceed One Million Dollars ($1,000,000), (B) each such sale shall be in an amount at least equal to the fair market value thereof, and (C) such leaseback transaction shall be subject to and count against the limitation in Section 11.3(d)(K); (E) the Borrowers may sell, lease or otherwise dispose of the assets or stock of Hawk Motors, Inc. and the Mexican Subsidiaries, in whole or in part, for consideration in an amount determined to be commercially reasonable by Hawk Corporation in the exercise of its good faith business judgment; provided, however, that at the time of such sale and after giving effect thereto, no Event of Default exists or will exist; (F) any Borrower or Wholly-Owned Subsidiary of such Borrower may merge or consolidate with or into another Borrower; (G) any Foreign Subsidiary may merge or consolidate with or into a Borrower or another Foreign Subsidiary; provided, however, that to the extent that the Administrative Agent reasonably determines that such merger or consolidation negatively affects the interest of the Administrative Agent or the Lenders under the Loan Documents or in the Collateral, the Borrowers will take any and all actions, in form and substance reasonably satisfactory to the Administrative Agent, as may be required to fully perfect the Administrative Agent's security interest in the ownership interest of any successor entity, which may include, without limitation, U.S. and foreign law stock pledges, filings and assignments; provided that the Borrowers shall not be required to pledge more than sixty-five percent (65%) of their ownership interest in any Foreign Subsidiary thereof; (H) the Borrowers and their respective Subsidiaries may sell, lease or otherwise dispose of assets, not otherwise permitted by this Section, for consideration in an amount not less than the fair market value thereof, having an aggregate book value when taken as a whole not exceeding One Million Dollars ($1,000,000) in the aggregate S-37 in any Fiscal Year, provided that at the time of such sale and after giving effect thereto, no Event of Default exists; (I) any Borrower and any Subsidiary thereof may consummate Permitted Acquisitions in accordance with the requirements of this Agreement; (J) the Borrowers may sell certain Accounts owing by foreign Account Debtors which are insured by the Export-Import Bank of the United States provided, however, that the documentation and any procedure which may be required for release of the Administrative Agent's security interest in such Accounts is reasonably satisfactory to the Administrative Agent; and (K) Foreign Subsidiaries may sell or otherwise transfer Accounts with respect to factoring arrangements. (b) CREDIT EXTENSIONS; PREPAYMENTS. No Borrower shall, nor shall it permit any Subsidiary to, (i) make prepayments or advance payments in respect of Indebtedness to others (except to the Administrative Agent for the benefit of the Lenders in accordance with this Agreement) or (ii) loan any money to, assume any Indebtedness of or any other obligation of, or undertake any Guaranty Obligations with respect to the Indebtedness of, any other Person, except: (A) each Borrower and any Subsidiary thereof may endorse checks, drafts, and similar instruments for deposit or collection in the ordinary course of business; (B) each Borrower or any Subsidiary thereof may undertake Guaranty Obligations with respect to (i) the Obligations of the Borrowers hereunder and the obligations under the Senior Notes, (ii) any existing Indebtedness of the Borrowers or Subsidiaries thereof set forth on the Disclosure Schedule and (iii) any Indebtedness of the Borrowers or Subsidiaries thereof that is otherwise permitted hereunder; (C) each Borrower and any Subsidiary thereof may renew, extend, refinance and refund Indebtedness, as long as such renewal, extension or refunding thereof is permitted under Section 11.3(c) (without any increase in the principal amount thereof or any shortening of the maturity of any principal amount thereof) and the terms thereof (including without limitation the terms of related warrants convertible into debt) are no less favorable to the Lenders than the Indebtedness being refinanced, refunded, renewed or extended); (D) the Borrowers and any Subsidiary thereof may make loans or advances to Persons so long as the aggregate outstanding amount of all such loans and advances does not exceed Two Hundred Fifty Thousand Dollars ($250,000) at any time outstanding; (E) the Borrowers may redeem the Untendered Notes; (F) the Borrowers and any Subsidiary thereof may make unsecured guaranties of Indebtedness permitted by Section 11.3(c); (G) the Borrowers and their Subsidiaries may make loans (including loans made on a non-arms-length basis) to (i) the Mexican Subsidiaries not to exceed One Million Dollars ($1,000,000) in an aggregate amount (which amount shall not include loans and advances made to such entities prior to the Closing Date) and (ii) other Foreign Subsidiaries not to exceed, when aggregated with the investments permitted in Section 11.3(e)(C), the following amounts: (1) for the period commencing on the Closing Date S-38 through December 31, 2004, One Million Dollars ($1,000,000) at any time outstanding (which amount shall not include loans and advances made to such entities prior to the Closing Date); and (2) for the periods consisting of each Fiscal Year thereafter, Three Million Five Hundred Thousand Dollars ($3,500,000) at any time outstanding (which amount shall not include loans and advances made to such entities prior to the Closing Date), provided, however, that such amount shall not exceed Twelve Million Dollars ($12,000,000) during the term of this Agreement and provided further that, beginning on December 31, 2004 and for each Fiscal Quarter thereafter, the Borrower Representative delivers a quarterly statement of all outstanding advances made in compliance with this Section and investments made in compliance with the terms of Section 11.3(e)(C) during the above referenced periods as part of the Officer's Certificate required by Section 11.1(d); (H) Hawk Corporation may grant unsecured guaranties in the ordinary course of business requested by vendors or other third parties doing business with Hawk Corporation's Subsidiaries; and (I) Hawk Corporation may make a Senior Note Permitted Change of Control Payment to the extent permitted by and subject to the satisfaction of the requirements of Section 12.5(iv) of this Agreement. (c) INDEBTEDNESS. No Borrower shall, nor shall it permit any Subsidiary thereof to, create, assume, incur, suffer to exist or have outstanding at any time any Indebtedness or other debt of any kind or be or become a Guarantor of or otherwise undertake or assume any Guaranty Obligation with respect to any Indebtedness of any other Person; except, that this Section 11.3(c) shall not prohibit: (i) the Obligations; (ii) Indebtedness outstanding on the Closing Date on the Senior Notes (iii) ordinary course trade accounts payable or customer deposits, other than the trade accounts payable by any Foreign Subsidiary to any Borrower that arise after the Closing Date; (iv) the Indebtedness on the Disclosure Schedule; (v) Indebtedness in respect of currency or interest rate swaps or similar transactions entered into in the ordinary course of business and not for speculative purposes; (vi) Indebtedness in respect of Guaranty Obligations with respect to (i) the Obligations of the Borrowers hereunder and obligations under the Senior Notes, (ii) any existing Indebtedness of the Borrowers or Subsidiaries thereof set forth on the Disclosure Schedule and (iii) any Indebtedness of the Borrowers or Subsidiaries thereof that is otherwise permitted hereunder; (vii) Indebtedness secured by a Lien permitted by clauses (H), (I), (K) or (N) of Section 11.3(d) hereof; (viii) any Indebtedness extending the maturity of, refunding or refinancing (but not increasing), in whole or in part, any of the Indebtedness permitted under this Section 11.3(c); S-39 (ix) any Indebtedness pursuant to a sale and leaseback transaction permitted under Section 11.3(a)(D); (x) Indebtedness of the Borrowers or any Subsidiary thereof consisting of its Guaranty of the Obligations of the Borrowers; (xi) unsecured Indebtedness not otherwise permitted under Section 11.3(c) of this Agreement, provided, however, that the aggregate outstanding principal amount of all such Indebtedness shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) at any time outstanding; (xii) Indebtedness with respect to payments by the Borrower of insurance premiums on an installment basis, in the ordinary course of business; (xiii) Indebtedness with respect to Untendered Notes; (xiv) Indebtedness of the Foreign Subsidiaries to the Borrowers permitted under Section 11.3(b)(G); or (xv) Indebtedness for Borrowed Money of the Foreign Subsidiaries not otherwise permitted hereunder, provided, however, that the aggregate outstanding principal amount of all such Indebtedness for Borrowed Money shall not exceed Twelve Million Dollars ($12,000,000) at any time outstanding; provided, however, that such Indebtedness shall not be guaranteed in any manner, directly or indirectly by any of the Borrowers. (d) LIENS; LEASES. No Borrower shall, nor shall it permit any Subsidiary thereof to, (i) acquire or hold any assets or property subject to any Lien, (ii) sell or otherwise transfer any Accounts, whether with or without recourse, except for assignments of defaulted Accounts without recourse for purposes of collection in the ordinary course of business, (iii) suffer or permit any property now owned or hereafter acquired by it to be or become encumbered by a Lien or (iv) lease as lessee any personal or real property under any operating lease; provided, however, that this Subsection shall not prohibit: (A) any lien for a tax, assessment or government charge or levy for taxes, assessments or charges not yet due and payable or not yet required to be paid pursuant to Section 11.2(i); (B) any deposit or cash pledges securing only workers' compensation, unemployment insurance or similar obligations (other than Liens arising under ERISA) in the ordinary course of business; (C) any mechanic's, carrier's, landlord's or similar common law or statutory lien incurred in the ordinary course of business for amounts that are not yet due and payable or which are being diligently contested in good faith, so long as the Administrative Agent has been notified of any such contest and adequate reserves are maintained by the Borrowers for their payment; (D) zoning or deed restrictions, public utility easements, rights of way, minor title irregularities and similar matters relating to any real property of a Borrower or its Subsidiaries, in all such cases having no effect which is materially adverse as a practical matter on the ownership or use of any such Real Estate in question, as such property is used in the ordinary course of business of by the Borrowers or their Subsidiaries; S-40 (E) any Lien which arises in connection with judgments or attachments (1) the occurrence of which does not constitute an Event of Default under Section 12.11, (2) the execution or other enforcement of such Lien is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings and (3) which is junior in priority to the Liens of the Administration Agent securing the Obligations from time to time outstanding; (F) deposits or cash pledges securing performance of contracts, bids, tenders, leases (other than Capitalized Leases), statutory obligations, surety and appeal bonds (other than contracts for the payment of Indebtedness for Borrowed Money) arising in the ordinary course of business; (G) any Lien in favor of the Administrative Agent created pursuant to the Loan Documents for the benefit of the Administrative Agent, Lenders and the LC Issuer; (H) any Lien created or assumed in purchasing, constructing or improving any real property or to which any Real Estate is subject when purchased; provided, however, that: (x) the mortgage, security interest or other lien is confined to the property in question and (y) the Indebtedness secured thereby does not exceed the total cost of the purchase, construction or improvement and (z) the aggregate outstanding Indebtedness of the Borrower secured by such Liens (when taken together with any secured Indebtedness permitted to be secured pursuant to clause (K) of this subsection) shall not at any time exceed Five Million Dollars ($5,000,000) in the aggregate; (I) any operating lease entered into by the Borrower as lessee; provided; however, that the scheduled rental payments in respect to all such leases of the Borrower (when taken together with all such leases of the Borrower) shall not at any time exceed Five Million Dollars ($5,000,000) in the aggregate during any Fiscal Year of the Borrowers; (J) any transfer of a check or other medium of payment for deposit or collection, or any similar transaction in the ordinary course of business; (K) any Lien (including any Lien in respect of a Capitalized Lease of personal property) which is created in connection with the purchase of personal property; provided, however, that: (x) the Lien is confined to the property in question, (y) the Indebtedness secured thereby does not exceed the total cost of the purchase, and (z) the aggregate outstanding Indebtedness secured by such Liens (when taken together with any secured Indebtedness permitted to be secured pursuant to clause (H) of this subsection and when taken together with the aggregate Indebtedness of the Borrowers) does not at any time exceed Five Million Dollars ($5,000,000) in the aggregate; (L) security deposits to secure the performance of operating leases and deposits received from customers, in each case in the ordinary course of business; (M) Liens securing the replacement, extension or renewal of any Indebtedness permitted to be refinanced by Section 11.3(c) hereof so long as such Lien is upon and limited to the same property previously subject thereto; (N) any existing Lien fully disclosed in the Disclosure Schedule (for the avoidance of doubt, notwithstanding the disclosure of any Lien as an existing Lien, such Lien shall be taken into consideration in calculating compliance with the limitations stated above in this Section 11.3(d)); S-41 (O) Liens with respect to the factoring of any Borrower's Accounts owing by foreign Account Debtors which are insured by the Export-Import Bank of the United States, provided, however, that: (x) the Lien is confined to the Accounts in question and (y) any procedure which may be required for release of the Administrative Agent's security interest in such Accounts is reasonably satisfactory to the Administrative Agent; or (P) Liens with respect to factoring of any Foreign Subsidiary's Accounts. In addition, no Borrower shall, nor shall it permit any of its Subsidiaries to enter into any contract or agreement with any Person that would prohibit the Administrative Agent or any Lender from acquiring a security interest, mortgage, or other Lien on, or a collateral assignment of, any of the property or assets of such Borrower or its Subsidiaries (except for (1) restrictions contained in agreements relating to permitted purchase money liens or Capitalized Leases so long as the restrictions under such agreements and Capital Leases are only with respect to the purchased or leased assets and the proceeds thereof, (2) restrictions under any agreement evidencing other Subordinated Indebtedness existing on the date hereof and (3) restrictions under any agreement requiring Liens that are permitted under Section 11.3(d)). (e) INVESTMENTS. No Borrower shall, nor shall it permit any Subsidiary thereof to, (i) make or hold any investment in any common stocks, bonds or securities of any Person, or make any further capital contribution to any Person, or (ii) be or become a party to any joint venture or other partnership other than: (A) the common stock of any Subsidiary thereof existing on the Closing Date and the capital contributions therein outstanding as of the Closing Date; (B) notes or securities issued by a customer or account debtors of the Borrowers or their Subsidiaries pursuant to Section 9.7; (C) the Borrowers and their Subsidiaries may make investments in Foreign Subsidiaries not to exceed when aggregated with the Indebtedness permitted in Section 11.3(b)(G), the following amounts: (1) for the period commencing on the Closing Date through December 31, 2004, One Million Dollars ($1,000,000) at any time outstanding (which amount shall not include loans and advances made to such entities prior to the Closing Date); and (2) for the periods consisting of each Fiscal Year thereafter, Three Million Five Hundred Thousand Dollars ($3,500,000) at any time outstanding (which amount shall not include loans and advances made to such entities prior to the Closing Date), provided, however, that such amount shall not exceed Twelve Million ($12,000,000) during the term of this Agreement and provided further that, beginning on December 31, 2004 and for each Fiscal Quarter thereafter, the Borrower Representative delivers a quarterly statement of all outstanding investments made in compliance with this Section and advances made in compliance with the terms of Section 11.3(b)(G) during the above referenced periods as part of the Officer's Certificate required by Section 11.1(d), and provided, finally, that it is expressly understood that any and all net increases in Foreign Trade Balances by the Borrowers with any Foreign Subsidiary in excess of the amount of such Foreign Trade Balances as of the Closing Date shall constitute investments for purposes of this clause (C) of Section 11.3(e); (D) the stock of any Person purchased in connection with a Permitted Acquisition; and (E) any Subsidiary created for the purpose of having any Person merge with and into such Subsidiary in connection with a Permitted Acquisition and holding the stock of such Subsidiary. S-42 provided, however, that the Borrowers and their Subsidiaries may make or hold investments, the aggregate amount of which does not exceed One Hundred Thousand Dollars ($100,000) (f) DISTRIBUTIONS. No Borrower shall make nor commit itself to make, nor shall it permit any Subsidiary thereof to make or commit to make, any Distribution to its shareholders or members at any time, except that: (i) so long as No Event of Default has occurred which is continuing and the Borrowers' Excess Availability is no less than Ten Million Dollars ($10,000,000) after giving effect to such Distribution, Hawk Corporation may make Distributions in the form of dividends in an aggregate amount not to exceed Two Million Dollars ($2,000,000) per annum; (ii) any Wholly-Owned Subsidiary thereof may declare and make cash dividends to its shareholders or members; and (iii) any Subsidiary thereof which is not a Wholly-Owned Subsidiary may declare and make cash dividends (x) for so long as such Subsidiary is treated as a partnership or disregarded entity for federal income tax purposes (a "Flow-Through Entity"), in an amount equal to the Permitted Tax Distributions in respect of such Subsidiary (provided that, if in any Fiscal Year, the Permitted Tax Distributions received by a shareholder, member or other equity holder of such Subsidiary are greater than the actual taxes paid by such shareholder, member or other equity holder, then the excess amount shall be deducted from the Permitted Tax Distributions starting in the next Fiscal Quarter until such excess is recouped) and (y) for so long as such Subsidiary is not a Flow-Through Entity but is included in one or more consolidated or combined income tax groups, in an amount equal to the federal, state and local income tax obligations of such Subsidiary as if such Subsidiary filed separate income tax returns on a consolidated or combined group basis. (g) CHANGE IN NATURE OF BUSINESS. No Borrower shall, nor shall it permit any of its Subsidiaries to, make any material change in the nature of its business as carried on at the date hereof; provided, however, that operation of complementary lines or business shall not be deemed to be a change in the nature of business. (h) CHARTER AMENDMENTS. No Borrower shall amend any of its Charter Documents nor permit any amendment of the Charter Documents of any of its Subsidiaries if such amendment would conflict with the Agreement or cause a Potential Default under this Agreement. (i) COMPLIANCE WITH ERISA. No Borrower shall, nor shall it permit any Subsidiary thereof or any ERISA Affiliate thereof to: (i) engage in any transaction in connection with which such Borrower, such Subsidiary or such ERISA Affiliate could reasonably be expected to be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code, terminate or withdraw from any Employee Benefit Plan (other than a Multiemployer Plan) in a manner, or take any other action with respect to any such Employee Benefit Plan (including, without limitation, a substantial cessation of business operations or an amendment of an Employee Benefit Plan within the meaning of Section 4041(e) of ERISA), which could reasonably be expected to result in any liability of any or such Borrower or any ERISA Affiliate to the PBGC, to the Department of Labor or to a trustee appointed under Section 4042(b) or (c) of ERISA, incur any liability to the PBGC on account of a withdrawal from or a termination of an Employee Benefit Plan under Section 4063 or 4064 of ERISA, incur any liability for post-retirement benefits under any and all welfare benefit plans (as defined in Section 3(1) of ERISA) other than as required by applicable statute, fail to make full payment when due of all amounts which, under the provisions of any Employee Benefit Plan or applicable Law, such Borrower or any ERISA Affiliate is required to pay as contributions thereto, or permit to exist any Accumulated Funding Deficiency, whether or not waived, with respect to any Employee Benefit Plan (other than a Multiemployer Plan); provided, however, that such engagement, termination, withdrawal, action, incurrence, failure or permitting shall not be deemed to have violated this clause (i) unless any such engagement, termination, withdrawal, action, incurrence, failure or permitting (A) has resulted or could reasonably be expected to result in a Material Adverse Effect or (B) has otherwise resulted or could reasonably be expected to result in liabilities or claims against such Borrower in an amount exceeding Five Hundred Thousand Dollars ($500,000); (ii) at any time permit the termination of any defined benefit pension plan intended to be qualified under Section 401(a) and S-43 501(a) of the Internal Revenue Code; provided, however, that such termination shall not be deemed to have violated this clause (ii) unless (A) the value of any benefit liability (as defined in Section 4001(a)(16) of ERISA) upon the termination date of any such terminated defined benefit pension plans of such Borrower, such Subsidiaries, and their ERISA Affiliates exceeds the then current value (as defined in Section 3 of ERISA) of all assets in such terminated defined benefit pension plans by an amount in excess of Five Hundred Thousand Dollars ($500,000), or (B) the payment of such amount has resulted or could reasonably be expected to result in a Material Adverse Effect or has resulted or could reasonably be expected to result in liabilities or claims against such Borrower or any Subsidiary thereof in an amount exceeding Five Hundred Thousand Dollars ($500,000); or (iii) if such Borrower or any ERISA Affiliate becomes obligated under a Multiemployer Plan (except with respect to the potential liabilities now existing as disclosed in the Disclosure Schedule), effect a complete or partial withdrawal such that such Borrower, any such Subsidiary, or their ERISA Affiliates incur Withdrawal Liability under Title IV of ERISA with respect to Multiemployer Plans or otherwise have liability under Title IV of ERISA; provided, however, that the incurrence of such Withdrawal Liability or other liability under Title IV of ERISA shall not be deemed to be a violation of this clause (iii) unless (A) the amount of the payment by such Borrower of such Withdrawal Liability or other liability has resulted or could reasonably be expected to result in a Material Adverse Effect or (B) has otherwise resulted or could reasonably be expected to result in liabilities or claims against any or all of the Borrowers or any Subsidiary thereof in an amount exceeding Five Hundred Thousand Dollars ($500,000). (j) REGULATION U COMPLIANCE. No Borrower shall use any portion of the proceeds of any Advance, in violation of any requirement of Law including Regulation U or of the terms and conditions of this Agreement. (k) ACCOUNTING CHANGES. No Borrower shall, nor shall it permit any Subsidiary thereof to, make or permit any change in its accounting policies or financial reporting practices and procedures, except as required or permitted by GAAP or as required by applicable law, in each case as to which the Borrower Representative shall have delivered to the Administrative Agent prior to the effectiveness of any such change a report prepared by a Responsible Officer of the Borrower Representative describing such change and explaining in reasonable detail the basis therefor and effect thereof. (l) ARM'S-LENGTH TRANSACTIONS. Except as set forth on the Disclosure Schedule, no Borrower will, nor permit any Subsidiary thereof to, enter into or permit to exist any transaction (including, without limitation, any transaction involving the investment, purchase, sale, lease, transfer or exchange of any property or the rendering of any service) with any Affiliate of such Borrower or such Subsidiaries except in the ordinary course of the business of such Borrower or such Subsidiaries and upon fair and reasonable terms not less favorable to such Borrower or such Subsidiaries than would be usual and customary in transactions with persons who are not such Affiliates; provided, however, that any payment made pursuant to Section 13.3(f) hereof shall be permitted by this Section 11.3(l). 11.4 FINANCIAL COVENANTS. (a) MINIMUM SHAREHOLDER EQUITY. The Borrowers shall not permit Shareholder Equity at any time to be less than the Shareholder Equity as of September 30, 2004, minus Five Million Dollars ($5,000,000), minus actual expenses up to Five Million Dollars ($5,000,000) associated with the move of the Brook Park, Ohio facility, and minus expenses up to One Million Dollars ($1,000,000) associated with the sale of the Motors Division incurred after September 30, 2004, but no later than March 31, 2005 (the "September 30, 2004 Shareholder Equity Amount") and as of each Fiscal Year ending on or after December 31, 2004, not less than the sum of: (x) the September 30, 2004 Shareholder Equity Amount, plus (y an aggregate amount equal to fifty percent (50%) of Consolidated Net Income (if S-44 any and only to the extent a positive number) attributable to the Fiscal Quarter of the Borrowers ending December 31, 2004 (which aggregate amount shall not be reduced by any consolidated net losses reported for the Fiscal Quarter ending December 31, 2004), plus (z) an amount equal to fifty percent (50%) of the Consolidated Net Income (if any and only to the extent a positive number) for the Fiscal Year ending December 31, 2005 and each Fiscal Year ending thereafter (which aggregate amount shall not be reduced by any consolidated net losses reported for the Fiscal Year ending December 31, 2005 and each Fiscal Year ending thereafter). (b) MINIMUM CONSOLIDATED CASH FLOW COVERAGE RATIO. In the event of an Consolidated Cash Flow Coverage Ratio Testing Event, then the Borrowers shall not permit the Consolidated Cash Flow Coverage Ratio of the Borrowers and their consolidated Subsidiaries as of the most recently ended Fiscal Quarter to be less than 1.00 to 1.00, provided, however, that if: (i) the Borrowers' Excess Availability is no less than Ten Million Dollars ($10,000,000) for a period of sixty (60) consecutive days after a Consolidated Cash Flow Coverage Ratio Testing Event and (ii) no Event of Default has occurred and is continuing, then the Borrowers shall not be subject to this financial covenant unless and until the occurrence of a subsequent Consolidated Cash Flow Coverage Ratio Testing Event. SECTION 12 EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder: 12.1 PAYMENT. Failure by the Borrowers (a) to make payment of principal on any Revolving Credit Note when due or (b) pay any interest on the Advances when due to the extent such failure is not remedied within three (3) Business Days after such required date of payment or (c) to pay any other Obligation when required to be paid hereunder to the extent such failure is not remedied within three (3) Business Days after such required date of payment; or 12.2 REPRESENTATIONS AND WARRANTIES. Any warranty or representation made or deemed made by any Borrowers in respect of such Borrower or any of its Subsidiaries in this Agreement, any other Loan Document or any certificate furnished at any time in compliance with this Agreement shall prove to have been false or inaccurate in any material respect when made or deemed made; or 12.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE COVENANTS. Failure by any Borrower or any of its Subsidiaries in any material respect to perform, keep or observe any other term, provision, condition or covenant contained in this Agreement (other than those provisions, terms or conditions referenced in Sections 12.1, 12.2, and 12.4 of this Agreement) or any other Loan Document that is required to be kept or observed by any Borrower or any Subsidiary thereof and such failure shall continue without remedy for a period of thirty (30) Business Days; or 12.4 VIOLATION OF NEGATIVE COVENANTS, FINANCIAL COVENANTS AND CERTAIN AFFIRMATIVE COVENANTS. Failure by any Borrower or any Subsidiary thereof to perform, keep, or observe any other term, provision, condition or covenant contained in Sections 8.2, 8.3, Section 9 or Sections 10.4 and 10.5 of this Agreement, or Sections 11.1(h), 11.2(a), 11.2(b), 11.2(c), 11.2(g), 11.2(i), 11.3 or 11.4 of this Agreement which is required to be performed, kept, or observed by such Borrower or any Subsidiary thereof; or 12.5 CROSS-DEFAULT. (i) Failure by any Borrower or any Subsidiary thereof to make any payment on any Indebtedness for Borrowed Money of such Borrower or such Subsidiary having a principal amount in excess of Two Hundred Fifty Thousand Dollars ($250,000), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or S-45 otherwise), or (ii) the occurrence of any other event or the existence of any condition under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness for Borrowed Money, or causes such Indebtedness to be repurchased, prepaid, defeased, redeemed, or otherwise acquired or (iii) the declaration of any such Indebtedness for Borrowed Money to be due and payable, or the requiring of any such Indebtedness to be prepaid or repurchased (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof, (iv) any condition (within the meaning of any "change of control", "mandatory repurchase" or similar provision in any note, agreement or instrument evidencing any such Indebtedness for Borrowed Money) shall occur or exist which condition permits a repurchase, prepayment of principal, defeasance, redemption prior to the maturity of such Indebtedness to be required by or offered to the holder thereof; provided, however, such requirement or permitted offer of repurchase, prepayment, defeasance, or redemption shall be prohibited hereunder and constitute an Event of Default hereunder only if the Administrative Agent has received notice of such required or permitted offer of repurchase, prepayment, defeasance or redemption or otherwise, the Obligations have been accelerated by reason of such required or permitted offer of repurchase, prepayment, defeasance or redemption or otherwise and there is not a contemporaneous payment of that portion of the Obligations that have been so accelerated and the Commitment with respect thereto shall have been terminated, and; provided, further that such limitation on the effect of this clause (iv) shall only be effective so long as there has not been any amendment or other modification to the Senior Note Indenture shortening or eliminating the thirty (30) day waiting period for a Change of Control Offer set forth in Section 4.19 of the Senior Note Indenture (the repurchase, repayment, defeasance or redemption pursuant to such Change of Control Offer, the "Senior Note Permitted Change of Control Payment") or (v) default by any Borrower or any Subsidiary thereof in respect of any Material Business Agreement or any Material License Agreement where such default (A) would permit the other party or parties to such agreement to terminate such agreement and (B) has resulted or could reasonably be expected to result in a Material Adverse Effect; or 12.6 DESTRUCTION OF COLLATERAL. The loss, theft, damage or destruction of any portion of the Collateral having an aggregate value in excess of Five Hundred Thousand Dollars ($500,000), to the extent not insured by an insurance carrier which has acknowledged coverage in the amount of the claim without any material reservation of rights or which has been ordered by a court of competent jurisdiction to pay such claim (excluding any loss of Intellectual Property by reason of abandonment where such abandonment is undertaken in good faith, pursuant to prudent business practice and would reasonably be expected to result in a Material Adverse Effect); or 12.7 MATERIAL ADVERSE EFFECT; CHANGE OF CONTROL. The occurrence of any Material Adverse Effect or the occurrence of any Change of Control; or 12.8 TERMINATION OF EXISTENCE. The dissolution or termination of existence of any Borrower or any Subsidiary thereof, but only to the extent not permitted under Section 11.3(a); or 12.9 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, LOAN DOCUMENT; SECURITY. If: (a) any covenant, material agreement or any Obligation of any Borrower contained in or evidenced by this Agreement or any of the other Loan Documents shall cease to be enforceable, or shall be determined to be unenforceable, in accordance with its terms, or (b) such Borrower shall deny or disaffirm its obligations under this Agreement or any of the other Loan Documents or any of the Liens granted in connection therewith, or (c) any Liens in favor of the Administrative Agent or any Lender granted in this Agreement or any of the other Loan Documents shall be determined to be void, voidable or invalid, or are subordinated or not otherwise given the priority contemplated by this Agreement, or (d) any perfected Liens granted in favor of the Administrative Agent or the Lenders shall be determined to be unperfected except in connection with sales of Inventory in the normal course of the business of the Borrowers, except, to the extent that the aggregate book value of the Collateral secured by such unperfected Liens does not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate or (e) any Subsidiary shall revoke or permit a payment default under such Guaranty; or S-46 12.10 ERISA. If: (a) any Borrower, any Subsidiary thereof, or any of their ERISA Affiliates or any other Person institutes any steps to terminate an Employee Benefit Plan of such Borrower, such Subsidiaries, or such ERISA Affiliates, which Employee Benefit Plan is subject to Title IV of ERISA and, as a result of such termination, such Borrower, its Subsidiaries, or ERISA Affiliate is required to make or could reasonably be expected to be required to make, a contribution to such Employee Benefit Plan the payment of which, when taken together with all like termination payments suffered by, such Borrower, such Subsidiaries or such ERISA Affiliates, either has resulted in, or could reasonably be expected to result in, a Material Adverse Effect, or (b) such Borrower, such Subsidiary or such ERISA Affiliate fails to make a contribution to any Employee Benefit Plan which failure would be sufficient to give rise to a Lien under Section 302(f) of ERISA; or 12.11 JUDGMENTS. Any money judgment, writ or warrant of attachment or similar process involving an amount, when aggregated with all such money judgment, writ or warrant of attachment or similar process outstanding at such time, in excess of Five Hundred Thousand Dollars ($500,000), to the extent not insured by an insurance carrier which has acknowledged coverage in the amount of the claim without any material reservation of rights or which has been ordered by a court of competent jurisdiction to pay such claim, is entered or filed against any or all of the Borrowers or any Subsidiary thereof or against any of their respective assets and is not released, discharged, vacated, fully bonded or stayed within sixty (60) days after such judgment, writ or warrant of attachment or similar proceeding is entered; or 12.12 FORFEITURE PROCEEDINGS. An adjudication against any Borrower or any Subsidiary thereof or in any criminal proceedings requiring such Borrower's or such Subsidiary's forfeiture of any asset or assets having, either individually or in the aggregate, a value in excess of One Hundred Thousand Dollars ($100,000); or 12.13 FINANCIAL IMPAIRMENT. The Financial Impairment of any Borrower or any Subsidiary thereof. SECTION 13 REMEDIES. 13.1 ACCELERATION; TERMINATION. Upon the occurrence of an Event of Default described in Sections 12.1 through 12.12 above, inclusive, that is continuing, the Administrative Agent may and, at the written request of the Required Lenders, shall without presentment, demand or notice of any kind all of which are hereby expressly waived by the Borrowers: (a) declare all of the Obligations due or to become due from the Borrowers to the Administrative Agent and the Lenders, whether under this Agreement, the Notes or otherwise, immediately due and payable, anything in the Notes or other evidence of the Obligations or in any of the other Loan Documents to the contrary notwithstanding, (b) terminate each Lender's Revolving Credit Commitment whereupon no Lender shall have any further obligation to make any Advance, (c) terminate the LC Issuer's obligation to issue Letters of Credit whereupon the LC Issuer shall have no further obligation to issue any Letter of Credit hereunder and (d) terminate the Lender's obligation to participate in Letters of Credit issued after such termination of the obligation of the LC Issuer to issue Letters of Credit. 13.2 AUTOMATIC ACCELERATION AND TERMINATION. If any Event of Default referred to in Section 12.13 above shall occur, (a) each Lender's Revolving Credit Commitment shall automatically and immediately terminate (if not already expired or terminated by the Borrowers or terminated pursuant to this Section 13) whereupon the no Lender shall have any obligation thereafter to make any Advance hereunder, (b) the LC Issuer's obligation to issue Letters of Credit shall immediately terminate whereupon the LC Issuer shall have no obligation thereafter to issue any Letters of Credit hereunder, and (c) all of the Obligations and the Letter of Credit Obligations then owing to the Administrative Agent, Lenders or the LC Issuer shall thereupon become and thereafter be immediately due and payable in full, all without any presentment, demand or notice of any kind, which are hereby waived by the Borrowers. S-47 13.3 GENERAL RIGHTS AND REMEDIES OF THE ADMINISTRATIVE AGENT AND THE LENDERS. With respect to the Collateral, the Administrative Agent shall have all of the rights and remedies of a secured party under the UCC or under other applicable Law. The Administrative Agent, each Lender and the LC Issuer shall have all other legal and equitable rights to which each may be entitled, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights or remedies contained in this Agreement or in any of the other Loan Documents. The Administrative Agent, each Lender and the LC Issuer hereby expressly agree that, unless requested by the Administrative Agent, upon the concurrence of the Required Lenders, such Lender and the LC Issuer will not take or cause to be taken, in respect of the Advances or the other Obligations or the Collateral, any action or remedy that is independent from the actions or remedies taken or to be taken by the Administrative Agent, except for any actions taken by any Lender or the LC Issuer necessary to preserve its rights in connection with any Event of Default described in Section 12.13 of this Agreement. 13.4 ADDITIONAL REMEDIES. After the Obligations and/or the Letter of Credit Obligations shall have been declared by the Administrative Agent to be or shall have otherwise hereunder become immediately due and payable, the Administrative Agent may, in its sole discretion, exercise the following rights and remedies to the extent permitted by applicable law and in addition to any other right or remedy provided for in this Agreement: (a) POSSESSION OF COLLATERAL. The Administrative Agent shall have the right to take immediate possession of the Collateral and all Proceeds relating to such Collateral and: (i) require the Borrowers, at the Borrowers' expense, to assemble the Collateral of the Borrowers and make it available to the Administrative Agent at such facilities of the Borrowers as the Administrative Agent shall designate or (ii) enter any of the premises of the Borrowers or wherever any Collateral shall be located and to keep and store the same on such premises until sold. If the premises on which the Collateral are located is owned or leased by any of the Borrowers, then the Borrowers shall not charge the Administrative Agent for storage of such Collateral on such premises. (b) FORECLOSURE OF LIENS. The Administrative Agent shall have the right to foreclose the Liens created under this Agreement and each of the other Loan Documents or under any other agreement relating to the Collateral. (c) DISPOSITION OF COLLATERAL. The Administrative Agent shall have the right to sell or to otherwise dispose of all or any Collateral in its then condition, or after any further processing thereof, at public or private sale or sales, wholesale dispositions, or sales pursuant to one or more contracts, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as the Administrative Agent, in its discretion, may deem advisable. Each Borrower acknowledges and covenants that ten (10) days written notice to the Borrower Representative of any public or private sale or other disposition of Collateral shall be reasonable notice thereof, and such sale shall be at such Borrower's premises or at such other locations where the Collateral then is located, or as otherwise determined by the Administrative Agent. The Administrative Agent shall have the right to conduct such sales on such Borrower's premises, without charge therefor, and such sales may be adjourned from time to time in accordance with applicable law without further requirement of notice to the Borrower Representative. Each Lender and each LC Issuer shall have the right to bid or credit bid any such sale on its own behalf. (d) APPLICATION OF COLLATERAL; APPLICATION OF LIQUIDATION PROCEEDS. Subject to Section 4.1(d) herein with respect to Collections, the Administrative Agent, with or without proceeding with sale or foreclosure or demanding payment of the Obligations, shall, without notice, at any time, appropriate and apply to the Obligations all monies received with respect to any and all Collateral of the Borrowers in the possession of the Administrative Agent, a Lender or the LC Issuer as follows: S-48 (i) First, to the payment of all expenses (to the extent not otherwise paid by the Borrowers) incurred by the Administrative Agent and the Lenders in connection with the exercise of such remedies, including, without limitation, all reasonable costs and expenses of collection, reasonable documented attorneys' fees, court costs and any foreclosure expenses; (ii) Second, to the payment pro rata of any fees then accrued and payable to the Administrative Agent or any Lender under this Agreement; (iii) Third, to the payment pro rata of interest then accrued on the outstanding Revolving Credit Advances of the Borrowers; (iv) Fourth, to the payment pro rata of the principal balance then owing on the outstanding Revolving Credit Advances as follows: (A) first, to Revolving Credit Advances comprised of Permitted Special Advances, (B) second, to the Revolving Credit Advances pro rata to the Lenders determined based on such outstanding and such deficiency; (v) Fifth, as cash collateral security against the aggregate undrawn amount of any Letter of Credit outstanding for the account of the Borrowers and any other Letter of Credit Obligations (whether then or thereafter anticipated to be outstanding) of the Borrowers; (vi) Sixth, to the payment of: (i) all other amounts owed by the Borrowers to the Administrative Agent, any Lender, the LC Issuer under this Agreement or any other Loan Document, (ii) all amounts owing to the Designated Hedge Creditor as Designated Hedge Obligations and (iii) all amounts owing to any Lender in connection with cash management services provided by such Lender to the Borrowers and their Subsidiaries; provided, however, if such monies and Proceeds are insufficient to pay such amounts in full, to the payment of such amounts pro rata; and (vii) Last, any remaining surplus after all of the Obligations have been paid in full, to the Borrowers or to whomsoever shall be lawfully entitled thereto. 13.5 SET-OFF. If any Event of Default referred to in Section 12 of this Agreement shall occur which is continuing, each of the Lenders and the LC Issuer and each Affiliate thereof shall have the right (in addition to such other rights as it may have by operation of Law or otherwise) to the extent permitted by applicable law, but subject to Section 13.10 of this Agreement, at any time to set off against and to appropriate to and apply toward the payment of the Obligations and the Letter of Credit Obligations, and all other liabilities under this Agreement and the other Loan Documents then owing to it (and any participation purchased or to be purchased pursuant to Section 13.10 below) whether or not the same shall then have matured, any and all deposit (general or special) and any other Indebtedness at any time held or owing by such Lender or each Affiliate thereof (including branches and agencies thereof wherever located) to or for the credit or account of the Borrowers, all without notice to or demand upon the Borrowers or any other Person, all such notices and demands being hereby expressly waived. 13.6 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT. Upon the occurrence of an Event of Default which is continuing, to the extent that any Letters of Credit have been issued which then are outstanding, the Administrative Agent, for the benefit of itself, the Lenders and the LC Issuer, may make demand upon Borrowers to, and forthwith upon such demand the Borrowers will, pay to the Administrative Agent in same day funds and in the currency in which such Letter of Credit is denominated, for deposit in a special cash collateral account (the "Letter of Credit Collateral Account"), an amount equal to one hundred five percent (105%) of the maximum amount available to be drawn S-49 under the Letters of Credit (i) to secure the Letter of Credit Obligations and (ii) upon payment in full thereof, to secure any other Obligations then outstanding. In the event that the Borrowers shall not deposit such funds upon demand by the Administrative Agent, the Administrative Agent may, in its sole discretion, deposit any funds of the Borrowers in the possession of the Administrative Agent to the Letter of Credit Collateral Account until the amount deposited in such account equals the maximum amount available to be drawn under the Letters of Credit. The Letter of Credit Collateral Account shall be in the name of Administrative Agent and under the sole dominion and control of the Administrative Agent subject to the terms of this Agreement. The Administrative Agent may apply funds held in the Letter of Credit Collateral Account to the payment of any amounts, as shall have become or shall become due and payable by the Borrowers to the LC Issuer and, after the occurrence and during the continuance of any Event of Default, to the payment of Obligations then outstanding. Each Borrower agrees not to: (i) sell or otherwise dispose of any interest in the Letter of Credit Collateral Account or any funds held therein, or (ii) create or permit to exist any Lien, security interest or other charge or encumbrances upon or with respect to the Letter of Credit Collateral Account or any funds held therein, except in favor of the Administrative Agent as provided in this Agreement. 13.7 AUTHORITY TO EXECUTE TRANSFERS. Without limitation of any authorization granted to the Administrative Agent hereunder, each Borrower also hereby authorizes the Administrative Agent, upon the occurrence of an Event of Default which is continuing, to execute, in connection with the exercise by the Administrative Agent of its remedies hereunder, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 13.8 LIMITED LICENSE TO LIQUIDATE. Each Borrower hereby grants to the Administrative Agent, for the benefit of itself, the Lenders and the LC Issuer: (a) a non-exclusive, royalty-free license or other right to use, without charge, all of such Borrower's Intellectual Property (including all rights of use of any name or trade secret, but excluding the Excluded Property) as it pertains to the Collateral, in manufacturing, advertising for sale and selling any Collateral; provided, however, that such license and right to use shall be exercisable by the Administrative Agent for the benefit of the Lenders only upon request by the Administrative Agent after the occurrence of an Event of Default which is continuing, and (b) to the extent permitted thereunder, all of such Borrower's rights under all licenses and all franchise agreements that do not constitute Excluded Property, which shall inure to the Administrative Agent for the benefit of itself, the Lenders and the LC Issuer without charge but only upon request by the Administrative Agent after the occurrence of an Event of Default which is continuing. 13.9 EQUALIZATION. Each Lender agrees with the other Lenders that if at any time it shall obtain any Advantage over the other Lenders or any thereof in respect of the Advances it will purchase from such other Lender or Lenders, for cash and at par, such additional participation in the Advances owing to the other or others as shall be necessary to nullify the Advantage. If any such Advantage shall be recovered in whole or in part from the Lender receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (with interest and other charges if and to the extent actually incurred by the Lender receiving the Advantage) ratably to the extent of the recovery. During the existence of any Potential Default or upon the occurrence of an Event of Default which is continuing, any payment of any Indebtedness owing by the Borrowers to any Lender shall be applied to the Obligations owing to such Lender until the same shall have been paid in full before being applied to other Indebtedness of the Borrowers owing to such Lender. 13.10 REMEDIES CUMULATIVE. The above-stated remedies are not intended to be exhaustive and the full or partial exercise of any of such remedies shall not preclude the full or partial exercise of any other remedy by the Administrative Agent under this Agreement, under any Loan Document, or at equity or under law. 13.11 APPOINTMENT OF ATTORNEY-IN-FACT. The Administrative Agent shall hereby have the right, and each Borrower hereby irrevocably makes, constitutes, and appoints the Administrative Agent (and all officers, employees, or agents designated by the Administrative Agent) as its true and lawful S-50 attorney-in-fact and agent, with full power of substitution, from time to time following the occurrence of an Event of Default which is continuing and without assent by such Borrower: (a) to effectuate, in such Borrower's name, such Borrower's obligations under this Agreement, (b) in such Borrower's or Administrative Agent's name: (i) to demand payment of the Accounts, (ii) to enforce payment of the Accounts, by legal proceedings or otherwise, (iii) to exercise all of such Borrower's rights and remedies with respect to the collection of the Accounts and any other Collateral, (iv) to settle, adjust, compromise, extend, or renew the Accounts, (v) to settle, adjust, or compromise any legal proceedings brought to collect the Accounts, (vi) if permitted by applicable Law, to sell or assign the Accounts and other Collateral, (vii) to take control, in any manner, of any item of payment or Proceeds relating to any Collateral, (viii) to prepare, file, and sign such Borrower's name on a proof of claim in a bankruptcy against any Account Debtor or on any notice of Lien, assignment, or satisfaction of Lien in connection with any Accounts, (ix) to do all acts and things reasonably necessary, in the Administrative Agent's good faith discretion, to fulfill such Borrower's obligations under this Agreement, (x) to endorse the name of such Borrower upon any of the items of payment or Proceeds relating to any Collateral and deposit the same to any Collection Account or to the Cash Concentration Account of the Administrative Agent, (xi) to endorse the name of such Borrower upon any Chattel Paper, document, Instrument, invoice, freight bill, bill of lading, or similar document or agreement relating to the Accounts, Inventory and any other Collateral, (xii) to use such Borrower's stationery and sign the name of such Borrower to verifications of the Accounts and notices thereof to Account Debtors, (xiii) to use the information recorded on or contained in any data processing equipment and computer hardware and software relating to the Accounts, Inventory, and any other Collateral to which such Borrower has access, (xiv) to make and adjust claims under such policies of insurance insuring the Collateral, receive and endorse the name of such Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies, and make all determinations with respect to such policies, and (xvi) to notify post office authorities to change the address for delivery of such Borrower's mail to an address designated by the Administrative Agent, receive and open all mail addressed to such Borrower, and, after removing all Collections, forward the mail to such Borrower, (c) to pay or discharge taxes or Liens levied against the Collateral; (d) to the extent not inconsistent with the applicable Lockbox Agreement and Blocked Account Agreement, to take all action necessary to grant the Administrative Agent sole access to any Lockbox or Blocked Account of such Borrower, (e) contact Account Debtors to pay any Collections to the Lockbox, (f) upon notice to the Borrower Representative, to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral and to enforce any other right in respect of any Collateral; (g) upon notice to the Borrower the Borrower Representative, to defend any suit, action or proceeding brought against such Borrower with respect to any Collateral; (h) upon notice to the Borrower, Representative to settle, compromise or adjust any such suit, action or proceeding; (i) to sell, transfer, pledge, or make any agreement with respect to the Collateral; and (j) to do, at the Administrative Agent's option and the Borrowers' expense, at any time, or from time to time, all acts and things which the Administrative Agent reasonably deems necessary to protect, preserve or realize upon the Collateral. Each Borrower hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. The expenses of the Administrative Agent incurred in connection with such the exercise of such power of attorney, together with interest thereon at a the rate then applicable hereunder to Alternate Base Rate Advances, shall be payable by the Borrowers to the Administrative Agent on demand. SECTION 14 THE ADMINISTRATIVE AGENT. 14.1 THE ADMINISTRATIVE AGENT. Each Lender and the LC Issuer irrevocably appoints KeyBank to act as Administrative Agent under this Agreement and the other Loan Documents for the benefit of such Lender and the LC Issuer with full authority to take such actions, and to exercise such powers, on behalf of such Lender and the LC Issuer in respect of this Agreement and the other Loan Documents as are herein and therein respectively delegated to the Administrative Agent or as are reasonably incidental to those delegated powers. The Administrative Agent in such capacity shall be deemed to be an independent contractor of the Lenders and the LC Issuer. Each of the Lenders and the S-51 LC Issuer hereby expressly agrees that, without first obtaining the prior written consent of the Administrative Agent or the Required Lenders, such Lender and the LC Issuer, as the case may be, shall not take or cause to be taken, in respect of the Obligations hereunder or the Collateral, any enforcement or remedial action that is independent from the actions or remedies taken or to be taken by the Administrative Agent, except for any actions taken by any Lender or the LC Issuer which are necessary to preserve its rights in connection with any Event of Default described in Section 12.3 of this Agreement. 14.2 NATURE OF APPOINTMENT. The Administrative Agent shall not have any fiduciary relationship with any Lender or the LC Issuer by reason of this Agreement and the other Loan Documents. The Administrative Agent shall not have any duty or responsibility whatsoever to any Lender or the LC Issuer except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, each Lender or the LC Issuer acknowledges that the Administrative Agent is acting as such solely as a convenience to the Lenders and not as a manager of the Revolving Credit Commitments, the obligations to issue Letters of Credit or the Obligations evidenced by the Notes. This Section 14 does not confer any rights upon the Borrowers or anyone else (except the Lenders and the LC Issuer), whether as a third party beneficiary or otherwise. 14.3 ADMINISTRATIVE AGENT AS LENDERS; OTHER TRANSACTIONS. The Administrative Agent's rights as a Lender under this Agreement and the other Loan Documents shall not be affected by serving as the Administrative Agent. The Administrative Agent and its Affiliates may generally transact any banking, financial, trust, advisory or other business with any Borrower and any Subsidiary thereof (including, without limitation, the acceptance of deposits, the extension of credit and the acceptance of fiduciary appointments) without notice to the Lenders or the LC Issuer, without accounting to the Lenders or the LC Issuer and without prejudice to the Administrative Agent's rights as a Lender under this Agreement and the other Loan Documents except as may be expressly required under this Agreement. 14.4 INSTRUCTIONS FROM LENDERS. The Administrative Agent shall not be required to exercise any discretion or take any action as to matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, collection and enforcement actions in respect of any Obligations and any Collateral) except that the Administrative Agent shall take such action (or omit to take such action) other than actions referred to in Section 16 of this Agreement, as may be reasonably requested of it in writing by the Required Lenders and which actions and omissions shall be binding upon all of the Lenders and the LC Issuer; provided, however, that the Administrative Agent shall not be required to act (or omit any act) if, in its judgment, any such action or omission might expose the Administrative Agent to personal liability or might be contrary to this Agreement, any Loan Document or any applicable Law. 14.5 LENDER'S DILIGENCE. Each Lender and the LC Issuer: (a) represents and warrants that it has made its decision to enter into this Agreement and the other Loan Documents and (b) agrees that it will make its own decision as to taking or not taking future actions in respect of this Agreement and the other Loan Documents; in each case without reliance on the Administrative Agent or any other Lender and the LC Issuer and on the basis of its independent credit analysis and its independent examination of and inquiry into such documents and other matters as it deems relevant and material. 14.6 NO IMPLIED REPRESENTATIONS. The Administrative Agent shall not be liable for any representation, warranty, agreement or obligation of any kind of any other party to this Agreement or anyone else, whether made or implied by any Borrower in this Agreement or any Borrower or any Subsidiary in any Loan Document or by a Lender or the LC Issuer in any notice or other communication or by anyone else or otherwise. 14.7 SUB-ADMINISTRATIVE AGENTS. The Administrative Agent may employ agents and shall not be liable (except as to money or property received by it or its agents) for any negligence or willful misconduct of any such agent selected by it with reasonable care. S-52 14.8 ADMINISTRATIVE AGENT'S DILIGENCE. The Administrative Agent shall not be required: (a) to keep itself informed as to anyone's compliance with any provision of this Agreement or any Loan Document, (b) to make any inquiry into the properties, financial condition or operation of the Borrowers and each Subsidiary thereof or any other matter relating to this Agreement or any Loan Document, (c) to report to any Lender and the LC Issuer any information (other than which this Agreement or any Loan Document expressly requires to be so reported) that the Administrative Agent or any of its Affiliates may have or acquire in respect of the properties, business or financial condition of the Borrowers and each Subsidiary thereof or any other matter relating to this Agreement or any Loan Document or (d) to inquire into the validity, effectiveness or genuineness of this Agreement or any Loan Document. 14.9 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge of any Potential Default or Event of Default unless and until it shall have received a written notice describing such Potential Default or Event of Default and citing the relevant provision of this Agreement or any Loan Document. The Administrative Agent shall give each Lender (except the Lender or the LC Issuer giving such notice) reasonably prompt notice of any such written notice. 14.10 ADMINISTRATIVE AGENT'S LIABILITY. Neither the Administrative Agent (acting in its capacity as Administrative Agent) nor any directors, officers, employees, attorneys, and other agents acting for the Administrative Agent, acting in such capacities respectively, shall be liable to the Lenders or the LC Issuer for any action or omission on their respective parts except for gross negligence, willful misconduct or bad faith. Without limitation of the generality of the foregoing, the Administrative Agent: (a) may treat the payee of any Note as the holder thereof until the Administrative Agent receives a fully executed copy of any assignment with respect thereto, signed by such payee and in form reasonably satisfactory to the Administrative Agent; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts which have been selected by the Administrative Agent with reasonable care; (c) makes no warranty or representation to any Lender and shall not be responsible for any statements, certifications, warranties or representations made in or in connection with this Agreement or any other Loan Document, the Administrative Agent being entitled to rely conclusively upon such certificates; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, the Notes or any other Loan Document or to inspect the property (including the books and records) of the Borrowers; (e) shall not be responsible for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, or collateral covered by any agreement or any other Loan Document and (f) shall incur no liability by acting upon any notice, consent, certificate or other instrument or writing believed by it in good faith to be genuine and correct and signed or sent by the proper party or parties. Neither the Administrative Agent, nor any of directors, officers, employees or agents thereof shall have any responsibility to the Borrowers or any Subsidiary thereof on account of the failure of or delay in performance or breach by any Lender or the LC Issuer of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the LC Issuer or the Borrowers of any of their respective obligations hereunder or under any Loan Document or in connection herewith or therewith. The Lenders and the LC Issuer each hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement, the Notes or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. 14.11 ADMINISTRATIVE AGENT'S INDEMNITY. The Lenders shall indemnify the Administrative Agent, in its capacity as Administrative Agent (to the extent the Administrative Agent is not reimbursed by the Borrowers), from and against: (a) any loss or liability (other than any caused by the Administrative Agent's gross negligence, willful misconduct or bad faith) incurred by the Administrative Agent as such, in respect of this Agreement, the Notes or any Loan Document and (b) any out-of-pocket expenses incurred in defending itself or otherwise related to this Agreement, the Notes or any Loan Document S-53 (other than any caused by the Administrative Agent's gross negligence, willful misconduct or bad faith) including, without limitation, reasonable fees and disbursements of legal counsel of its own selection (including, without limitation, the reasonable interdepartmental charges of its salaried attorneys) in the defense of any claim against it or in the prosecution of its rights and remedies as the Administrative Agent (other than the loss, liability or costs incurred by the Administrative Agent in the defense of any claim against it by the Lenders or the LC Issuer arising in connection with its actions in its capacity as Administrative Agent); provided, however, that each Lender shall be liable for only its Pro Rata Share of the whole loss or liability. 14.12 RESIGNATION OF ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent for any reason effective twenty (20) Business Days after giving notice thereof to the Lenders and the LC Issuer and the Borrower Representative. If the Administrative Agent shall resign, the Required Lenders shall appoint from among the Lenders a successor Administrative Agent for the Lenders and the LC Issuer which successor Administrative Agent shall be reasonably acceptable to the Borrowers. If, however, in the case of resignation by the Administrative Agent, no successor Administrative Agent shall have been appointed by the time such resignation becomes effective, then the retiring Administrative Agent may, on behalf of the Lenders and the LC Issuer, appoint a successor Administrative Agent from among the remaining Lenders. Upon appointment (whether effected by the Required Lenders or the retiring Administrative Agent on behalf of the Lenders) and acceptance of such appointment as "Administrative Agent," the successor Administrative Agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor Administrative Agent, effective upon its appointment and acceptance, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holder of the Notes. After any Administrative Agent's resignation, the provisions of Section 14.11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. SECTION 15 BORROWER GUARANTY. 15.1 BORROWER CROSS-GUARANTY; MAXIMUM LIABILITY. To induce the Lenders to make the Revolving Credit Advances to the Borrowers and the LC Issuer to issue Letters of Credit, and in consideration thereof, each of the Borrowers hereby unconditionally and irrevocably: (a) guarantees, jointly and severally, to the Administrative Agent, the Lenders and the LC Issuer the due and punctual payment in immediately available funds of all Obligations owing by any or all of the other Borrowers hereunder (whether by acceleration or otherwise), under any Designated Hedge Agreement or with respect to any cash management services provided by a Lender, (b) guarantees, jointly and severally, to the LC Issuer the due and punctual payment in immediately available funds of all reimbursement obligations of each Letter of Credit Obligor and (c) agrees, jointly and severally, to pay any and all reasonable expenses which may be incurred by the Administrative Agent in enforcing its rights with respect to such Obligations (collectively, the "Borrower Guaranteed Obligations"). To the extent that the Obligations of a Borrower are construed to be a Borrower Guaranty of the Obligations of any other Borrower to the Lenders and the LC Issuer, and to the extent it is necessary for the enforceability of such a Borrower Guaranty, the maximum liability of a Borrower Guarantor under its Borrower Guaranty shall be the greatest amount which, after taking into account Section 10.03 of the Senior Note Indenture and after taking into consideration all other valid and enforceable debts and liabilities of such Borrower Guarantor, an applicable court has determined (after any appeals) would not render such Borrower Guarantor insolvent, unable to pay its debts as they become due, inadequately capitalized for the business which it intends to conduct (in all such cases, within the meaning of Section 548 of the Bankruptcy Code, 11 U.S.C.Sections 101, et. seq., or any other similar state Law), or unable to pay a judgment rendered upon a claim that is the subject of an action or proceeding pending at the time when the obligations of this Borrower Guaranty are incurred or increased. For avoidance of doubt, in determining the amount of all valid and enforceable debts and liabilities of any Borrower Guarantor, such amount shall not take into S-54 account debts and liabilities owing to the holders of the Senior Notes under the Senior Note Indenture to the extent permitted by law. 15.2 GUARANTY UNCONDITIONAL. The obligations of the Borrower Guarantors under the Borrower Guaranty shall be joint and several, irrevocable, unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by, except for payment of Obligations and to the extent permitted by applicable Law (i) any extension, renewal, settlement, compromise, waiver or release in respect of any Obligation or any Revolving Credit Advance under this Agreement or any Loan Document by operation of Law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Loan Document; (iii) any modification, amendment, waiver, release, non-perfection or invalidity of any direct or indirect security, or of any guarantee or other liability of any third party, of the Obligations of any Borrower or any Subsidiary thereof with respect to which the Borrower Guaranty relates; (iv) any change in the corporate existence, structure, or ownership of, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Borrower Guarantor or its assets or any resulting release or discharge of any of the Obligations of the Borrower Guarantors contained in this Agreement or any Loan Document; (v) the existence of any claim, set-off or other rights which any Borrower Guarantor may have at any time against any Lender, the LC Issuer or any other Person, whether or not arising in connection with this Agreement or any Loan Document; provided, however, that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against any Borrower or any Subsidiary thereof for any reason of this Agreement or any Loan Document or any provision of applicable Law or regulation purporting to prohibit the payment by any Borrower under this Agreement or any Loan Document; or (vii) to the extent permitted by applicable Law, any other act or omission to act or delay of any kind by a Borrower, a Borrower Guarantor, the Administrative Agent, the Lenders, the LC Issuer or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Borrower Guaranteed Obligations under this Section 15. 15.3 DISCHARGE; REINSTATEMENT. The obligations of each Borrower Guarantor under this Section 15 shall remain in full force and effect until the Revolving Credit Commitments of the Lenders and the obligations of the LC Issuer are terminated, and the Obligations of the Borrowers under this Agreement or any other Loan Document have been paid in full. If at any time any payment of any amount payable by Borrower Guarantor under this Section 15, any other section of this Agreement or other Loan Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Borrower Guarantor or otherwise, the other Borrower Guarantors' obligations under this Section 15 with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. This Section 15 shall survive the termination of this Agreement until the payment in full of all amounts payable under this Agreement and any other Loan Documents. 15.4 WAIVER. No Borrower Guarantor shall be entitled to enforce any remedy which the Administrative Agent, any Lender or the LC Issuer now has or may hereafter have against any Borrower, any endorser or any Guarantor or other Borrower Guarantor in respect of all or any part of the Borrower Guaranteed Obligations paid by such Borrower Guarantor until all of the Obligations and Letter of Credit Obligations shall have been fully and finally paid to the Administrative Agent for the benefit of the Administrative Agent, any Lender or the LC Issuer and all commitments of the Lenders and the LC Issuer to the Borrowers have terminated. Each Borrower Guarantor hereby waives any benefit of, and any right to participate in, any security or collateral given to the Administrative Agent for the benefit of the Administrative Agent, the Lenders and the LC Issuer to secure payment of the Borrower Guaranteed Obligations or any other liability of any Borrower, any Guarantor or any Borrower Guarantor to the Administrative Agent, any Lender or the LC Issuer. Each Borrower Guarantor also waives all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Borrower Guaranty. Each Borrower Guarantor further waives all notices of the existence, creation or incurring of additional S-55 Obligations by any other Borrower, and also waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the Borrower Guaranteed Obligations is due, notices of any and all proceedings to collect all or any part of the Borrower Guaranteed Obligations, and, to the extent permitted by Law, notices of exchange, sale, surrender or other handling of any Collateral given to the Administrative Agent for the benefit of the Administrative Agent, the Lenders and the LC Issuer to secure payment of the Borrower Guaranteed Obligations. 15.5 STAY OF ACCELERATION. If acceleration of the time for payment of any amount payable by any Borrower or Borrower Guarantor under this Agreement or any other Loan Document in respect of a Borrower Guaranteed Obligation is stayed upon the insolvency, bankruptcy or reorganization of any Borrower or Borrower Guarantor all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the other Borrower Guarantors hereunder forthwith on demand by the Administrative Agent or the Required Lender, to the extent permitted by applicable law. 15.6 SUBROGATION AND CONTRIBUTION RIGHTS. If any Borrower Guarantor makes a payment in respect of the Borrower Guaranteed Obligations, it shall be subrogated to the rights, if any, of the payees against the other Borrower Guarantors with respect to such payment and shall have the rights of contribution set forth below against the other Borrower Guarantors; provided, however, that such Borrower Guarantor shall not enforce its rights to any payment by way of subrogation or by exercising its right of contribution until all the Obligations and Letter of Credit Obligations, as the case may be, owing to the Administrative Agent, the Lenders and the LC Issuer shall have been finally paid in full and may not under applicable insolvency laws be required to be repaid by the Administrative Agent, any Lender or the LC Issuer, as the case may be, and the Revolving Credit Commitments of the Lenders and all obligations of the LC Issuer to issue Letters of Credit hereunder have been terminated. 15.7 GUARANTEED OBLIGATION AND CONTRIBUTION PAYMENTS. Subject to all of the Obligations and Letter of Credit Obligations, as the case may be, owing to the Administrative Agent, the Lenders and the LC Issuer having been finally paid in full and not subject to required repayment under applicable insolvency laws and the Revolving Credit Commitments of the Lenders hereunder and all obligations of the LC Issuer to issue Letters of Credit hereunder having terminated, each Borrower Guarantor shall make, and agrees with each of the other Borrower Guarantors (and the successors and assigns of such Borrower Guarantors) to make, payments in respect of the Obligations of such Borrower Guarantor to which such other Borrower Guarantors are subrogated or contribution payments to which such other Borrower Guarantors are entitled, such that, taking into account all such payments on account of subrogation or contribution rights: (a) PRO RATA SHARING. Each Borrower Guarantor shall have paid to the other Borrower Guarantors on account of such subrogation and contribution rights, (A) all Obligations the benefit of which has been received by such Borrower Guarantor or which relate to Obligations the benefit of which has been received by such Borrower Guarantor or (B) if the aggregate of all such payments by all Borrower Guarantors to all other Borrower Guarantors would exceed the outstanding Obligations, such Borrower Guarantor's pro rata share of the outstanding Obligations (other than Designated Hedge Obligations), in accordance with the amount of the benefit received by the Borrower Guarantor as described under subsection (A) hereinabove; and (b) DEFICIENCY. If there remain Obligations unpaid after application of the payments referred to above, the deficiency shall be shared among the Borrower Guarantors pro rata in proportion to their respective net worth on the Closing Date of this Agreement. SECTION 16 TRANSFERS AND ASSIGNMENTS. 16.1 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, S-56 except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender. No Lender may assign or otherwise transfer any of its rights or obligations hereunder except: (i) to an Eligible Assignee in accordance with the provisions of Section 16.2, (ii) by way of participation in accordance with the provisions of Section 16.4 or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 16.6 (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 16.4 and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. 16.2 TRANSFER OF REVOLVING CREDIT COMMITMENTS. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and the Revolving Credit Loans at the time owing to such Lender); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Revolving Credit Commitment and the Revolving Credit Loans at the time owing to such Lender or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Revolving Credit Commitment (which for this purpose includes Revolving Credit Loans outstanding thereunder) or, if the applicable Revolving Credit Commitment is not then in effect, the principal outstanding balance of the Revolving Credit Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than Five Million Dollars ($5,000,000), and, so long as no Event of Default has occurred and is continuing, the Borrower Representative otherwise consents (each such consent not to be unreasonably withheld or delayed); (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Revolving Credit Loan or the Revolving Credit Commitment or any other future facilities hereunder assigned except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among the Revolving Credit Loans on a non-pro rata basis; (iii) any assignment of a Revolving Credit Commitment must be approved by the Administrative Agent, the LC Issuer and, so long as no Event of Default has occurred and is continuing, the Borrower Representative (each such approval not to be unreasonably withheld or delayed) unless the Person that is the proposed assignee is itself a Lender with a Revolving Credit Commitment (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of Three Thousand Five Hundred Dollars ($3,500), and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire in form and substance satisfactory to the Administrative Agent. Subject to acceptance and recording thereof by the Administrative Agent pursuant to 16.3 of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the 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 Section 18 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 16.4. 16.3 MAINTENANCE OF REGISTER. The Administrative Agent, acting solely for this purpose as an agent of each Borrower, shall maintain at its office in Cleveland, Ohio, a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, S-57 and the Revolving Credit Commitments of, and principal amounts of the Revolving Credit Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrowers, the Administrative 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 Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 16.4 SALE OF PARTICIPATIONS. Each Lender shall have the right at any time or times to sell one or more participations to a financial institution in all or, if less than all, any constant fixed percentage of such Lender's Revolving Credit Commitments, any Advance made by such Lender, any Note executed in favor of such Lender, any participation by such Lender in a Letter of Credit and any participations, if any, purchased by such Lender pursuant to Section 16.4 of this Agreement or this Section 16; provided, however, in each such case, such Lender shall, as between itself and the purchaser, shall retain all of its rights (including, without limitation, rights to enforce against the Borrowers this Agreement and the other Loan Documents) and duties pursuant to this Agreement and the other Loan Documents, including, without limitation, that Lender's right to approve any waiver, consent or amendment pursuant to Section 19.1 of this Agreement; except any waiver, consent or amendment which would (A) reduce any fee or commission allocated to the participation or subparticipation, as the case may be, (B) reduce the amount of any principal payment on any Advance allocated to the participation or subparticipation, as the case may be, or reduce the principal amount of any Advance so allocated or the rate of interest payable thereon, (C) extend the time for payment of any amount allocated to the participation or subparticipation, as the case may be, or (D) result in the release of a substantial portion of the Collateral.. Such purchaser shall not be a Lender for any purposes of this Agreement and the other Loan Documents. The provisions of Section 18 of this Agreement shall inure to the benefit of each purchaser of a participation (provided that (i) each such participant shall look solely to the seller of its participation for those benefits, (ii) no seller (whether or not a Lender) shall have a claim against the Borrowers of any kind whatsoever resulting from such benefits, and (iii) the Borrowers' liabilities, if any, under any of those Sections shall not be increased as a result of the sale of any such participation) and Administrative Agent shall continue to distribute payments pursuant to this Agreement as if no participation has been sold. No participation or subparticipation shall operate as a delegation of any duty of the seller of such participation or subparticipation. Under no circumstance shall any participation be deemed a novation in respect of all or any part of the selling Lender's obligations pursuant to this Agreement. Each purchaser of a participation shall be required to represent and warrant that its purchase shall not constitute a "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code). 16.5 PLEDGE OF INTERESTS. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. 16.6 REPLACEMENT OF LENDERS. If any Lender is a "Defaulting Lender" hereunder, then, the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with the restrictions contained in Section 16.2), all of its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such obligations; provided that: (i) the Borrower Representative shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld and (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts). None of the Lenders shall be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply. S-58 16.7 USA PATRIOT ACT. Each assignee and participant that is not incorporated (or formed, as applicable) under the Laws of the United States or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA Patriot Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Administrative Agent the certification, or, if applicable, recertification, certifying that such assignee or participant is not a "shell" and certifying to other matters as required by Section 313 of the USA Patriot Act and the applicable regulations at such times as are required under the USA Patriot Act. 16.8 REPLACEMENT OF NON-CONSENTING LENDERS. If, in connection with any proposed amendment, waiver or consent hereunder pursuant to Section 19.1 hereof: (i) requiring the consent of all Lenders, the consent of Required Lenders is obtained but the consent of all Lenders whose consent is required is not obtained or (ii) requiring the consent of Required Lenders, the consent Lenders holding fifty-one percent (51%) or more is obtained but the consent of Required Lenders is not obtained (any Lender withholding consent as described in clause (i) and (ii) hereof being referred to as a "Non-Consenting Lender"), then, so long as the Administrative Agent is not the Non-Consenting Lender, the Administrative Agent may, at the sole reasonable expense of the Borrowers, upon notice to such Non-Consenting Lender and the Borrower Representative, require such Non-Consenting Lender to assign and delegate, without recourse (in accordance with the restrictions contained in Section 16.2), all of its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that such Lender shall have received payment of an amount equal to the outstanding principal of its Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts). SECTION 17 CONFIDENTIALITY. (a) The Administrative Agent, each Lender and the LC Issuer hereby agree to use all commercially reasonable efforts to hold all non-public information obtained pursuant to the requirements of this Agreement in accordance with customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices; except that any such confidential information may be disclosed: (i) to the extent permitted by applicable Law, with at least concurrent written notice to the Borrower Representative, if required by subpoena or similar order of any court of competent jurisdiction, (ii) if required to be disclosed to any regulatory or administrative governmental agency or commission having any regulatory authority over the Administrative Agent, such Lender or the LC Issuer or its securities, (iii) to any other party to this Agreement, (iv) to any Affiliate of any Lender so long as such Affiliate agrees in writing to be bound by the provisions of this Section 17 prior to the time of such disclosure, (v) to any prospective transferee, participant so long as such Person agrees in writing to be bound by the provisions of this Section 17 prior to the time of such disclosure, (vi) to any Person if such information shall have been already publicly disclosed other than as a result of a breach of this Section 17, (vii) in connection with the preparation, negotiation or administration of this Agreement or the exercise of any right or remedy under this Agreement, to the counsel, auditors, professional advisors and consultants, and accountants to the Administrative Agent and (viii) to the extent permitted by applicable Law, with at least concurrent written notice to the Borrower Representative, if required in connection with any legal proceedings instituted by or against the Administrative Agent, such Lender or the LC Issuer with respect to such respective capacities. (b) Notwithstanding anything to the contrary set forth herein or in any other agreement to which the parties hereto are parties or by which they are bound, the obligations of confidentiality contained herein and therein shall not apply to the tax structure or tax treatment of the transactions: contemplated by the Loan Documents, and each party hereto (and any employee representative, or agent of any party hereto) may disclose to any and all persons, without limitation of any S-59 kind, the tax structure and tax treatment of such transactions and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such tax treatment and tax structure; provided, however, that such disclosure shall not include the name (or other identifying, information not relevant to the tax structure or tax treatment) of any Person and shall not include information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws. SECTION 18 INDEMNITIES. 18.1 INCREASED COSTS. If, after the Closing Date of this Agreement, (a) the introduction of any Law, rule or regulation or any change therein, (b) any change in the interpretation or administration of any Law, rule or regulation by any central bank or other governmental authority or (b) the compliance by any Lender or the LC Issuer with any guideline, request or directive from any central bank or other governmental authority (whether or not having the force of Law) shall increase the cost to any Lender or the LC Issuer (other than any increase in the cost of the overhead of a Lender or the LC Issuer) of agreeing to make or making, funding or maintaining Advances to the Borrowers or the cost to the LC Issuer or any Lender of issuing, maintaining or participating in any Letter of Credit, then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender or the LC Issuer additional amounts sufficient to indemnify such Lender and the LC Issuer for such increased cost. 18.2 RISK-BASED CAPITAL. If any Lender or the LC Issuer shall have determined that after the Closing Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged by law with the interpretation or administration thereof, or compliance by such Lender or the LC Issuer or the parent corporation of any thereof with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, in each case made subsequent to the Closing Date, has or would have the effect of reducing by an amount reasonably deemed by such Lender or the LC Issuer to be material to the rate of return on the capital or assets of such Lender or the LC Issuer or the parent corporation of any thereof as a consequence of the commitments or obligations of such Lender or the LC Issuer hereunder to a level below that which such Lender or the LC Issuer or the parent corporation of any thereof could have achieved but for such adoption, effectiveness, change or compliance, then from time to time, within 15 Business Days after demand by such Lender or the LC Issuer (with a copy to the Administrative Agent), the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or the LC Issuer or the parent corporation of any thereof for such reduction. 18.3 TAXES. (a) TAXES; WITHHOLDING; INDEMNIFICATION OF TAXES PAID. Any and all payments by the Borrowers hereunder, under the Notes or the other Loan Documents shall be made, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings imposed by any governmental entity, and all liabilities with respect thereto, excluding, (i) in the case of a Lender and the LC Issuer, taxes imposed on or measured by its net income or overall gross receipts, and franchise taxes imposed on it, by the jurisdiction under the Laws of which such Lender or the LC Issuer, as applicable, is organized, is doing business or has a present or former connection, or any political subdivision thereof, (ii) any United States withholding taxes payable with respect to payments hereunder or under the Loan Documents under Laws (including any statute, treaty or regulation) in effect on the Closing Date (or, in the case of (a) a transferee of any rights of Lender, the date of the transfer, (b) a successor Lender, the date of the appointment of such Lender and (c) a successor LC Issuer, the date such LC Issuer becomes an LC Issuer) applicable to such Lender or LC Issuer, as the case may be, but not excluding any United States withholding tax payable with respect to interest arising under a Loan Document as a result of any change in such Laws occurring after the Closing Date (or the date of such transfer or the date of such appointment of such successor Lender or the date such successor LC Issuer S-60 becomes a LC Issuer), (iii) any non-United States withholding taxes imposed by the jurisdictions under the Laws of which such Lender or the LC Issuer, as applicable, is organized, conducts business or has a present or former connection, or any political subdivision thereof, in effect on the Closing Date (or, in the case of (a) a transferee of any rights of a Lender, the date of the transfer, (b) a successor Lender, the date of the appointment of such Lender and (c) a successor LC Issuer, the date such LC Issuer becomes a LC Issuer) applicable to such Lender or such LC Issuer, as the case may be, but not excluding any United States withholding tax payable with respect to interest arising under a Loan Document as a result of any change in such Laws occurring after the Closing Date (or the date of such transfer or the date of such appointment of such successor Lender or the date such successor LC Issuer becomes a LC Issuer) and (iv) all liabilities, penalties. and interest with respect to any of the forgoing (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Borrower shall be required by Law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to the Lenders or the LC Issuer: (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) each Lender or the LC Issuer, as applicable, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law. The Borrowers shall indemnify each Lender and the LC Issuer for the full amount of such Taxes (including any Taxes on amounts payable under this Section paid by such Lender and the LC Issuer and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto paid by such Lender or the LC Issuer on the account of any obligation of the Borrowers hereunder or under any Loan Document, and any penalties, interest and reasonable out-of-pocket expense arising therefrom or with respect thereto, provided such written demand sets forth in reasonable detail the basis and calculation of such amount. (b) STAMP TAXES. The Borrowers agrees to pay, and will indemnify the Administrative Agent, each Lender and the LC Issuer for, any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) IRS CERTIFICATES OF LENDERS. (i) Each Lender and each LC Issuer that is not a United States person as defined in Section 7701(a)(30) of the Code (each, a "Foreign Lender") as to which payments to be made under this Agreement are fully exempt from United States withholding tax under an applicable statute or tax treaty shall provide prior to or on the Closing Date to the Borrower Representative a properly completed and executed IRS Form W-8ECI or Form W-8BEN or other applicable form, certificate or document prescribed by the IRS certifying as to such Foreign Lender's entitlement to such exemption (a "Certificate of Exemption"). Any Person that is not a United States person as defined in Section 7701(a)(30) of the Code that seeks to become a Lender or a LC Issuer, as applicable, under this Agreement shall provide a Certificate of Exemption to the Borrower Representative prior to becoming, a Lender or a LC Issuer, as applicable, hereunder. No Person that is not a United States person as defined in Section 7701(a)(30) of the Code may become a Lender or a LC Issuer, as applicable, hereunder if such Person fails to deliver a Certificate of Exemption as prescribed in this Section in advance of becoming a Lender or a LC Issuer, as applicable. (ii) Each Lender and each LC Issuer that is a United States person as defined in Section 7701(a)(30) of the Code (each, a "U.S. Lender") shall provide prior to or on the Closing Date (or on or prior to the date it becomes a party to this Agreement) to the Borrower Representative appropriately completed and S-61 executed IRS Form W-9 (certifying that such U.S. Lender is entitled to an exemption from United States backup withholding tax) or any successor form. Solely for purposes of this Section, a U.S. Lender shall not include a Lender or a LC Issuer that may be treated as an exempt recipient based on the indicators described in Treasury Regulation Section 1.6049-4(c)(1)(ii). (iii) Each Lender and each LC Issuer, from time to time after submitting, the forms, certificates or documents referred to, in this Section, shall submit to the Borrower Representative such additional duly completed and signed copies of one or more other such forms, certificates or documents (or such successor forms, certificates or other documents as shall be adopted from time to time by the IRS or relevant taxing authorities) (A) on or before the date that any such form, certificate or document expires or becomes obsolete, (B) after the occurrence of any event requiring a change in the most recent form, certificate or document previously delivered by it to the Borrower Representative, (C) from time to time thereafter if reasonably requested by the Borrower Representative, and (D) as may be appropriate under then current United States law or regulations to avoid United States withholding taxes on payments in respect of any amounts to be received by such Lender or such LC Issuer as applicable, pursuant to this Agreement. (iv) If any Lender or the LC Issuer determines that it is unable to submit to the Borrower Representative any form, certificate or document that such Lender or the LC Issuer, as the case may be, is requested to submit pursuant to this Section, or that it is required to withdraw or cancel any such form, certificate or document, or that any such form, certificate or document previously submitted has otherwise become ineffective or inaccurate such Lender or the LC Issuer, as the case may be, shall promptly notify the Borrower Representative, as appropriate, of such fact. (v) The Borrowers shall not be required pursuant to this Section to pay any additional amount to, or to indemnify the Administrative Agent, any Lender or any LC Issuer, as the case may be, to the extent that (A) the Administrative Agent, such Lender or such LC Issuer becomes subject to Taxes subsequent to the Closing Date (or, if applicable, subsequent to the date such Person becomes a party to this Agreement) as a result of any change in the circumstances of the Administrative Agent, such Lender or the LC Issuer, as the case may be (other than a change in applicable Law), including without limitation a change in the residence, place of incorporation, principal place of business the Administrative Agent, such Lender or the LC Issuer or a change in the branch or lending office of the Administrative Agent, such Lender or such Issuer, as the case may be; or (B) such Taxes would not have been incurred but for the failure of the Administrative Agent, such Lender or such LC Issuer, as the case may be, to provide to the Borrower Representative any form, certificate or document that it was required so to do pursuant to this Section other than any form, certificate or document required as a result of a change in Law. (d) REFUNDS OF TAXES. If the Administrative Agent, any Lender or the LC Issuer determines that it has received a refund in respect of any Taxes or Other Taxes as to which indemnification has been paid by the Borrowers pursuant to this Section or with respect to any Taxes that have been deducted and paid to a taxing authority pursuant to this Section by the Borrowers, it shall promptly remit such refund (including any interest) to the Borrowers, net of all out-of-pocket expenses of the Administrative Agent, such Lender or the LC Issuer, as the case may be; provided, however, that the Borrowers, upon the request of the Administrative Agent, such Lender or the LC Issuer, as the case may S-62 be, agrees promptly to return such refund (plus any interest) to such party in the event such party is required to repay such refund to the relevant taxing authority. In addition, the Administrative Agent, such Lender or the LC Issuer shall provide the Borrower Representative with a copy of any notice of assessment from the relevant taxing authority (deleting any confidential information contained therein). (e) AVOIDING NEGATIVE TAX CONSEQUENCES. The Administrative Agent, each Lender and the LC Issuer agree that, upon the occurrence of any event giving rise to the operation of Section 18.3(a) or Section 18.3(b) with respect to the Administrative Agent, such Lender or the LC Issuer, as the case may be, it will, if requested by the Borrower Representative, use reasonable commercial efforts (subject to the Administrative Agent, such Lender's or the LC Issuer's overall, internal policies of general application) to designate another lending office for any Advance, Note or Letter of Credit affected by such event with the object of avoiding the consequences of such event, provided that such designation is made on terms that do not, in the reasonable judgment of the Administrative Agent, such Lender or the LC Issuer, as the case may be, cause the Administrative Agent, such Lender and its lending office(s) or cause the LC Issuer and its lending office(s), as the case may be, to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section 18.3(e) shall affect or postpone any of the obligations of the Borrowers or the rights of the Administrative Agent, a Lender or the LC Issuer pursuant to Section 18.3(a) and Section 18.3(b). (f) APPLICATION OF THESE TAX PROVISIONS. Notwithstanding any provision contained herein to the contrary, any indemnity with respect to taxes, levies, imposts, deductions, charges or withholdings imposed by any governmental authority, or any liabilities with respect thereto, shall be governed solely and exclusively by this Section. 18.4 LOSSES. If any payment of principal of, or Rate Conversion or Rate Continuation of, any LIBOR Rate Advance is not paid when due or is made on a day other than on the last day of an Interest Period relating to such Loan, as a result of a payment or Rate Conversion or Rate Continuation or acceleration of the maturity of the Notes for any other reason, the Borrowers shall, upon demand by the Administrative Agent, pay to the Administrative Agent the greater of (i) Two Hundred Dollars ($200) or (ii) any amounts required to compensate the Administrative Agent and the Lenders for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Rate Conversion or Rate Continuation, including, without limitation, any loss, cost or expense (other than any expenses directly attributable to loan origination efforts) incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Administrative Agent and Lenders to fund or maintain such Loan. 18.5 INDEMNIFICATION FOR REQUESTS. Whenever the Borrower Representative: (a) shall revoke any Credit Request or Rate Conversion/Continuation Request involving any LIBOR Rate Advance, (b) shall for any other reason fail to borrow pursuant to any such Credit Request or Rate Conversion/Continuation Request or otherwise comply therewith, (c) shall fail to fulfill, on or before the date specified in any such request, the applicable conditions set forth in Section 7 of this Agreement or (d) shall fail to honor any prepayment notice with respect to LIBOR Rate Advances, then, in each case on any Lender's demand, the Borrowers shall indemnify each Lender and the Administrative Agent against any loss, cost or expense reasonably incurred by such Lender as a result of any such failure by the Borrowers, including, without limitation, any such loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender or the Administrative Agent to fund the LIBOR Rate Advance to be made by such Lender or the Administrative Agent in connection with such request when such LIBOR Rate Advance, as a direct result of such failure by the Borrowers, is not made on such date. 18.6 GENERAL INDEMNITY. The Borrowers shall jointly and severally indemnify and hold harmless the Administrative Agent, each Lender and the LC Issuer, and the respective directors, officers, employees and Affiliates thereof, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever S-63 including, without limitation, reasonable fees and disbursements of counsel and settlements costs, which may be imposed on, incurred by, or asserted against the Administrative Agent, any Lender or the LC Issuer, or the respective directors, officers, employees and Affiliates thereof in connection with any investigative, administrative or judicial proceeding by a third party (whether the Administrative Agent, such Lender or the LC Issuer is or is not designated as a party thereto) directly relating to or arising out of: (x) this Agreement or any other Loan Document, (y) the transactions contemplated thereby or any actual or proposed use of proceeds hereunder, or (z) any Environmental Claims against any Borrower or any Subsidiary thereof or any Environmental Claims against the Administrative Agent or any Lender pursuant to the transactions contemplated hereby or the exercise of any remedies hereunder; except that neither the Administrative Agent, any Lender nor the LC Issuer, nor any such directors, officers, employees and Affiliates thereof shall have the right to be indemnified hereunder for its own gross negligence, willful misconduct or bad faith as determined by a court of competent jurisdiction. 18.7 CERTIFICATE FOR INDEMNIFICATION. Each demand by the Administrative Agent, a Lender or the LC Issuer for payment pursuant to this Section 18 shall be accompanied by a certificate setting forth the reason for the payment, the amount to be paid, and the computations and assumptions in determining the amount, which certificate shall, absent manifest error, be presumed to be correct. In determining the amount of any such payment thereunder, the Administrative Agent, each Lender and the LC Issuer may use reasonable averaging and attribution methods, so long as such methods are set forth in the certificate referred to in the preceding sentence. The failure to give any such notice shall not release or diminish any of the Borrowers' obligations to pay additional amounts pursuant to this Section 18 upon the subsequent receipt of such notice. SECTION 19 GENERAL. 19.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, the Administrative Agent and the Borrowers, and to the extent Consent of the LC Issuer shall be required with respect to any amendment, waiver, or consent, with respect to Section 2.2 or any other provision the amendment or waiver of which would adversely affect the LC Issuer; provided, however, that unanimous consent of all of the Lenders shall be required with respect to (a) the extension of maturity of any Note, or the extension of the payment date for interest, principal and/or fees thereunder, or (b) any reduction in fees hereunder or the rate of interest on any Note, or in any amount of principal or interest due on any Note, or in the manner of pro rata application of any payments made by the Borrowers to the Lenders hereunder, or (c) any change in any percentage voting requirements in this Agreement, or (d) any increase in the principal amount of or percentage of any Lender's Commitments, or (e) any change in the definitions "Collateral" or "Required Lenders", or (f) any increase in the permitted amount of Permitted Special Advances, or (g) except as otherwise permitted herein, the release in one or more actions of Collateral with an aggregate value exceeding One Hundred Thousand Dollars ($100,000) or (h) the release of any Guarantor, or (i) any change in Section 14, 16.2, 16.4, or Section 18 hereof or this Section 19.1 itself, or (j) subject to the Administrative Agent's exercise of its reasonable credit judgment with respect to reserves, any change in the advance rates set forth in the definition of "Borrowing Base" or in any other component thereof or definition applicable thereto or any reduction in the amount of any reserve established on the Closing Date. The Lender, the LC Issuer and any other current of future holder of a Note hereunder shall be bound by any amendment, waiver or consent obtained as authorized by this Section, regardless of its failure to agree thereto. Any amendment, waiver, discharge, termination or consent pursuant to this Section shall be effective only in the specific instance and for the specific purpose for which it was given. 19.2 EFFECTIVE AGREEMENT; BINDING EFFECT. This Agreement shall become effective on the date and as of the time on and as of which: (x) the Borrowers, the Administrative Agent, each Lender and the LC Issuer shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent at the address specified in Section 19.9. As of such time, S-64 this Agreement shall be binding upon and inure to the benefit of the Borrowers, the Administrative Agent, each Lender and the LC Issuer, and their respective successors and assigns, except that not Borrower shall have any right to assign its rights hereunder or any interest herein without the prior unanimous written consent of the Administrative Agent, the Lenders and the LC Issuer. 19.3 COSTS AND EXPENSES. Except as otherwise specifically provided in Section 9.4 of this Agreement, each Borrower agrees to pay on demand (a) all reasonable costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent) in connection with the preparation, execution, delivery, administration, modification, amendment, forbearance and waiver of this Agreement or the other Loan Documents, and (b) the Administrative Agent, the Lenders and the LC Issuer in connection with the enforcement of, the exercise of remedies under, or the preservation of rights and remedies under this Agreement or any of the other Loan Documents (including any collection, bankruptcy or other enforcement proceedings arising with respect to the Borrowers, this Agreement, or any Event of Default under this Agreement); provided, however, that Lenders who are not acting in the capacity as the Administrative Agent or the LC Issuer shall be entitled to reimbursement for no more than one counsel representing all such Lenders (absent a conflict of interest in which case the Lenders may engage and be reimbursed for additional counsel). 19.4 SURVIVAL OF PROVISIONS. All representations and warranties made in or pursuant to this Agreement shall survive the execution and delivery of this Agreement and of the Notes. The provisions of Section 17 and Section 18 of this Agreement shall survive the payment of the Obligations and any other Indebtedness owed by the Borrowers hereunder and the termination of this Agreement (whether by acceleration or otherwise). 19.5 SHARING OF INFORMATION. Subject to the provisions of Section 17, the Administrative Agent, each Lender and the LC Issuer shall have the right to furnish to its Affiliates, its accountants, its employees, its officers, its directors, its legal counsel, potential participants, and to any governmental agency having jurisdiction over the Administrative Agent, such Lender and the LC Issuer information concerning the business, financial condition, and property of the Borrowers, the amount of the Advances of the Borrowers hereunder, and the terms, conditions and other provisions applicable to the respective parts thereof. 19.6 INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, taken, received or reserved by any Lender or the LC Issuer shall exceed the maximum lawful rate that may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law (the "Maximum Lawful Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest and all such charges payable, contracted for, charged, taken, received or reserved in respect of the Advances of the Lenders or the LC Issuer to the Borrowers shall be equal to the Maximum Lawful Rate. 19.7 LIMITATION OF LIABILITY. To the extent permitted by applicable law, no claim may be made by any parties hereto against the Administrative Agent, any Lender or the LC Issuer or the Affiliates, directors, officers, employees, agents, attorneys and consultants of any of them, for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith. Each of the parties hereto hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. S-65 19.8 ILLEGALITY. If any provision in this Agreement or any other Loan Document shall for any reason be or become illegal, void or unenforceable, that illegality, voidness or unenforceability shall not affect any other provision. 19.9 NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and shall be given solely: (a) by hand delivery or by overnight courier delivery service, with all charges paid, (b) by facsimile transmission, if confirmed same day in writing by first class mail, (c) by registered or certified mail, postage prepaid and addressed to the parties, or (d) electronic mail. For the purposes of this Agreement, such notices shall be deemed to be given and received: (i) if by hand or by overnight courier service, upon actual receipt, (ii) if by facsimile transmission, upon receipt of machine-generated confirmation of such transmission (and provided the above-stated written confirmation is sent), (iii) if by registered or certified mail, upon the first to occur of actual receipt or the expiration of 72 hours after deposit with the U.S. Postal Service, or (iv) if by electronic mail, when transmitted to an electronic email address (or by another means of electronic delivery; provided, however, that notices from the Borrower -------- ------- Representative to the Administrative Agent, any Lender or the LC Issuer shall not be effective until actually received thereby. Notices or other communications hereunder shall be addressed: if to the Borrower Representative, at the address specified on the signature pages of this Agreement with respect to the Borrower Representative; if to the Administrative Agent, to the Notice Office of the Administrative Agent; if to a Lender, to the Notice Office of such Lender; specified on the signature pages of this Agreement or, if such Lender shall have become a party hereto pursuant to Section 16.2, in the most recent Assignment Agreement to which such Lender is a party; if to the LC Issuer, to the Notice Office of such LC Issuer specified on the signature pages of this Agreement. 19.10 GOVERNING LAW. This Agreement and the other Loan Documents (including the Administrative Agent Fee Letter) and the respective rights and obligations of the parties hereto shall be governed by and construed in accordance with the internal laws of the State of Ohio (without giving effect to the conflict of laws rules thereof and except to the extent perfection of the Administrative Agent's security interests and Liens and the effect thereof are otherwise governed pursuant to the UCC or the applicable Law of any foreign jurisdiction). 19.11 ENTIRE AGREEMENT. This Agreement and the other Loan Documents referred to in or otherwise contemplated by this Agreement set forth the entire agreement of the parties as to the transactions contemplated by this Agreement. 19.12 EXECUTION IN COUNTERPARTS; EXECUTION BY FACSIMILE. This Agreement may be executed in any number of counterparts and by different 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 but one and the same agreement. Delivery of an executed counterpart hereof by facsimile shall be effective as manual delivery of such counterpart; provided, however, that, each party hereto will promptly thereafter deliver counterpart originals of such counterpart facsimiles delivered by or on behalf of such party. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE PARTIES OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR OTHER LOAN DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA S-66 SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT, 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 ANY SUCH OHIO 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 ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION. EACH OF THE PARTIES HERETO 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, THE NOTES OR ANY OTHER LOAN DOCUMENT IN ANY OHIO STATE OR FEDERAL COURT SITTING IN OHIO. EACH OF THE PARTIES HERETO HEREBY 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. THE PARTIES CONFIRM THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE. [remainder of page intentionally left blank] S-67 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers or agents thereunto duly authorized, as of the date first above written. BORROWERS BORROWERS HAWK CORPORATION /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board, Chief Executive Officer and President Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 ALLEGHENY CLEARFIELD, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 S-1 FRICTION PRODUCTS CO. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 HAWK MIM, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 HAWK MOTORS, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer S-2 Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 HAWK PRECISION COMPONENTS GROUP, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 HELSEL, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer S-3 Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 LOGAN METAL STAMPINGS, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 NET SHAPE TECHNOLOGIES LLC By: Hawk MIM, Inc., its sole member /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer S-4 Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: 216) 621-6536 QUARTER MASTER INDUSTRIES, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 SINTERLOY CORPORATION /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer S-5 Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 S.K. WELLMAN CORP. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 S.K. WELLMAN HOLDINGS, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer S-6 Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 TEX RACING ENTERPRISES, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 WELLMAN PRODUCTS GROUP, INC. /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer S-7 Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 WELLMAN PRODUCTS, LLC BY: WELLMAN PRODUCTS GROUP, INC., ITS SOLE MEMBER /s/ Ronald E. Weinberg ---------------------------------------- By: Ronald E. Weinberg Its: Chairman of the Board and Chief Executive Officer Address for notices: 200 Public Square, Suite 1500 Cleveland, Ohio 44114-2301 Attention: Vice President - Chief Financial Officer Telecopy: (216) 861-4546 With a copy to: Kohrman Jackson & Krantz P.L.L. One Cleveland Center, 20th Floor 1375 East 9th Street Cleveland, Ohio 44114-1793 Attention: Marc C. Krantz, Esq. Telecopy: (216) 621-6536 S-8 ADMINISTRATIVE AGENT KEYBANK NATIONAL ASSOCIATION as a Administrative Agent /s/ John P. Dunn ---------------------------------------- By: John P. Dunn Its: Vice President Address for Notices: KeyBank National Association Asset Based Lending Department Mail Code OH-01-27-0618 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: Stacey L. Jones Telecopy: (216) 689-3298 Email: Stacey_L_Jones@KeyBank.com Payment Office: 127 Public Square Cleveland, Ohio 44114 Attention: Stacey L. Jones Telecopy: (216) 689-3298 S-9 LENDERS KEYBANK NATIONAL ASSOCIATION as a Lender /s/ John P. Dunn ---------------------------------------- By: John P. Dunn Its: Vice President Address for Notices: KeyBank National Association Asset Based Lending Department Mail Code OH-01-27-0618 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: Stacey L. Jones Telecopy: (216) 689-3298 Email: Stacey_L_Jones@KeyBank.com Payment Office: 127 Public Square Cleveland, Ohio 44114 Attention: Stacey L. Jones Telecopy: (216) 689-3299 S-10 LC ISSUER KEYBANK NATIONAL ASSOCIATION as LC Issuer /s/ John P. Dunn ---------------------------------------- By: John P. Dunn Its: Vice President KeyBank National Association Asset Based Lending Department Mail Code OH-01-27-0618 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: Stacey L. Jones Telecopy: (216) 689-3298 Email: Stacey_L_Jones@KeyBank.com Payment Office: 127 Public Square Cleveland, Ohio 44114 Attention: Stacey L. Jones Telecopy: (216) 689-3298 S-11 ANNEX I CREDIT AND SECURITY AGREEMENT, DATED AS OF NOVEMBER 1, 2004, AMONG THE BORROWERS, THE ADMINISTRATIVE AGENT, THE LENDERS, AND THE LC ISSUER COMMITMENTS AND PERCENTAGES OF THE LENDERS
Revolving Credit Pro Rata Share Name of Lender Commitment (percentage) ~~KeyBank $30,000,000 100% Total Commitment $30,000,000~~
ANNEX I-1 ANNEX II TO CREDIT AND SECURITY AGREEMENT DEFINITIONS As used in this Agreement and all other Loan Documents, the following Uniform Commercial Code terms shall have the meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined) ascribed to such terms in the UCC: "Account", "Account Debtor", "Certificated Security", "Chattel Paper", "Deposit Account", "Document", "Commodity Account", "Commodity Contract", "Commodity Customer", "Commodity Intermediary", "Control" "Entitlement Holder", "Entitlement Order", "Equipment", "Financial Asset", "Fixture", "General Intangible", "Instrument", "Inventory", "Issuer", "Investment Property", "Lease", "Lessor", "Record", "Proceeds", "Sale", "Secured Party", "Securities Account", "Securities Act", "Securities Intermediary", "Security", "Security Agreement", "Security Certificate", "Security Entitlement", "Security Interest", and "Uncertificated Security". As used in this Agreement and all other Loan Documents, the following terms shall have the meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined) set forth below: "ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed thereto in Section 302(a)(2) of ERISA. "ACQUISITION" means and includes (i) any acquisition on a going concern basis (by purchase of fee title) of any facility and/or business operated by a Person which is not a Subsidiary of a Borrower and (ii) any acquisition of all or substantially all (but in all cases greater than or equal to fifty percent (50%) or such greater amount as required to acquire majority control) of the outstanding equity or other similar interests in any Person that is not a natural Person (whether by merger, stock purchase, creation of a corporate joint venture or otherwise). "ADDITIONAL PLEDGED COLLATERAL" means all shares of, limited and /or general partnership interest in, and limited liability company interests in, and all securities convertible into, and warrants, options and other rights to purchase or otherwise acquire, stock of, either (i) any Person that, after the Closing Date of this Agreement, as a result of any occurrence, becomes a Subsidiary of a Borrower, or (ii) any issuer of Pledged Stock, any Partnership or any LLC that are acquired by a Borrower after the Closing Date; all certificates or other instruments representing any of the foregoing; all Security Entitlements of such Borrower in respect of any of the foregoing; all additional indebtedness from time to time owed to such Borrower by any obligor on the Pledged Notes and the instruments evidencing such indebtedness; and all interest, cash, instruments and other property or Proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing. Additional Pledged Collateral may be General Intangibles or Investment Property. "ADJUSTMENT DATE" means (a) the date, with respect to the last Fiscal Quarter of the Borrower in each Fiscal Year that is the 15th day after the date on which the Borrower delivers the audited financial statements required to be delivered with respect to its Fiscal Year end, commencing with the Fiscal Year ending December 31, 2004, together with the Officer's Certificate required to be furnished by the Borrower with such financial statements pursuant to (and complying with) Section 11.1(e), and (b) the date, with respect to each of the first three Fiscal Quarters of the Borrower in each Fiscal Year, commencing with the Fiscal Quarter ending March 31, 2005, that is the 15th day after the date on which the Borrower delivers the financial ANNEX II-1 statements required hereunder to be delivered with respect to such Fiscal Quarter, together with the Officer's Certificate required to be furnished by the Borrower with such financial statements pursuant to (and complying with) Section 11.1(e). "ADMINISTRATIVE AGENT" means KeyBank, in its capacity as Administrative Agent for the Lenders. "ADVANCE ACCOUNT" has the meaning set forth in Section 4.1 of this Agreement. "ADVANTAGE" means any payment (whether made voluntarily or involuntarily, by offset of any deposit or other Indebtedness or otherwise) received by a Lender in respect of the Obligations if the payment results in any other Lender's having more than its Pro Rata Share of the Obligations in question. "AFFILIATE" means, with respect to a specified Person, any other Person: (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person ("control" meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise), (b) which beneficially owns or holds with power to vote ten percent (10%) or more of any class of the voting stock or similar interest of such Person, (c) ten percent (10%) or more of the voting stock or similar interest of which other Person is beneficially owned or held by such Person, or (d) who is an executive officer or director of such Person or of such other Person. "AGREEMENT" means this Credit and Security Agreement and any amendment, supplement or modification, if any, to this Credit and Security Agreement. "ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the higher of: (a) the rate of interest which is established from time to time by KeyBank at its principal office in Cleveland, Ohio as its "prime rate" or "base rate" in effect, such rate to be adjusted automatically, without notice, as of the opening of business on the effective date of any change in such rate (it being agreed that: (i) such rate is not necessarily the lowest rate of interest then available from KeyBank on fluctuating rate loans and (ii) such rate may be established by KeyBank by public announcement or otherwise) and (b) the Federal Funds Effective Rate in effect on such day plus one half of one percent (1/2 of 1%) per annum. "ALTERNATE BASE RATE ADVANCE" means an Advance, denominated in Dollars which bears interest as provided in Section 6.1 of this Agreement. "ALTERNATE BASE RATE BORROWING" means a Borrowing consisting of Alternate Base Rate Advances. "ANTI-TERRORISM LAWS" shall mean any laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA Patriot Act, the Laws comprising or implementing the Bank Secrecy Act, and the laws administered by the United States Treasury Department's Office of Foreign Asset Control (as any of the foregoing laws may from time to time be amended, renewed, extended, or replaced). "APPLICABLE MARGIN" means, with respect to any Borrowing: (i) from the Closing Date until the first Adjustment Date, (x) for the Unused Commitment Fees, 25 bps per annum and (y) for Revolving Credit Borrowings, zero (0) bps with respect to Alternate Base Rate Advances and 175 bps per annum with respect to LIBOR Rate Advances, and (ii) with respect the first Adjustment Date and any subsequent Adjustment Date, the percentage per annum applicable to Alternate Base Rate Borrowings or LIBOR Rate Borrowings, as the case may be, corresponding Annex II-2 to the level of the Consolidated Leverage Ratio for the Testing Period ending as of the Fiscal Quarter immediately preceding such Adjustment Date in the table set forth below; provided, however, that notwithstanding clauses (i) and (ii) above, to the extent that either (A) the financial statements or the Officer's Certificate required to be delivered following any Fiscal Quarter under Sections 11.1(b), 11.1(c) and 11.1(d) are not delivered by the due date therefor, or (B) any Event of Default occurs, then the Applicable Margin shall be, from and after such due date or the date of such Event of Default (as applicable) until the date on which such financial statements and Officer's Certificate are delivered or such Event of Default is no longer continuing (as applicable), the per annum percentages set forth in Level IV; provided, further, however, that nothing in herein shall limit the applicability of Section 6.1(c) with respect to the imposition of a default rate of interest.
Level Consolidated Leverage Alternate Base LIBOR Rate Margin Unused Ratio Rate Margin (bps) (bps) Commitment Fee Margin (bps) I <3.00 to 1.00 0 bps 150 bps 25 bps II > or = 3.00 to 1.00 but 0 bps 175 bps 25 bps < 4.00 to 1.00 III > or = 4.00 to 1.00 but 0 bps 200 bps 25 bps < 4.75 to 1.00 IV > or = 4.75 to 1.00 0 bps 225 bps 25 bps
"APPROVED FUND" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "APPROVED SECURITIES INTERMEDIARY" means a Securities Intermediary or Commodity Intermediary selected or approved by the Administrative Agent and with respect to which a Borrower has delivered to the Administrative Agent an executed Control Account Letter. "ASSUMED TAX RATE" means, for or in respect of any Tax Period (as defined in the definition of "Permitted Tax Distribution"), fifty percent (50%). "BLOCKED ACCOUNT" means a Deposit Account established with a bank acceptable to the Agent by a Borrower in its respective name pursuant to a Deposit Account Agreement and to which only the applicable depository bank and the Administrative Agent have access pursuant to Section 5.1 of this Agreement. "BLOCKED PERSON" shall have the meaning assigned to such term in Section 10.19 hereof. "BORROW" means to obtain a Borrowing. Annex II-3 "BORROWER GUARANTEED OBLIGATIONS" has the meaning set forth in Section 15.1. "BORROWER GUARANTOR" means any Borrower with respect to the Obligations owing to the Lenders by the other Borrowers. "BORROWER GUARANTY" means the joint and several obligation of each Borrower Guarantor to pay the Obligations of the other Borrowers pursuant to Section 15 of this Agreement. "BORROWER REPRESENTATIVE" means Hawk Corporation, a Delaware corporation. "BORROWERS" means collectively, Hawk Corporation, a Delaware corporation, Allegheny Clearfield, Inc., a Pennsylvania corporation, Friction Products Co., an Ohio corporation, Hawk MIM, Inc., an Ohio corporation, Hawk Motors, Inc., a Delaware corporation, Hawk Precision Components Group, Inc., an Ohio corporation, Helsel, Inc., a Delaware corporation, Logan Metal Stampings, Inc., an Ohio corporation, Net Shape Technologies LLC, a Delaware limited liability company, Quarter Master Industries, Inc., a Delaware corporation, Sinterloy Corporation, a Delaware corporation, S.K. Wellman Corp., a Delaware corporation, S.K. Wellman Holdings, Inc., a Delaware corporation, Tex Racing Enterprises, Inc., a Delaware corporation, Wellman Products Group, Inc., an Ohio corporation, and Wellman Products, LLC, an Ohio limited liability company. "BORROWING" means an Advance made by the Lenders on a single date. "BORROWING BASE" means, at any date of determination, the sum of the following: (a) up to eighty-five percent (85%) of the aggregate amount of Eligible Accounts minus any applicable Dilution Reserve; plus (b) the lesser of: (1) up to sixty percent (60%) of the amount of Eligible Inventory which consists of raw materials and finished goods plus the lesser of (i) up to twenty-five percent (25%) of Eligible Inventory which consists of work-in-process or (ii) Three Million Dollars ($3,000,000) and (2) Seventeen Million Five Hundred Thousand Dollars ($17,500,000); minus (c) the Reserve Amount. For purposes hereof, (1) the net amount of Eligible Accounts at any time shall be the face amount of such Eligible Accounts less, without duplication, any and all returns, rebates, discounts (which may, at the Administrative Agent's option, be calculated on shortest terms), credits, allowances or excise taxes of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable in connection with such Accounts at such time, and (2) the net amount of Eligible Inventory shall be determined on a first-in, first-out, lower of historical cost or market basis (and will exclude any write up resulting from purchase accounting treatment) in accordance with GAAP. Annex II-4 "BORROWING BASE CERTIFICATE" has the meaning specified in Section 9.5(i) of this Agreement. "BUSINESS DAY" means (i) a day of the year on which the Lender is not required or authorized to close in the city in which the applicable Payment Office of the Lender is located and (ii) if the applicable Business Day relates to LIBOR Rate Advances, a day of the year which is a Business Day described in clause (i) above and which is also a day on which dealings in Dollar deposits are carried on in the London interbank market and banks are open for business in London. "CAPITAL EXPENDITURES" means those expenses or lease obligations which should be capitalized in accordance with GAAP. "CAPITALIZED LEASES" means, in respect of any Person, any lease of property imposing obligations on such Person, as lessee of such property, which are required in accordance with GAAP to be capitalized on a balance sheet of such Person. "CASH COLLATERAL ACCOUNT CONTROL LETTER" has the meaning specified in Section 5.1 of this Agreement and further specifically means a letter agreement, substantially in the form of Exhibit O (with such changes as may be agreed to by the Administrative Agent), executed by the Borrower, acknowledged and agreed to by the Lockbox Bank, and accepted by the Administrative Agent, and regarding the Lockbox and the Collection Account maintained by the Lockbox Bank for the Borrower. "CASH CONCENTRATION ACCOUNT" means (i) that certain Deposit Account, account number 359681155636, maintained by the Borrowers at KeyBank for the benefit of Administrative Agent or (ii) such other Deposit Account as the Administrative Agent may designated from time to time by written notice to the Borrower Representative as being the Cash Concentration Account. "CASH CONTROL ELECTION" means the election by the Administrative Agent made after the occurrence and during the continuance of a Cash Control Event to elect to exercise direct dominion over Collections by notice to the Borrower Representative and applicable Lockbox Banks of such election; provided, however, that a Cash Control Election shall cease to be effective after the cure or waiver of any Cash Control Event pursuant to the terms hereof if no Event of Default occurs within the three (3) consecutive calendar month period after such cure or waiver; provided further, however, that any Cash Control Election that was based in whole or in part on the occurrence of an Event of Default arising from Borrowers' failure to comply with any of the covenants contained in Section 11.4 of the Credit Agreement shall cease to be effective after waiver of such Cash Control Event pursuant to the terms hereof if no Event of Default occurs within the three (3) consecutive calendar month period after such waiver and the Borrowers has delivered financial statements to the Lenders pursuant to Section 11.1(b) which evidence that Borrowers have complied with each of the covenants contained in Section 11.4 of the Credit Agreement for the Fiscal Quarter ending immediately after the waiver of such Cash Control Event. "CASH CONTROL EVENT" means (i) the occurrence of any Event of Default or (ii) the Borrowers' Excess Availability shall be less than Ten Million Dollars ($10,000,000) for a period of two consecutive Business Days pursuant to which Administrative Agent may elect to exercise direct dominion over Collections. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Sections 9601 et seq. "CERTIFICATE OF EXEMPTION" shall have the meaning set forth in Section 18.3(c)(i) of this Annex II-5 Agreement. "CHANGE OF CONTROL" means any of the following: (a) an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934) of beneficial ownership (within the meaning of Rule 13-d promulgated under the Exchange Act) of twenty-five percent (25%) or more of either (i) the then outstanding shares of common stock of Hawk Corporation (the "Outstanding Hawk Corporation Common Stock"), or (ii) the combined voting power of the then outstanding voting securities of Hawk Corporation entitled to vote generally in the election of directors (the "Outstanding Hawk Corporation Voting Securities"), excluding, however, the following acquisitions of Outstanding Hawk Corporation Common Stock and Outstanding Hawk Corporation Voting Securities: (A) any acquisition by Hawk Corporation or any entity directly or indirectly controlled by Hawk Corporation, and (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Hawk Corporation or any entity directly or indirectly controlled by Hawk Corporation, and (C) any acquisition by any of Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz or any "group" (as defined in Rule 13d-5 of the Securities Exchange Act) consisting of any or all of the foregoing or their heirs; (b) individuals who constitute the Board of Directors of Hawk Corporation (the "Hawk Corporation Board") , as of the Closing Date (the "Incumbent Board") cease for any reason to constitute at least a majority of such Hawk Corporation Board; provided, however, that any individual who becomes a member of such Hawk Corporation Board subsequent to the Closing Date whose election, or nomination for election by Hawk Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board and but provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Hawk Corporation Board shall not be so considered as a member of the Incumbent Board; (c) violates any "change of control" or similar provision in any agreement entered into by a Borrower in connection with the Senior Notes and the Senior Notes Indenture; or (d) any "change of control" or "mandatory repurchase" event based on change of control or similar provision in any document entered into by a Borrower in connection with the Senior Notes and the Senior Note Indenture becomes operative, effective or triggered. "CHARTER DOCUMENTS" means, as to any Person (other than a natural person), the charter, certificate or articles of incorporation, by-laws, regulations, general or limited partnership agreement, certificate of limited partnership, certificate of formation, operating agreement, or other similar organizational or governing documents of such Person. "CLOSING DATE" means the date and the time as of which any initial Revolving Credit Borrowings are advanced under this Agreement. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" means all assets of the Borrowers in which a security interest or Lien is granted to the Administrative Agent for the benefit of the Lenders pursuant to Section 8.1 hereof or any other Loan Document to secure repayment of the Obligations and all other property of the Borrowers in which a Lien is granted to the Administrative Agent for the benefit of the Lenders to secure repayment of the Obligations; provided, however, that in no event shall any Borrower Annex II-6 be required to pledge more than sixty-five percent (65%) of voting power of all classes of the capital stock of a Subsidiary that is not a Domestic Subsidiary and provided further that in no event shall any Borrower be required to cause the pledge of any capital stock of any Subsidiary of any Foreign Subsidiary. "COLLECTION ACCOUNT" means a Deposit Account established by the Borrowers with one or more other Lockbox Banks which may be reasonably acceptable to the Administrative Agent in the name of the Borrowers, pursuant to a Deposit Account Agreement and: (i) to which account after the occurrence of a Cash Control Event which is continuing and receipt of notice from the Administrative Agent to the Lockbox Bank pursuant to the Deposit Account Control Letter, only the Lockbox Bank and Administrative Agent shall have access pursuant to Section 5.1 of this Agreement and (ii) which account shall not be a payroll account. "COLLECTIONS" means all payments to a Person from Account Debtors in respect of Accounts, Chattel Paper, and General Intangibles owing to such Person. "CONSOLIDATED AMORTIZATION EXPENSE" means, with respect to a Person, for any period, all amortization expenses with respect to the General Intangibles of such Person and its consolidated Subsidiaries during such period, as determined on a consolidated basis in accordance with GAAP, including, without duplication, amortization realized as the result of the tender offer contemplated in Hawk Corporation's Offer to Purchase and Consent Solicitation Statement dated September 30, 2004. "CONSOLIDATED CAPITAL EXPENDITURES" means, with respect to a Person for any period, all Capital Expenditures of such Person and its consolidated Subsidiaries during such period, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED CASH FLOW COVERAGE RATIO" means, with respect to a Person, for any Testing Period, the ratio of (x) the sum of Consolidated EBITDA of such Person and its consolidated Subsidiaries for such period less Unfunded Capital Expenditures of such Person and its consolidated Subsidiaries for such period less Consolidated Cash Income Tax Expense of such Person and its consolidated Subsidiaries for such period less, with respect to Hawk Corporation, Distributions paid in cash by such Person to (y) the sum, without duplication, of Consolidated Cash Interest Expense of such Person and its consolidated Subsidiaries for such period plus regularly scheduled cash principal payments on Indebtedness (other than the Revolving Credit Advances) of such Person and its consolidated Subsidiaries for such period, all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED CASH FLOW COVERAGE RATIO TESTING EVENT" means any time that the Borrowers' Excess Availability has fallen below Ten Million Dollars ($10,000,000). "CONSOLIDATED CASH INCOME TAX EXPENSE" means, with respect to a Person, for any period, without duplication, all taxes (based on the net income of such Person and its consolidated Subsidiaries) paid in cash during such period (including, without limitation, any additions to such taxes and any penalties and interest with respect thereto and net of any tax refunds received during such period), all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED CASH INTEREST EXPENSE" means, with respect to a Person, for any period, (a) the amount of interest expense of such Person and its consolidated Subsidiaries during such period paid in cash during such period, as determined on a consolidated basis in accordance with GAAP, plus (b) the interest payment portion of any Capitalized Lease rental payment of such Person and its consolidated Subsidiaries paid in cash during such period, as determined on a consolidated basis in accordance with GAAP, less (c) interest income received in cash or accrued during such period, as determined on a consolidated basis in accordance with GAAP. Annex II-7 "CONSOLIDATED DEPRECIATION EXPENSE" means, with respect to a Person, for any period, all depreciation expenses of such Person and its consolidated Subsidiaries during such period, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED EBIT" means, with respect to a Person, for any period, (a) Consolidated Net Income of such Person and its consolidated Subsidiaries for such period; plus (b) the sum (without duplication) of the amounts taken into account for such period in determining such Consolidated Net Income of (i) Consolidated Interest Expense of such Person and its consolidated Subsidiaries for such period, (ii) Consolidated Income Tax Expense of such Person and its consolidated Subsidiaries for such period, (iii) amortization or write-off of deferred financing costs of such Person and its consolidated Subsidiaries for such period, (iv) non-cash gains and losses in respect of unrealized foreign exchange obligations for such period and (v) extraordinary and other non-recurring non-cash losses and charges for such period; less (c) gains on sales of assets (other than sales of Inventory in the ordinary course of business of such Person or its consolidated Subsidiaries) and other extraordinary gains and other non-recurring non-cash gains; all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED EBITDA" means, with respect to a Person, for any period, (a) Consolidated EBIT of such Person and its consolidated Subsidiaries for such period; plus (b) the sum (without duplication) of the amounts taken into account for such period in determining such Consolidated EBIT of (i) Consolidated Depreciation Expense of such Person and its consolidated Subsidiaries for such period, (ii) Consolidated Amortization Expense with respect to of such Person and its consolidated Subsidiaries for such period, and (iii) any non-cash losses in respect of the write-off of equipment by such Person and its consolidated Subsidiaries for such period, all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INCOME TAX EXPENSE" means, with respect to a Person, for any period, all taxes (based on the net income of such Person and its consolidated Subsidiaries) paid in cash or accrued during such period (including, without limitation, any penalties and interest with respect thereto and net of any tax refunds received during such period), all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, with respect to a Person, without duplication, for any period, (a) the amount of interest expense of such Person and its consolidated Subsidiaries during such period paid in cash or accrued during such period, all as determined on a consolidated basis in accordance with GAAP, plus (b) the interest payment portion of any Capitalized Lease rental payment of such Person and its consolidated Subsidiaries paid in cash or accrued during such period, as determined on a consolidated basis in accordance with GAAP, less (c) interest income received in cash or accrued during such period, as determined on a consolidated basis in accordance with GAAP, less (d) the deferred financing cost of such Person and its consolidated Subsidiaries during such period, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED LEVERAGE RATIO" means, with respect to a Person, for any Testing Date, the ratio of: (x) the Consolidated Total Funded Debt of such Person and its consolidated Subsidiaries for such period then ending to (y) the Consolidated EBITDA of such Person and its consolidated Subsidiaries for such period then ending. "CONSOLIDATED NET INCOME" means, with respect to a Person, for any period, the net income (or loss) of such Person and its consolidated Subsidiaries for such period (after taxes and extraordinary items) taken as a single accounting period determined on a consolidated basis in conformity with GAAP; provided, however, that there shall be excluded from Consolidated Net Income of the Borrowers and their consolidated Subsidiaries: (i) the income, (or loss) of any entity (other than the consolidated Subsidiaries of the Borrowers) in which the Borrowers or any Annex II-8 such consolidated Subsidiaries has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrowers or any of its consolidated Subsidiaries during such period, and (ii) the income of any Subsidiary of the Borrowers or any of its consolidated Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by that 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. "CONSOLIDATED TOTAL FUNDED DEBT" means, with respect to a Person, at any date of determination, without duplication and net of cash on hand if no Revolving Credit Advances are outstanding hereunder, all Indebtedness of such Person and its consolidated Subsidiaries which consists of: (a) Indebtedness for Borrowed Money, (b) bonds, notes, debentures and similar debt securities, (c) the deferred purchase price of capital assets or services (other than trade accounts payable and accrued expenses in the ordinary course of business) which in accordance with GAAP would be shown on the liability side of a consolidated balance sheet of such Person and its consolidated Subsidiaries, (d) all Capitalized Leases, (e) the present value, determined on the basis of the implicit interest rate, of all basic rental obligations under all synthetic leases (i.e. leases accounted for by the lessee as operating leases under which the lessee is the "owner" of the leased property for Federal income tax purposes), (f) all net obligations of such Person under hedge or swap agreements, (g) the full outstanding value of trade accounts receivable sold with full or limited recourse (other than sales of delinquent accounts receivable for collection purposes), and (h) the stated value, or liquidation value (if higher), of all redeemable equity securities of such Person; all as determined on a consolidated basis in accordance with GAAP. "CONTROL ACCOUNT" means a Securities Account or Commodity Account maintained by a Borrowers with an Approved Securities Intermediary which account is the subject of an effective Control Account Letter, and includes all Financial Assets held therein and all certificates and instruments, if any, representing or evidencing the Financial Assets contained therein. "CONTROL ACCOUNT LETTER" means a letter agreement, substantially in the form of Exhibit L (with such changes as may be agreed to by the Lender), executed by a Borrower and the Administrative Agent and acknowledged and agreed to by the relevant Approved Securities Intermediary. "CREDIT EVENT" means: (a) the making of a Revolving Credit Advance by any Lenders or (b) the issuance of any Letter of Credit by the LC Issuer and the participation by the Lenders in the risk thereof. "CREDIT REQUEST" means a request for a Revolving Credit Borrowing made in accordance with Section 3.1, in the form attached hereto as Exhibit B-1 and incorporated herein by reference. "DEEMED CREDIT REQUEST" has the meaning specified in Section 3.3 of this Agreement. "DEFAULT UNDER ERISA" means: (a) the occurrence or existence of a material Accumulated Funding Deficiency in respect of any Employee Benefit Plan within the scope of Section 302(a) of ERISA, or (b) any failure by the Borrowers or any Subsidiary thereof to make a full and timely payment of premiums required by Section 4001 of ERISA in respect of any Employee Benefit Plan, or (c) the occurrence or existence of any material liability under Section 4062, 4063, 4064, 4069, 4201, 4217 or 4243 of ERISA in respect of any Employee Benefit Plan, or (d) the occurrence or existence of any material breach of any other law or regulation in respect of any such Employee Benefit Plan, or (e) the institution or existence of any action for the forcible termination of any such Employee Benefit Plan which is within the scope of Section 4001(a)(3) or (15) of ERISA. Annex II-9 "DEFAULTING LENDER" means any Lender with respect to which a Lender Default is in effect. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 5.1 of this Agreement. "DEPOSIT ACCOUNT CONTROL LETTER" has the meaning set forth in Section 5.1 of this Agreement. "DESIGNATED HEDGE AGREEMENT" means any Hedge Agreement to which a Borrower is a party which, pursuant to a written instrument signed by the Administrative Agent, has been designated as a Designated Hedge Agreement so that credit exposure of the counterparty thereunder will be entitled to share in the benefits of the grant of security interests by the Borrower set forth in Section 8.1 of this Agreement under Designated Hedge Agreements. "DESIGNATED HEDGE CREDITOR" means the counterparty to any Hedge Agreement to which a Borrower is a party which has been designated by the Administrative Agent in accordance with this Agreement as a Designated Hedge Agreement. "DESIGNATED HEDGE OBLIGATIONS" means the obligations of a Borrower to the Designated Hedge Creditor under any Designated Hedge Agreement. "DILUTION" means, as of any date of determination, the total of all non-cash deductions from Accounts by Account Debtors of the Borrowers, other than those deductions arising from payment of such Accounts, and includes, without limitation, deductions arising from credit memos, returns, discounts, bad debts, and all other deductions, expressed as a percentage of cash collections plus dilutive items, as determined by the Administrative Agent in the good faith exercise of its reasonable credit judgment. "DILUTION RESERVE" means, as of each date of determination thereof, the Dilution Reserve Percentage times the amount of the Eligible Accounts of the Borrowers. "DILUTION RESERVE PERCENTAGE" means, as of each date of determination thereof, the percentage by which Dilution exceeds five percent (5%) as determined by the Administrative Agent from time to time in the good faith exercise of its reasonable credit judgment. The Dilution Reserve Percentage as of the Closing Date is zero percent (0%). The Administrative Agent may, in its reasonable discretion, adjust the Dilution Reserve Percentage to reflect any changes in Dilution which are demonstrated by any field examination of the Borrowers' Accounts by the Administrative Agent. "DISCLOSURE SCHEDULE" means the schedule which is attached hereto as Annex IV and is incorporated into this Agreement. "DISTRIBUTION" means a payment made, liability incurred or other consideration (other than any stock dividend or stock split payable solely in capital stock of a Borrower) given by a Borrower for the purchase, acquisition, redemption or retirement of any capital stock (whether added to treasury or otherwise) of such Borrower or as a dividend, return of capital or other distribution in respect of the capital stock of such Borrower. "DOLLARS" and the sign "$" each means lawful money of the United States. "DOMESTIC SUBSIDIARY" means (i) any direct Subsidiary of a Borrower that is organized under the Laws of any state of the United States or the District of Columbia and (ii) any direct or indirect Subsidiary of another Domestic Subsidiary which is not a Foreign Subsidiary. Annex II-10 "ELIGIBLE ACCOUNTS" means the Accounts of a Borrower which are comprised of a right to payment for goods sold or leased or for services rendered, but, by way of example and not limitation, excluding Accounts which: (a) other than Retail Accounts, remain unpaid more than ninety (90) days after the original date of invoice or sixty (60) days from the date payment is due (provided that (i) with respect to Accounts approved in writing by the Administrative Agent that arise during the period from October 1st through June 30th of each year and that by their terms are due and payable in full within ninety (90) days after the sale of goods or the rendering of services giving rise to such Account, such Accounts shall be considered Eligible Accounts; and (ii) that the Administrative Agent may from time to time, in its reasonable discretion, elect to treat certain other Accounts that are the subject of normal seasonal dating terms programs as Eligible Accounts; provided that in the case of clauses (i) and (ii) such Accounts are otherwise Eligible Accounts); (b) have arisen from services performed by the Borrower to or for the Account Debtor outside the ordinary course of business; (c) have arisen from the sale by the Borrower of goods where such goods have not been shipped or delivered to the Account Debtor; (d) have arisen from transactions which are not complete, are not bona fide, or require further acts on the part of the Borrower to make such Account payable by the Account Debtor; (e) have arisen in connection with sales of goods which were shipped or delivered to the Account Debtor on other than an absolute sale basis, such as shipments or deliveries made on consignment, a sale or return basis, a guaranteed sale basis, a bill and hold basis, or on the basis of any similar understanding; (f) have arisen in connection with sales of goods which were, at the time of sale thereof, subject to any Lien, except the security interest in favor of the Administrative Agent created by the Loan Documents; (g) are subject to any provision prohibiting assignment or requiring notice of or consent to such assignment; (h) are subject to any Lien other than the Lien in favor of the Administrative Agent or as permitted by Section 11.3(d) (A) or (E); (i) are subject to any asserted setoff, counterclaim, defense, chargeback, allowance, dispute, or adjustment to the extent thereof, or have arisen in connection with the sale of goods which have been returned, rejected, repossessed, lost or damaged to the extent of such return; (j) are owed from an Account Debtor of which the Borrower has received notice that such Account Debtor is the subject of Financial Impairment or has suspended normal business operations, dissolved, liquidated or terminated its existence; (k) are owed by any Account Debtor located in New Jersey or Minnesota unless the Borrower has filed all legally required Notice of Business Activities Reports with the New Jersey Department of Taxation or the Minnesota Annex II-11 Department of Revenue, respectively; (l) are evidenced by Chattel Paper or any Instrument of any kind (including, without limitation, any promissory notes); (m) are Accounts with respect to which any of the representations, warranties, covenants and agreements contained in this Agreement or any of the Loan Documents are not or have ceased to be complete and correct or have been breached; (n) are Accounts with respect to which the Administrative Agent does not have a first priority, perfected security interest; (o) represent a progress billing or have had the time for payment extended by the Borrower without the consent of the Administrative Agent (for the purposes hereof, "progress billing" means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which the Account Debtor's obligation to pay such invoice is conditioned upon the Borrower's completion of any further performance under the contract or agreement); (p) are owed by a Person that is not a citizen of or organized under the laws of the United States or any State or are owed by any Person located outside of the United States unless (i) such Accounts are owed by an Account Debtor located in Canada and the Administrative Agent has a first priority lien perfected to its satisfaction in such Accounts, (ii) payment of such Accounts is guaranteed by a letter of credit in form and substance and issued by a financial institution satisfactory to the Administrative Agent, in its reasonable discretion, and which has been transferred or assigned to the Administrative Agent as security for the Obligations, or (iii) such Accounts are insured by the Export Import Bank of the United States and sold to KeyBank pursuant to a factoring arrangement, the terms of which are in form and substance satisfactory to the Administrative Agent (provided, however, that only ninety-five percent (95%) of such Accounts shall qualify as Eligible Accounts); (q) are owed by the United States or any department, agency, or instrumentality thereof unless the Borrower has complied with the Federal Assignment of Claims Act in respect of the Administrative Agent's security interest therein as granted hereunder; (r) are owed by any State or any department, agency, or instrumentality thereof unless the Borrower has complied with any applicable statutory or regulatory requirements thereof in respect of the Administrative Agent's security interest therein as granted hereunder; (s) are owed by an Affiliate of the Borrower; (t) with respect to Retail Accounts (i) are not outstanding more than one hundred fifty (150) days from the dates of their original invoice dates (provided however, that the Retail Accounts with respect to the initial stocking order by S.K. Wellman Corp. customer nos. 30174 and 30178 may be outstanding until February 15, 2005) or sixty (60) days from their payment due dates or are otherwise not considered Eligible Accounts, or (ii) and do not exceed Three Million Dollars ($3,000,000) in the aggregate. Annex II-12 (u) are owed by an Account Debtor with respect to which more than twenty-five percent (25%) of the balances then outstanding on Accounts owed by such Account Debtor and its Affiliates to the Borrower has remained unpaid for more than ninety (90) days from the dates of their original dates (or one hundred fifty (150) days with respect to Retail Accounts or until February 15, 2005 with respect to the initial stocking order by S.K. Wellman Corp. customer nos. 30174 and 30178) of invoice or sixty (60) days from the payment due date, as applicable; (v) when added to any and all other Accounts of the Account Debtor thereof owing to the Borrower, produce aggregate indebtedness from any such Account Debtor in excess of twenty percent (20%) of the Eligible Accounts of the Borrowers, to the extent of such excess; or (w) are, in the Administrative Agent's good faith exercise of its reasonable credit judgment as provided in Section 2.1(c) hereof, Accounts of an Account Debtor which Account Debtor is deemed to be an unacceptable credit risk or Accounts which are otherwise deemed unacceptable or ineligible. In exercising such judgment, the Administrative Agent may consider without limitation the following factors or circumstances (i) the financial and business condition of the Borrower, (ii) changes in collection history and dilution with respect to the Accounts, (iii) changes material to any concentration of risk with respect to Accounts, (iv) any other factors or circumstances that will or could reasonably be expected to have a Material Adverse Effect, (v) history of charge-backs or other credit adjustments, and (vi) any other factors that change or could reasonably be expected to materially change the credit risk of lending to the Borrower on the security of the Accounts. The Administrative Agent shall use reasonable efforts to notify the Borrower of any such determination under this clause (w), but shall not be liable for any damages arising out of any failure to so notify the Borrower. "ELIGIBLE ASSIGNEE" means any of the following Persons: (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, (ii) the L/C Issuer, and (iii) unless an Event of Default has occurred and is continuing, the Borrower Representative (each such approval not to be unreasonably withheld or delayed); provided that, notwithstanding the foregoing, "Eligible Assignee" shall not include any Borrower or any of the Borrowers' Affiliates or Subsidiaries and; provided, further, that, notwithstanding the foregoing, a Person shall only be an "Eligible Assignee" if (i) such Person shall have complied with the requirements of Section 18.3(c), and (ii) the assignment to or participation of such Person shall not constitute a "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code). "ELIGIBLE INVENTORY" means the Inventory of a Borrower, but, by way of example and not limitation, excluding Inventory which: (a) consists of (i) damaged, defective, unmerchantable, spoiled or unsalable items or (ii) reserves associated with slow-moving Inventory as determined by the Borrowers based on the Borrowers reserve policies as applied on a consistent basis as verified by any field examinations of the Borrowers' Inventory; (b) consists of goods (i) not held for sale, such as any labels, any maintenance items, any supplies and packaging or (ii) any Inventory used in connection with research and development; (c) are subject to any Lien other than the Lien in favor of the Administrative Annex II-13 Agent or as permitted by Section 11.3(d)(A) or (E); (d) is not subject to a first priority, perfected security interest in favor of the Administrative Agent; (e) is located at a location not owned by the Borrower, or at a location owned by the Borrower with respect to which location a Person other the Administrative Agent has a first priority mortgage Lien thereon and for which the Borrower has not delivered to the Administrative Agent an appropriate landlord or warehouseman's waiver, in form, and substance reasonably satisfactory to the Administrative Agent; (f) is held for return to vendor; (g) is in the possession of a bailee or other third Person (other than a consignee) including Inventory held by a third party for processing or Inventory purchased by but not yet delivered to the Borrower and for which the Borrower has not delivered to the Administrative Agent an appropriate bailee's waiver, in form and substance reasonably satisfactory to the Administrative Agent; (h) is Inventory of the Borrower held by a third Person on consignment or is held by or placed into the possession of a third Person for sale or display by that Person; (i) is located outside of the United States; except, that Inventory located in Canada shall not be excluded from Eligible Inventory under this clause (i) unless the Administrative Agent's security interest therein is not able to be perfected by filing; (j) is processed or purchased pursuant to any contract with the United States government, any agency or instrumentality thereof or prime contractor thereof, which contract provides for progress or advance payments to the extent such Inventory is identified to such contract; or (k) is, in the Administrative Agent's good faith exercise of its reasonable credit judgment as provided is Section 2.1(c) hereof, Inventory which is otherwise deemed ineligible. In exercising such judgment, the Administrative Agent may consider without limitation the following factors or circumstances (i) the financial and business condition of the Borrower, (ii) material changes in demand for, and changes in pricing of, Inventory, (iv) changes material to any concentration of risk with respect to Inventory, (v) any other factors or circumstances that will or could reasonably be expected to have a Material Adverse Effect, and (vi) any other factors that change or could reasonably be expected to materially change the credit risk of lending to the Borrower on the security of the Inventory. The Administrative Agent shall use reasonable efforts to notify the Borrower of any such determination under this clause (k), but shall not be liable for any damages arising out of any failure to so notify the Borrower. "EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as defined in Section 3 of ERISA of a Borrower or any of its ERISA Affiliates or any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA or any "pension plan" as defined in Section 3(2) of ERISA or any "welfare plan" as defined in Section 3(1) of ERISA. "ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or judicial Annex II-14 actions, suits, demands, demand letters, claims, complaints, liens, notices of non-compliance, investigations, proceedings alleging non-compliance with or liabilities under any Environmental Law or any Environmental Permit, instituted by any Person, including, without limitation, (a) by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law or (b) by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health or the environment. "ENVIRONMENTAL LAWS" means any applicable federal, state or local law, regulation, ordinance, or order pertaining to the protection of the environment, including (but not limited to) applicable provision of CERCLA, RCRA, the Hazardous Materials Transportation Act, 49 USC Sections 1801 et seq., the Federal Water Pollution Control Act (33 USC Sections 1251 et seq.), the Toxic Substances Control Act (15 USC Sections 2601 et seq.) and the Occupational Safety and Health Act (29 USC Sections 651 et seq.), and all similar state, regional or local laws, treaties, regulations, statutes or ordinances, common law, civil laws, or any case precedents, rulings, requirements, directives or requests having the force of law of any foreign or domestic governmental authority, agency or tribunal, and all foreign equivalents thereof, as the same have been or hereafter may be amended, and any and all analogous future laws, treaties, regulations, statutes or ordinances, common law, civil laws, or any case precedents, rulings, requirements, directives or requests having the force of law of any foreign or domestic governmental authority, agency and which govern: (a) the existence, cleanup and/or remedy of contamination on property; (b) the emission or discharge of Hazardous Materials into the environment; (c) the control of hazardous wastes; (d) the use, generation, transport, treatment, storage, disposal, removal or recovery of Hazardous Materials; or (e) the maintenance and development of wetlands. "ENVIRONMENTAL PERMITS" means all permits, approvals, certificates, notifications, identification numbers, licenses and other authorizations required under any applicable Environmental Laws or necessary for the conduct of business. "ERISA" means the Employee Retirement Income Security Act of 1974 (Public Law 93-406), as amended, and in the event of any amendment affecting any Section thereof referred to in this Agreement, that reference shall be a reference to that Section as amended, supplemented, replaced or otherwise modified. "ERISA AFFILIATE" means, with respect to any Person, any other Person that is under common control with such Person within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes such Person and which is treated as a single employer under Sections 414(b) or (c) of the Internal Revenue Code. In addition, for provisions of this Agreement that relate to Section 412 of the Internal Revenue Code, the term "ERISA Affiliate" of any Person shall mean any other Person aggregated with such Person under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code. "ERISA REGULATOR" means any governmental agency (such as the Department of Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corporation) having any regulatory authority over any Employee Benefit Plan. "EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest Period in respect of any LIBOR Rate Advance, as of any date of determination, the then stated maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, applicable to such Interest Period (if more than one such percentage is applicable, the daily average of such percentages for those days in such Interest Period during which any such percentages shall be so applicable) by the Board of Governors of the Federal Reserve System, any successor thereto, or any other banking authority, domestic or foreign, to which the Lender may Annex II-15 be subject in respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) or in respect of any other category of liabilities including deposits by reference to which the interest rate on LIBOR Rate Advances is determined or any category of extension of credit or other assets that include the LIBOR Rate Advances. For purposes hereof, such reserve requirements shall include, without limitation, those imposed under Regulation D of the Federal Reserve Board and the LIBOR Rate Advances shall be deemed to constitute Eurocurrency Liabilities subject to such reserve requirements without benefit of credits for proration, exceptions or offsets which may be available from time to time to the Lender under said Regulation D. "EVENT OF DEFAULT" has the meaning specified in Section 12 of this Agreement. "EXCESS AVAILABILITY" means, as of any date of determination, the excess, if any, of the (x) lesser of (A) an amount equal to the Borrowing Base of the Borrowers at such time or (B) the amount of the Lender's Revolving Credit Commitment in effect at such time minus (y) the sum of the aggregate amount of Revolving Credit Advances of the Lenders outstanding at such time plus, without duplication, the aggregate LC Exposure of the Lenders at such time. "EXCLUDED PROPERTY" means: (a) any permit, lease, license, contract or agreement held by a Borrower or any Subsidiary (in each case as otherwise permitted by this Agreement) that validly prohibits the creation by such Borrower or such Subsidiary of a security interest therein; (b) all Equipment and Fixtures now or hereafter owned or leased by a Borrower or any Subsidiary; (c) all Properties now or hereafter owned or leased by a Borrower or any Subsidiary; and (d) the proceeds of the split-dollar life insurance policies maintained by Hawk Corporation with respect to Norman C. Harbert and Ronald E. Weinberg to the extent such proceeds are payable to Norman C. Harbert, Ronald E. Weinberg or their respective estates or beneficiaries. and in the case of clause (a) above, only to the extent, and for so long as, such permit, lease, license, contract or other agreement, validly prohibits the creation of a Lien in such property in favor of the Lender and, upon the termination of such prohibition (howsoever occurring), such permit, lease, license, contract or other agreement shall cease to be "Excluded Property". "EXECUTIVE ORDER NO. 13224" means the Executive Order No. 13224 on Terrorist Financing effective September 24, 2001, as the same has been or hereafter may be renewed, extended, amended or replaced. "EXISTING CREDIT FACILITY" means the Indebtedness under the Existing Credit Facility. means that certain Credit Agreement, dated as of October 18, 2002, as amended or supplemented from time to time, among Hawk Corporation, and certain of its Domestic Subsidiaries from time to time party thereto, as Borrowers and Guarantors, the lending institutions party hereto, as Lenders, J.P. Morgan Business Credit Corp., as Advisor, JPMorgan Chase Bank, as Administrative Agent and Collateral Agent, Issuing Bank and Arranger, PNC Bank, National Association, as a Documentation Agent, and Fleet Capital Corp., as a Documentation Agent. "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest one hundredth of one percent (1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Annex II-16 Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, however, that: (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such a rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average of quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "FINANCIAL IMPAIRMENT" means, in respect of a Person, the distressed economic condition of such Person manifested by any one or more of the following events: (a) the discontinuation of the business of the Person, unless such discontinuation is part of a consolidation, or sale permitted by Section 11.3(a) hereof; (b) the Person generally ceases or is generally unable or admits in writing its inability, generally, to make timely payment upon the Person's debts, obligations, or liabilities as they mature or come due; (c) the assignment by the Person for the benefit of creditors; (d) the voluntary institution by the Person of, or the consent granted by the Person to the involuntary institution of (whether by petition, complaint, application, default, answer (including, without limitation, an answer or any other permissible or required responsive pleading admitting: (i) the jurisdiction of the forum or (ii) any material allegations of the petition, complaint, application, or other writing to which such answer serves as a responsive pleading thereto), or otherwise) of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation, receivership, trusteeship, or similar proceeding pursuant to or purporting to be pursuant to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation, receivership, trusteeship, or similar law of any jurisdiction; (e) the voluntary application by the Person for or consent granted by the Person to the involuntary appointment of any receiver, trustee, or similar officer (i) for the Person or (ii) of or for all or any substantial part of the Person's property; or (f) the commencement or filing against a Person, without such Person's application, approval or consent, of an involuntary proceeding or an involuntary petition seeking: (a) liquidation, reorganization or other relief in respect of such Person, its debts or all or a substantial part of its assets under any Federal, state or foreign bankruptcy, insolvency, receivership, or similar law now or hereafter in effect or (b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Person or for a substantial part of its assets, and, in any such case, either (i) such proceeding or petition shall continue undismissed for sixty (60) days or (ii) an order or decree approving or ordering any of the foregoing shall be entered; or (g) in the case of a Person which is an Account obligor, any judgment, writ, warrant of attachment, execution, or similar process is issued or levied against all or any substantial part of such Person's property and such judgment, writ, warrant of attachment, execution, or similar process is not released, vacated, or fully bonded within thirty (30) days after it is issued, levied or rendered. "FINANCIAL PROJECTIONS" has the meaning specified in Section 10.14(b) of this Agreement. Annex II-17 "FISCAL MONTH" means any of the twelve consecutive monthly fiscal accounting periods collectively forming a Fiscal Year of the Borrowers. "FISCAL QUARTER" means any of the four consecutive three-month fiscal accounting periods collectively forming a Fiscal Year of the Borrowers. "FISCAL YEAR" means the Borrowers' regular annual accounting period for federal income tax purposes ending December 31. "FOREIGN LENDER" has the meaning specified in Section 18.3(c)(i) of this Agreement. "FOREIGN SUBSIDIARY" means (i) any Subsidiary of a Borrower that is not organized under the laws of any state of the United States or the District of Columbia and (ii) any direct or indirect Subsidiary of any Subsidiary described in clause (i) of this definition. "FOREIGN TRADE BALANCES" means the amount of trade accounts payable by any Foreign Subsidiaries to any Borrower in existence on the Closing Date and as at any time outstanding thereafter based on repayment and issuance of new trade accounts payable as permitted by Section 11.3(e)(C) of this Agreement. "GAAP" means generally accepted accounting principles of the U.S. consistent with those applied in the preparation of the financial statements referred to in Section 11.1 of this Agreement and otherwise consistently applied. "GUARANTOR" means a Person who pledges his credit or property in any manner for the payment or other performance of Indebtedness, agreements or other obligation of another Person including, without limitation, any guarantor (whether of collection or payment), any obligor in respect of a standby letter of credit or surety bond issued for the account of another Person, any surety, any co-maker, any endorser, and any Person who agrees conditionally or otherwise to make any loan, purchase or investment in order thereby to enable another Person to prevent or correct a default of any kind. "GUARANTY" means the obligation of a Guarantor. "GUARANTY OBLIGATIONS" means, with respect to any Person, without duplication, any obligation of such Person guaranteeing any Indebtedness ("primary Indebtedness") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether contingent or not contingent, (a) to purchase any such primary Indebtedness or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary Indebtedness or (ii) to maintain working capital or equity capital of the primary obligor or otherwise maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary Indebtedness of the ability of the primary obligor to make payment of such primary Indebtedness, or (d) otherwise to assure or hold harmless the owner of such primary Indebtedness against loss in respect thereof; provided, however, that the term "Guaranty Obligations" shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary Indebtedness in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "HAZARDOUS MATERIAL" means and includes: (a) any asbestos or other material composed of or containing asbestos which is, or may become, even if properly managed, friable, Annex II-18 (b) petroleum and any petroleum product, including crude oil or any fraction thereof, and natural gas or synthetic natural gas liquids or mixtures thereof, or (c) any hazardous or toxic waste, substance or material defined as such in (or for purposes of) CERCLA or RCRA, any so-called "Superfund" or "Superlien" law, or any other applicable Environmental Laws. "HEDGE AGREEMENT" means (i) any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement, or similar agreement or arrangement designed to protect against fluctuations in interest rates as well as (ii) any foreign exchange, option or similar derivative agreement designed to protect against fluctuations in foreign exchange rates. "INDEBTEDNESS" means, with respect to any Person, without duplication, (a) Indebtedness for Borrowed Money, (b) obligations to pay the deferred purchase price of property or services (other than accrued liabilities incurred in the ordinary course of business), (c) Capital Expenditures or other obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (d) all obligations of such Person as an account party in respect of letters of credit or banker's acceptances, (e) obligations secured by any Lien on the properties or assets of the Person, (f) obligations of such Person in respect of currency or interest rate swap or comparable transactions and (g) obligations under direct or indirect Guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. "INDEBTEDNESS FOR BORROWED MONEY" means, with respect to any Person, without duplication, all obligations of such Person for money borrowed including, without limitation, all notes payable, drafts accepted representing extensions of credit, obligations evidenced by bonds, debentures, Notes or other similar instruments, and obligations upon which interest charges are customarily paid or discounted, and all Guaranties of such obligations. "INTELLECTUAL PROPERTY" means all inventions, designs, patents, and applications therefor, trademarks, service marks, trade names, and registrations and applications therefor, copyrights, any registrations therefor, and any licenses thereof, whether now owned or existing or hereafter arising or acquired. "INTEREST PERIOD" means, for each LIBOR Rate Advance comprising a Borrowing, the period commencing on the date of such LIBOR Rate Advance or the date of the Rate Conversion or Rate Continuation of any Loans into such LIBOR Rate Advance and ending on the numerically corresponding day of the period selected by the Borrower Representative pursuant to the provisions hereof and each subsequent period commencing on the last day of the immediately preceding Interest Period in respect of such LIBOR Rate Advances and ending on the last day of the period selected by the Borrower Representative pursuant to the provisions hereof; provided, however, that the duration of each such Interest Period shall be one, two, three, or six months, in each case as the Borrower Representative may select by delivery to the Lender of a Credit Request therefor in accordance with Section 3.1 of this Agreement or a Rate Conversion\Continuation Request in accordance with Section 6.2 of this Agreement; provided, further, that: (i) the Interest Period for each LIBOR Rate Advance comprising part of the same Borrowing shall be of the same duration; (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next Annex II-19 following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; (iii) if the Interest Period commences on a Business Day for which there is no numerical equivalent in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of that calendar month; and (iv) with respect to LIBOR Rate Advances which constitute Revolving Credit Advances, no Interest Period may end on a date later than the Revolving Credit Termination Date. "IRS" means the Internal Revenue Service of the United States. "KEYBANK" means KeyBank National Association, a national banking association. "LAW" means any law, treaty, regulation, statute or ordinance, common law, civil law, or any case precedent, ruling, requirement, directive or request having the force of law of any foreign or domestic governmental authority, agency or tribunal. "LC EXPOSURE" means, with respect to any Lender, at any time of determination, such Lender's Pro Rata Share of the sum of: (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time, plus (b) the aggregate amount that has been drawn under such Letters of Credit for which the LC Issuer (or the Lenders, pursuant to any participation therein), has not at such time been reimbursed by the Borrowers. "LC ISSUER" means, with respect to any Letter of Credit, the issuer of such Letter of Credit and shall be, with respect to any Letter of Credit hereunder, KeyBank, or each other Lender that is requested by the Administrative Agent with the approval of the Borrowers, and agrees to act as a LC Issuer, and each of their successors and assigns (and which may be replaced at the sole discretion of the Administrative Agent). "LENDER DEFAULT" means (i) the refusal (which has not been retracted) of a Lender in violation of its obligations under this Agreement to make available to the Administrative Agent its Pro Rata Share of any Revolving Credit Borrowing hereunder or to fund any portion of the participation purchase price payable by such Lender for its participating interests hereunder or (ii) the notification to the Administrative Agent or the Borrower Representative by a Lender that such Lender does not intend to comply with its obligations hereunder to make available to the Administrative Agent its Pro Rata Share of any Revolving Credit Borrowing hereunder or to fund any portion of the participation purchase price payable by such Lender for its participating interests hereunder. "LENDERS" means the financial institutions listed on the signature pages hereof as the "Lenders" and having Revolving Credit Commitments hereunder or outstanding Revolving Credit Advances hereunder and the successors thereto and assignees thereof. "LENDING INSTALLATION" means, with respect to a Lender, the branch, Subsidiary or Affiliate of such Lender specified under the name of such Lender on the signature pages hereto or as otherwise selected by such Lender pursuant to Section 3.7 of this Agreement, or such other branch, Subsidiary or Affiliate as such Lender may from time to time specify in writing to the Borrower Representative, the Administrative Agent and the Lenders as its Lending Installation. "LENDING OFFICE" means, with respect to any Lender or Designated Letter of Credit Issuer, the office of such Lender or LC Issuer specified as its "Lending Office" under its name on Annex II-20 the signature pages hereto, or such other office of such Lender or LC Issuer as such Lender or LC Issuer may from time to time specify in writing to the Borrower Representative and the Administrative Agent as the office at which Revolving Credit Advances or Letters of Credit are to be made, issued and maintained, as the case may be. "LETTER OF CREDIT" means each (i) commercial documentary letter of credit issued in connection with the purchase of goods in the ordinary course of business thereof and (ii) each documentary standby letter of credit for the account of the Borrowers or any of their Subsidiaries issued by the LC Issuer, in each case in support or guarantee of (x) worker compensation obligations, liability insurance, releases of contract retention obligations, contract tender or bid performance obligations, obligations for repayment of advance payments, contract performance obligations, and other bonding obligations of the Borrowers or such Subsidiaries incurred in the ordinary course of business thereof and (y) such other standby obligations of the Borrowers and such Subsidiaries incurred in the ordinary course of business thereof: provided, however, that in no case may a Borrower or any of its Subsidiaries request or have issued for its account any standby Letter of Credit to secure or otherwise support any Indebtedness for Borrowed Money of such Borrower or such Subsidiaries, or any Affiliates thereof, existing as of the Closing Date or any Guaranties of such Borrower or such Subsidiaries existing as of or after the Closing Date even to the extent such Indebtedness or Guaranties are otherwise permitted hereunder. "LETTER OF CREDIT COLLATERAL ACCOUNT" has the meaning set forth in Section 13.6 hereof. "LETTER OF CREDIT OBLIGATIONS" means (a) the obligations of the Borrowers to reimburse the LC Issuer hereunder, (b) all fees owing to the LC Issuer under this Agreement and the other Loan Documents, (c) any costs and expenses reimbursable to the LC Issuer pursuant to Section 19.3 of this Agreement, and (d) taxes, Other Taxes, compensation, indemnification obligations or other amounts owing to the LC Issuer under this Agreement, the reimbursement agreement executed in favor of the LC Issuer or any other Loan Document. "LETTER OF CREDIT REQUEST" means a request for the issuance of a Letter of Credit made in accordance with this Agreement, in the form attached hereto as Exhibit B-2 and incorporated herein by reference. "LIBOR RATE ADVANCE" means a Loan, denominated in Dollars, which bears interest as provided in Section 6.1(b) of this Agreement. "LIBOR RATE BORROWING" means a Borrowing consisting of LIBOR Rate Advances. "LIEN" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "LLC" means each limited liability company in which a Borrower has an interest, including those set forth on the Disclosure Schedule. "LLC AGREEMENT" means each operating agreement governing an LLC, as each such agreement has heretofore been and may hereafter be amended, restated, supplemented or otherwise modified. "LOAN DOCUMENTS" means this Agreement, any note, mortgage, deed of trust, security agreement, guaranty or other lien instrument, any fee letter, reimbursement agreement, financial statement, audit report, environmental audit, notice, request of Advance, cash management agreement, officer's certificate or other writing of any kind which is now or hereafter required to Annex II-21 be delivered by or on behalf of the Borrowers to the Administrative Agent, the Lenders or the LC Issuer (or any of their respective Affiliates) in connection with this Agreement, including, without limitation, the Notes. "LOCKBOX" means a post office box rented by and in the name of a Borrower as required by this Agreement and as to which only the Lockbox Bank and the Administrative Agent has access pursuant to the requirements of this Agreement. "LOCKBOX AGREEMENT" has the meaning set forth in Section 5.1 of this Agreement. "LOCKBOX BANK" means KeyBank National Association or any other bank reasonably acceptable to the Agent. "LONDON INTERBANK OFFERED RATE" means, for any Interest Period with respect to a LIBOR Rate Borrowing, the quotient (rounded upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of 1%) of: (x) the per annum rate of interest, determined by the Lender in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 12:00 noon (London time) two Business Days prior to the beginning of such Interest Period pertaining to such LIBOR Rate Advance, as provided by Bloomberg's or Reuters (or any other similar company or service that provides rate quotations comparable to those currently provided by such companies as the rate in the London interbank market), as determined by the Lender from time to time for purposes of providing quotations of interest rates applicable to deposits in Dollars or in the London interbank market) as the rate in the London interbank market for deposits in Dollars in immediately available funds with a maturity comparable to such Interest Period divided by (y) a number equal to 1.00 minus the Eurocurrency Reserve Percentage. In the event that such rate quotation is not available for any reason, then the rate (for purposes of clause (x) hereof) shall be the rate, determined by the Lender as of approximately 12:00 noon (London time) two Business Days prior to the beginning of such Interest Period pertaining to such LIBOR Rate Advance, to be the average (rounded upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of 1%)) of the per annum rates at which deposits in Dollars in immediately available funds in an amount comparable to such LIBOR Borrowing and with a maturity comparable to such Interest Period are offered to the prime banks by leading banks in the London interbank market. The London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Percentage. "MATERIAL ADVERSE EFFECT" means: (a) a material adverse effect on the business, properties, operations or condition (financial or otherwise) of the Borrowers, taken as a whole, (b) an impairment of a material portion of the Collateral, (c) a material impairment of the Borrowers' ability to repay the Obligations, (d) a material impairment to the Administrative Agent's security interest and Lien on the Collateral valued at more than Two Hundred Fifty Thousand Dollars ($250,000) or the priority thereof, or (e) a material adverse effect on the legality, validity or enforceability of this Agreement, the other Loan Documents or any Lien created hereby or thereby in respect of Collateral valued at more than Two Hundred Fifty Thousand Dollars ($250,000). "MATERIAL BUSINESS AGREEMENT" means each agreement or contract (not including Material License Agreements) of any Borrower or any Subsidiary thereof (other than any agreement that by its terms may be terminated upon 60 days notice or less) which: (a) the termination of which could reasonably be expected to result in a Material Adverse Effect or (b) that Hawk Corporation is required to disclose in its public filings under Item 601(b)(10) of Regulation S-K promulgated under the Securities Exchange Act. "MATERIAL LICENSE AGREEMENT" means each license agreement of a Borrower in respect Annex II-22 of Third Party Intellectual Property set forth on the Disclosure Schedule as being a license agreement the termination of which could reasonably be expected to result in a Material Adverse Effect. "MAXIMUM LAWFUL RATE" has the meaning specified in Section 19.6 of this Agreement. "MEXICAN SUBSIDIARIES" means Hawk Motors de Mexico, S. de R.L. de C.V. and Hawk Motors Monterrey, S.A. de C.V. "MOODY'S" means Moody's Investors Services, Inc., and any successor thereto. "MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA. "NON-TAX DISTRIBUTIONS" has the meaning set forth in Section 11.3(f). "NOTICE OFFICE" means (i) with respect to the Administrative Agent, such office of the Administrative Agent specified as its "Notice Office" under its name on the signature pages hereto, or such other office, located in a city in the United States Eastern Time Zone, as the Administrative Agent may from time to time specify in writing to the Borrower Representative, the Lenders and the LC Issuer as the office to which notices to the Administrative Agent are to be given by the Borrower Representative, the Lenders and the LC Issuer, as the case may be, and (ii) with respect to each Lender and each LC Issuer, such office thereof specified as its "Notice Office" under its name on the signature pages hereto, or such other office as such Lender or LC Issuer may from time to time specify in writing to the Borrower Representative, the Administrative Agent, the other Lenders and the LC Issuer as the office to which notices thereto are to be given by the Borrower Representative, the Lenders or the LC Issuer, as the case may be. "NOTES" means the Revolving Credit Notes. "OBLIGATIONS" means the present and future obligations of the Borrowers to the Lenders under this Agreement or any other Loan Document including without limitation (a) the outstanding principal and accrued interest (including interest accruing after a petition for relief under the federal bankruptcy laws has been filed) in respect of any Revolving Credit Advances advanced to the Borrowers by the Lenders plus the outstanding LC Exposure of the Lenders and the obligation of the Borrowers to repay the Lenders for Advances thereby in connection with the LC Exposure, (b) all fees owing to the Lenders or the Administrative Agent under this Agreement and the other Loan Documents, (c) any costs and expenses reimbursable to the Lenders or the Administrative Agent pursuant to Section 19.3 of this Agreement, and (d) Taxes, Other Taxes, compensation, indemnification obligations or other amounts owing by the Borrowers to the Administrative Agent or the Lenders under this Agreement, the Notes or any Loan Document, and also includes Designated Hedge Obligations owing to any Lender (amounts owing to a Person which was a Lender at the time the hedge exposure of the Borrowers was first incurred shall continue to be considered as an Obligation for all purposes hereunder and secured hereby even after such Person is no longer a Lender). "OPERATING ACCOUNT" means, with respect to the Borrowers, the account described in the Disclosure Schedule and maintained by and in the name of the Borrower Representative with KeyBank for the purposes of disbursing the proceeds of Advances, which account shall in no case be a payroll or medical account. "OTHER TAXES" has the meaning specified in Section 18.3(b) of this Agreement. "PARTNERSHIP" means each partnership in which a Borrower has an interest, including Annex II-23 those set forth on the Disclosure Schedule. "PARTNERSHIP AGREEMENT" means each partnership agreement governing a Partnership, as each such agreement has heretofore been and may hereafter be amended, restated, supplemented or otherwise modified. "PAYMENT OFFICE" means, with respect to the Administrative Agent, such office of the Administrative Agent specified as its "payment office" under its name on the signature pages hereto, or such other office as the Administrative Agent may from time to time specify in writing to the Borrower Representative and the Lenders as the office to which payments are to be made by the Borrowers or funds are to be made accessible to the Administrative Agent by the Lenders, as the case may be. "PBGC" means the Pension Benefit Guaranty Corporation or any other governmental authority succeeding to any of its functions. "PERMITTED ACCOUNT" has the meaning specified in Section 9.13 of this Agreement but expressly excludes any Blocked Account or any other Deposit Account into which Collections are received which is required to be a Blocked Account hereunder. "PERMITTED ACQUISITION" shall mean and include any Acquisition as to which all of the following conditions are satisfied or as to which the Required Lenders have otherwise consented in accordance with Section 19.1 of this Agreement: (i) such Acquisition does not involve the Acquisition of a Person which is (A) a general partnership, general partner of a limited partnership or is otherwise a Person as to which limited liability is unavailable to the holders of its equity or other similar interests therein or (B) a limited partnership interest, or (C) a trust or unincorporated association, or (D) without the consent of the Required Lenders, a Person having an equity interest or other similar interest held by a foreign government or any political subdivision or agency thereof; (ii) such Acquisition involves a line or lines of business which are complementary (including machining operations and aluminum casting operations) to the lines of business in which the Borrowers and their Subsidiaries, considered as an entirety, are engaged on the Closing Date; (iii) such Acquisition is not actively opposed by the board of directors (or similar governing body) of the selling Person or the person whose equity interests are to be acquired, unless all of the Lenders specifically approve or consent to such Acquisition in writing; (iv) after giving effect to the consummation of the Acquisition, the Borrowers shall have (A) Excess Availability under the Revolving Credit Commitment hereunder of Ten Million Dollars ($10,000,000) and (B) a Cash Flow Coverage Ratio of no less than 1.0 to 1.0 on a pro forma basis for the trailing twelve months then ending; (v) the Total Acquisition Consideration for any single Permitted Acquisition shall be limited to Two Million Five Hundred Thousand Dollars ($2,500,000) and all Permitted Acquisitions consummated after the Closing Date shall be limited to Five Million Dollars ($5,000,000) in the aggregate; (vi) at least thirty (30) Business Days prior to the completion of such transaction, the Borrowers shall have delivered to the Administrative Agent (A) a notice of the proposed Permitted Acquisition and (B) a certificate of a Responsible Officer of the Borrower Representative demonstrating, in reasonable detail, the computations necessary to show Annex II-24 compliance with the financial covenants contained in Section 11.4 hereof on a pro forma basis; and (vii) no Event of Default has occurred which is continuing and has not been waived in accordance with Section 19.1 of this Agreement and no Event of Default will occur by reason of consummation of the Acquisition. "PERMITTED SPECIAL ADVANCES" means Revolving Credit Advances made by the Administrative Agent on behalf of the Lenders pursuant to Section 3.8(f) hereof and which are advanced in one or more of the following circumstances: (i) such Advances are advanced after the occurrence and during the continuance of a Potential Default or after the occurrence of an Event of Default which is continuing or (ii) such Advances are advanced at any time that any of the other applicable conditions precedent set forth in Section 7.2 of this Agreement have not been satisfied, or (iii) such Advances cause the outstanding balance of Revolving Credit Advances to exceed the Borrowing Base at such time minus the sum of outstanding Revolving Credit Advances at such time and the aggregate LC Exposure of the Lenders at such time. "PERMITTED TAX DISTRIBUTIONS" means, for or in respect of any fiscal year or other tax period of a Borrower (each a "Tax Period"), a distribution by such Borrower to its members in an amount equal to the product of (x) taxable income of such Borrower for such Tax Period multiplied by (y) the Assumed Tax Rate. Permitted Tax Distributions shall be calculated and made in advance of the dates on which estimated tax payments relating to the pertinent Tax Period are due, and shall be made without regard to the actual tax status of any member of such Borrower. Notwithstanding the foregoing, Permitted Tax Distributions shall also include any amounts determined pursuant to the foregoing formula with respect to adjustments to the taxable income of such Borrower imposed by any governmental authority (or otherwise). "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLEDGED COLLATERAL" means, collectively, the Pledged Notes, the Pledged Stock, the Pledged Partnership Interests, the Pledged LLC Interests, any other Investment Property of any Borrower in excess of One Hundred Thousand Dollars ($100,000) in the aggregate, all certificates or other instruments representing any of the foregoing, all Security Entitlements of any Borrower in respect of any of the foregoing, all dividends, interest distributions, cash, warrants, rights, instruments and other property or Proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing. Pledged Collateral may be General Intangibles or Investment Property. "PLEDGED LLC INTERESTS" means all of a Borrower's right, title and interest as a member of any LLCs and all of a Borrower's right, title and interest in, to and under any LLC Agreement to which it is a party. "PLEDGED NOTES" means all right, title and interest of a Borrower in the Instruments evidencing all Indebtedness owed to a Borrower including all Indebtedness described on the Disclosure Schedule, issued by the obligors named therein, and all interest, cash, Instruments and other property or Proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Indebtedness. "PLEDGED PARTNERSHIP INTERESTS" shall mean all of a Borrower's right, title and interest as a limited and/or general partner in all Partnerships and all of a Borrower's right, title and interest in, to and under any Partnership Agreements to which it is a party. Annex II-25 "PLEDGED STOCK" means the shares of capital stock owned by a Borrower, including all shares of capital stock listed on the Disclosure Schedule; provided, however, that with respect to a Subsidiary that is not a Domestic Subsidiary only outstanding capital stock possessing up to but not exceeding sixty-five percent (65%) of the voting power of all classes of capital stock of such controlled foreign entity entitled to vote shall be deemed to be pledged hereunder; and provided further that any capital stock of Hawk Corporation held in treasury by Hawk Corporation shall not constitute Pledged Stock. "POTENTIAL DEFAULT" means: (i) an event, condition or thing which with the lapse of any applicable grace period or with the giving of notice or both would constitute, an Event of Default referred to in Section 12 of this Agreement and which has not been appropriately waived in writing in accordance with this Agreement or fully corrected, prior to becoming an actual Event of Default and (ii) any financial condition which can reasonably be expected to result in a violation of the financial covenants hereof with the expiration of time. "PRODUCTS" means property directly or indirectly resulting from any manufacturing, processing, assembling or commingling of any Inventory. "PROPERTIES" has the meaning specified in Section 10.10 of this Agreement. "PRO RATA SHARE" means, in respect of any Lender, the quotient (expressed as a percentage) obtained at any time by dividing: (x) the sum of such Lender's Revolving Credit Commitment at such time by (y) the sum of the aggregate amount of the Revolving Credit Commitments of all of the Lenders; provided, however, that, if all of the Revolving Credit Commitments are terminated pursuant to the terms hereof, then, such Lender's Pro Rata Share shall mean the quotient (expressed as a percentage) obtained by dividing (x) the aggregate amount of such Lender's Advances (together with any participating interests of such Lender hereunder) outstanding at such time by (y) the aggregate amount of Advances (together with all such participating interests of all of the Lenders hereunder) of all of the Lenders outstanding at such time. "RATE CONTINUATION" means a continuation pursuant to Section 6.2 of this Agreement of LIBOR Rate Advances having a particular Interest Period as LIBOR Rate Advances having an Interest Period of the same duration. "RATE CONVERSION" means a conversion pursuant to Section 6.2 of this Agreement of Loans of one Type into Loans of another Type and, with respect to LIBOR Rate Advances, from one permissible Interest Period to another permissible Interest Period. "RATE CONVERSION/CONTINUATION REQUEST" has the meaning specified in Section 6.2 of this Agreement. "RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. "REIMBURSEMENT AGREEMENT" has the meaning set forth in Section 2.2(b) of this Agreement. "REPORTABLE EVENT" means any of the events set forth in Section 4043 of ERISA excluding those events for which the requirement of notice has been waived by the PBGC. "REQUIRED LENDERS" means, at any time: (i) Lenders (excluding, for purposes of this definition, any Lender then constituting a "Defaulting Lender" under Section 3.6(b)) having at least sixty-six and two thirds percent (66 and 2/3rds%) of the aggregate outstanding Revolving Credit Commitments of the Revolving Credit Lenders at such time; provided, however, that if Annex II-26 that, if the Revolving Credit Commitments are terminated pursuant to the terms hereof, then, the term "Required Lenders" shall mean Lenders (excluding any Lender then constituting a Defaulting Lender) having at least sixty-six and two thirds percent (66 and 2/3rds%) of the aggregate outstanding principal amount of the Revolving Credit Advances of all of the Lenders outstanding at such time (excluding, for purposes of determining the aggregate outstanding Revolving Credit Commitments of the Revolving Credit Lenders and the aggregate outstanding principal amount of Revolving Credit Advances of the Lenders, as the case may be, at such time, the outstanding Revolving Credit Commitments and the outstanding principal amount of the Revolving Credit Advances, as the case may be, of any such Defaulting Lender) and (ii) if there are only two Lenders (excluding, for purposes of this definition, any Lender then constituting a "Defaulting Lender" under Section 3.6(b)), Lenders having one hundred percent (100%) of the aggregate outstanding Revolving Credit Commitments of the Revolving Credit Lenders at such time or, if the Revolving Credit Commitments are terminated, then Lenders (excluding any Lender then constituting a Defaulting Lender) having one hundred percent (100%) of the aggregate outstanding principal amount of Revolving Credit Advances. "RESERVE AMOUNT" means the aggregate amount of the reserves against Borrowing Base availability as such amount is determined by the Administrative Agent pursuant to Section 2.1(c) of this Agreement. "RESPONSIBLE OFFICER" means, with respect to a Borrower and the Borrower Representative, President, Chief Executive Officer, Vice President - Chief Financial Officer, Vice President -Finance, or Corporate Controller. "RETAIL ACCOUNTS" means Accounts that (i) are owing from retail customers with a Moody's rating of no less than Baa3 or S&P's rating of no less than BBB-, (ii) are owing from S.K. Wellman Corp. customer nos. 30174 and 30178, or (iii) are owing from such other retail customers as agreed in writing by the Administrative Agent. "REVOLVING CREDIT ADVANCE" means a Revolving Credit Advance made by a Lender to the Borrowers pursuant to Section 2.1(a) of this Agreement (whether made by a Lender pursuant to a Credit Request or by reason of a Deemed Credit Request), and includes Swing Line Advances and Permitted Special Advances (except to the extent Swing Line Advances or Permitted Special Advances are expressly excluded for purposes of certain calculations under this Agreement). "REVOLVING CREDIT BORROWING" means a Borrowing consisting of Revolving Credit Advances. "REVOLVING CREDIT COMMITMENT" means the commitment of each Lender to advance Revolving Credit Advances up to the amount, if any, set forth in opposite such Lender's name in Annex I hereto as its Revolving Credit Commitment as such commitment may be reduced from time to time pursuant to Section 4.3 and/or Section 13 hereof, or adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 16.2 of this Agreement. "REVOLVING CREDIT NOTE" means, with respect to the Borrowers, the promissory note of the Borrowers payable to the order of each Lender, in substantially the form of Exhibit A-1 hereto, and in the original principal amount of the Revolving Credit Commitment, evidencing the aggregate indebtedness of the Borrowers to such Lender resulting from the Revolving Credit Advances made by such Lender. "REVOLVING CREDIT TERMINATION DATE" means November 1, 2009, or earlier if terminated pursuant to the terms of this Agreement. Annex II-27 "SENIOR NOTES" means the 8-3/4% Senior Notes due 2014 of Hawk Corporation issued pursuant to the Senior Note Indenture, including, but not limited to any Exchange Notes (as defined in the Senior Note Indenture) issued thereunder. "SENIOR NOTE INDENTURE" means that certain Indenture, dated as of November 1, 2004, among Hawk Corporation, as Issuer, the Guarantors named therein, as Guarantors, and HSBC Bank USA, National Association, as Trustee as the same may be further amended, supplemented, replaced or otherwise modified from time to time in accordance with this Agreement. "SETTLEMENT DATE" has the meaning specified in Section 3.8(b) of this Agreement. "SETTLEMENT PERIOD" has the meaning specified in Section 3.8(b) of this Agreement. "SHAREHOLDER EQUITY" shall mean all amounts that would be included under the caption "shareholders' equity" (or any like caption) on a balance sheet of Hawk Corporation, all as determined on a consolidated basis in accordance with GAAP as at such date. "SOLVENT" means, with respect to any Person, as of any date of determination, that: (a) the fair value of the property of the Person as of such date is greater than the total amount of the liabilities (including contingent liabilities computed at the amount that, in light of all the facts and circumstances existing as of such date, represents the amount that can reasonably be expected to become an actual or matured liability) of the Person, (b) the present fair salable value of the assets of the Person as of such date is not less than the amount that will be required to pay the probable liabilities of the Person on its debts as they become absolute and matured, (c) the Person is able to pay all liabilities of the Person as those liabilities mature, and (d) the Person does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. The determination of whether a Person is Solvent shall take into account all such Person's assets and liabilities regardless of whether, or the amount at which, any such asset or liability is included on a balance sheet of such Person prepared in accordance with GAAP, including assets such as contingent contribution or subrogation rights, business prospects, distribution channels and goodwill. In computing the amount of contingent or unrealized assets or contingent or unliquidated liabilities at any time, such assets and liabilities will be computed at the amounts which, in light of all the facts and circumstances existing at such time, represent the amount that reasonably can be expected to become realized assets or matured liabilities, as the case may be. In computing the amount that would be required to pay a Person's probable liability on its existing debts as they become absolute and matured, reasonable valuation techniques, including a present value analysis, shall be applied using such rates over such periods as are appropriate under the circumstances, and it is understood that, in appropriate circumstances, the present value of contingent liabilities may be zero. "S&P" means Standard and Poor's Rating Services, a division of McGraw Hill Companies, Inc., and any successor thereto. "SUBSIDIARY" means, in respect of a corporate Person, a corporation or other business entity the shares constituting a majority of the outstanding capital stock (or other form of ownership) or constituting a majority of the voting power in any election of directors (or shares constituting both majorities) of which are (or upon the exercise of any outstanding warrants, options or other rights would be) owned directly or indirectly at the time in question by such Person or another subsidiary of such Person or any combination of the foregoing. "SWING LINE ADVANCE" has the meaning set forth in Section 3.8(a) of this Agreement. "SWING LINE LENDER" means KeyBank. Annex II-28 "TESTING PERIOD" means in respect of each Fiscal Quarter ending after the Closing Date, the period consisting of the four consecutive Fiscal Quarters then last ended (whether or not such quarters are all within the same Fiscal Year). "THIRD PARTY INTELLECTUAL PROPERTY" means any Intellectual Property not owned by a Borrower. "TOTAL ACQUISITION CONSIDERATION" means, with respect to any Permitted Acquisition, the total of all consideration (whether in cash, property or other form of consideration other than consideration in the form of equity securities) received by the Person whose assets or stock is being acquired or by the shareholders thereof in connection with the Permitted Acquisition. "TYPE" means a LIBOR Rate Advance or an Alternate Base Rate Advance, as applicable. "UCC" means the Uniform Commercial Code as from time to time in effect in the State of Ohio; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the Administrative Agent's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Ohio, the term "UCC" shall mean the Uniform Commercial Code as from time to time in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for the purposes of definitions related to such provisions; provided, further, that if the UCC is amended after the date hereof, such amendment will not be given effect for the purposes of this Agreement if and to the extent the result of such amendment would be to limit or eliminate any item of Collateral. "UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures which are not funded with the proceeds of Indebtedness (other than Revolving Credit Advances). "UNITED STATES" and "U.S." each means United States of America. "UNTENDERED NOTES" means those certain 12% Senior Notes due 2006 which remain outstanding after the completion of the tender offer contemplated in the Borrower's Offer to Purchase and Consent Solicitation Statement dated September 30, 2004. "USA PATRIOT ACT" shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced. "U.S. LENDER" has the meaning set forth in Section 18.3(c)(ii) of this Agreement. "VOTING STOCK" means capital stock of a corporation, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or persons performing similar functions). "WITHDRAWAL LIABILITY" means (in respect of a Borrower, its Subsidiaries and their ERISA Affiliates), at any date of determination, the amount equal to the aggregate present value (as defined in Section 3 of ERISA) at such date of the amount claimed to have been incurred as a result of a withdrawal less any portion thereof as to which such Borrower reasonably believes, after appropriate consideration of the possible adjustments arising under subtitle E of Title IV of ERISA, such Borrower, its Subsidiaries and their ERISA Affiliates will have no liability; provided, however, that such Borrower shall obtain promptly written advice from independent actuarial consultants supporting such determination. Annex II-29 "WHOLLY-OWNED SUBSIDIARY" means, in respect of any Person, a Subsidiary of such Person in which such Person owns all of the outstanding capital stock (or other form of ownership) and controls all of the voting power in any election of directors or otherwise. Annex II-30 EX-99.1 6 l10322aexv99w1.txt EX-99.1 PRESS RELEASE Exhibit 99.1 [HAWK CORPORATION LOGO] HAWK COMPLETES OFFERING OF $110 MILLION 8 3/4% SENIOR NOTES AND NEW $30 MILLION BANK FACILITY Cleveland, Ohio - November 1, 2004 - Hawk Corporation (AMEX: HWK) announced today that it has completed two financing transactions to replace its existing debt instruments. In the first transaction, Hawk completed its previously disclosed private offering of $110.0 million 8 3/4% Senior Notes due 2014. The Notes represent senior unsecured obligations of Hawk and are guaranteed by Hawk's domestic subsidiaries. Interest is payable semi-annually and the Notes mature in November 2014. Concurrently with the completion of the Notes offering, Hawk closed a new five year, senior secured credit facility with KeyBank National Association. The new bank facility has a maximum revolving credit commitment of $30.0 million. Hawk will use the initial borrowings under its new bank facility along with proceeds of the Notes to refinance all of its outstanding 12% Senior Notes due 2006, to repay loans under its previous bank facility and to pay fees and expenses related to these transactions. Hawk will use its new bank facility to finance its ongoing working capital requirements and for general corporate purposes. "We are pleased to have extended the maturity of our high yield bonds to ten years with a very attractive fixed interest rate and covenant terms," stated Joseph J. Levanduski, the Vice President - CFO of Hawk. "This, combined with our new bank facility, will provide Hawk with ample liquidity and flexibility to continue its long-term growth initiatives." THE COMPANY Hawk Corporation is a leading worldwide supplier of highly engineered products. Its friction products group is a leading supplier of friction materials for brakes, clutches and transmissions used in airplanes, trucks, construction equipment, farm equipment and recreational and performance automotive vehicles. Through its precision components group, Hawk is a leading supplier of powder metal and metal injected molded components used in industrial, consumer and other applications, such as pumps, motors and transmissions, lawn and garden equipment, appliances, small hand tools, trucks and telecommunications equipment. Hawk's performance racing group manufactures clutches and gearboxes for motorsport applications and performance automotive markets. Headquartered in Cleveland, Ohio, Hawk has approximately 1,600 employees and 16 manufacturing, research and administrative sites in five countries at its continuing operations. FORWARD-LOOKING STATEMENTS This press release may include forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Hawk, that could cause actual results to differ materially from such statements. As noted, actual results and events may differ significantly from those projected in the forward-looking statements. Reference is made to Hawk's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2003, its quarterly reports on Form 10-Q, and other periodic filings, for a description of the foregoing and other factors that could cause actual results to differ materially from those in the forward-looking statements. Any forward-looking statement speaks only as of the date that such statement is made, and Hawk undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. COMPANY CONTACT INFORMATION Ronald E. Weinberg, Chairman, CEO and President (216) 861-3553 Thomas A. Gilbride, Vice President - Finance (216) 861-3553 Hawk Corporation is online at: www.hawkcorp.com ~~-----END PRIVACY-ENHANCED MESSAGE-----~~

	•		pay dividends, redeem subordinated debt or make other restricted payments;

	•		issue preferred stock of its subsidiaries;

	•		transfer or sell assets, including capital stock of its subsidiaries;

	•		incur dividend or other payment restrictions affecting certain of its subsidiaries;

	•		make certain investments or acquisitions;

	•		grant liens on its assets;

	•		enter into certain transactions with affiliates; and

	•		merge, consolidate or transfer substantially all of its assets.


Item 2.03.	Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.