-----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, JD0GnvnwA2eICahGE5ivf7/nUqoSpovH4WyAUnMBlgd6CTCOPWwbUqO/fB8tuS0a EvamJkSj4zBC0j5wzkOLGQ== 0000950123-04-014015.txt : 20041123 0000950123-04-014015.hdr.sgml : 20041123 20041122212040 ACCESSION NUMBER: 0000950123-04-014015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20041118 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Changes in Control of Registrant ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041123 DATE AS OF CHANGE: 20041122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: K&F INDUSTRIES INC CENTRAL INDEX KEY: 0000851797 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 341614845 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-40977 FILM NUMBER: 041162217 BUSINESS ADDRESS: STREET 1: 600 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2122970900 MAIL ADDRESS: STREET 1: 600 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10016 8-K 1 y69010e8vk.txt FORM 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 Date of Report (Date of earliest event reported) November 18, 2004 K&F INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 33-29035 34-1614845 - ------------------------- --------------------- --------------------------- (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation or organization) 600 THIRD AVENUE, NEW YORK, NY 10016 ------------------------------------ ------------ (Address of principal executive (Zip code) offices) (212) 297-0900 --------------------------------- (Registrant's telephone number, including area code) N/A --------------------------------- (Former name, former address and former fiscal year, if changed since last report.) 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: ( ) Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ( ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b)) ( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)) ================================================================================ ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. See Items 5.01 and 8.01 below. ITEM 5.01. CHANGES IN CONTROL OF REGISTRANT. Effective November 18, 2004, an affiliate of Aurora Capital Group, a Los Angeles-based private investment firm, acquired (the "Acquisition") K&F Industries, Inc., a Delaware corporation (the "Company"), pursuant to a Stock Purchase Agreement, dated October 15, 2004 (the "Agreement") by and among K&F Parent, Inc. (formerly AAKF Acquisition, Inc.), a Delaware corporation ("K&F Parent"), the Company and the Company's stockholders. The Agreement is filed as Exhibit 2.1 hereto, and is incorporated herein by reference. K&F Parent was the indirect parent company of K&F Acquisition, Inc., a Delaware corporation ("K&F Acquisition"). The rights and obligations of K&F Parent under the Agreement were assigned to K&F Acquisition prior to the completion of the Acquisition. Following the completion of the Acquisition, K&F Acquisition was merged with and into the Company, with the Company remaining as the surviving corporation (the "Merger"). Aurora Capital financed the Acquisition, including Acquisition related costs, and refinanced the Company's existing debt through the issuance of Notes (as defined below), the issuance of preferred and common equity of K&F Parent, and borrowings under the New Credit Facility (as defined below). Following the Merger, the Company is a party to and bears responsibility for the obligations under the Notes and the New Credit Facility. On November 18, 2004, Aurora Capital and the Company jointly issued a press release announcing the completion of the Acquisition. A copy of the press release is filed as Exhibit 99.1 hereto, and is incorporated herein by reference. ITEM 8.01. OTHER EVENTS. K&F Acquisition completed the offering of $315,000,000 aggregate principal amount of 7-3/4% Senior Subordinated Notes due 2014 (the "Notes") on November 18, 2004, concurrent with the closing of the Acquisition. The Notes were offered in a private placement to eligible purchasers pursuant to Regulation D, Rule 144A and Regulation S under the Securities Act of 1933. The Indenture relating to the Notes is filed as Exhibit 4.1 hereto, and is incorporated herein by reference. K&F Acquisition also entered into a Registration Rights Agreement (the "Registration Rights Agreement") with the initial purchasers of the Notes granting customary rights to such purchasers. The Registration Rights Agreement is filed as Exhibit 4.2 hereto, and is incorporated herein by reference. Following the Merger, the Company is a party to and bears responsibility for the obligations under the Registration Rights Agreement. Also, on November 18, 2004, the $530,000,000 credit facility (the "New Credit Facility") among K&F Acquisition, Lehman Commercial Paper, Inc. and certain other financial institutions 2 became effective. The New Credit Facility replaces K&F Industries prior credit facility. The New Credit Facility is filed as Exhibit 10.1 hereto, and is incorporated herein by reference. 3 ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits EXHIBIT NUMBER DESCRIPTION OF EXHIBIT -------------- ------------------------------------------------------------ 2.1 Stock Purchase Agreement, dated as of October 15, 2004, entered into by and among K&F Parent, Inc. (formerly AAKF Acquisition, Inc.) K&F Industries, Inc. and the stockholders of K&F Industries. 4.1 Indenture, dated as of November 18, 2004 between K&F Acquisition, Inc., and U.S. Bank National Association. 4.2 Registration Rights Agreement, dated as of November 18, 2004 by and among K&F Acquisition, Lehman Brothers Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc., and J.P. Morgan Securities Inc. 10.1 Credit Agreement, dated as of November 18, 2004, among K&F Intermediate Holdco, Inc., a Delaware corporation, K&F Acquisition, Inc., a Delaware corporation as Borrower, the several banks and other financial institutions or entities from time to time parties to this Agreement as the Lenders, Lehman Brothers Inc. and J.P. Morgan Securities Inc., as Advisors, J.P. Morgan Securities Inc., as Syndication Agent, Goldman Sachs Credit Partners L.P. and Citigroup Global Markets Inc., as Co-Documentation Agents and Lehman Commercial Paper Inc., as Administrative Agent. 99.1 Press Release issued November 18, 2004. 4 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 thereunto duly authorized. K&F INDUSTRIES, INC. Date: November 22, 2004 By: /s/ Ronald H. Kisner --------------------------------------- EXECUTIVE VICE PRESIDENT 5 EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- --------------------------------------------------------------------- 2.1 Stock Purchase Agreement, dated as of October 15, 2004, entered into by and among K&F Parent, Inc. (formerly AAKF Acquisition, Inc.) K&F Industries, Inc. and the stockholders of K&F Industries. 4.1 Indenture, dated as of November 18, 2004 between K&F Acquisition, Inc., and U.S. Bank National Association. 4.2 Registration Rights Agreement, dated as of November 18, 2004 by and among K&F Acquisition, Lehman Brothers Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc., and J.P. Morgan Securities Inc. 10.1 Credit Agreement, dated as of November 18, 2004, among K&F Intermediate Holdco, Inc., a Delaware corporation, K&F Acquisition, Inc., a Delaware corporation as Borrower, the several banks and other financial institutions or entities from time to time parties to this Agreement as the Lenders, Lehman Brothers Inc. and J.P. Morgan Securities Inc., as Advisors, J.P. Morgan Securities Inc., as Syndication Agent, Goldman Sachs Credit Partners L.P. and Citigroup Global Markets Inc., as Co-Documentation Agents and Lehman Commercial Paper Inc., as Administrative Agent. 99.1 Press Release issued November 18, 2004. 6 EX-2.1 2 y69010exv2w1.txt STOCK PURCHASE AGREEMENT Execution Copy EXHIBIT 2.1 - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT by and among AAKF Acquisition, Inc., as Purchaser, K&F Industries, Inc., as the Company, and the other parties listed herein, as the Stockholders Dated as of October 15, 2004 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I. DEFINITIONS........................................................................................... 1 SECTION 1.1. Definitions.............................................................................. 1 ARTICLE II. SALE OF SHARES....................................................................................... 17 SECTION 2.1. Purchase and Sale of the Common Stock.................................................... 17 SECTION 2.2. Closing.................................................................................. 18 SECTION 2.3. Subsequent Change of Control............................................................. 19 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................... 22 SECTION 3.1. Organization, Standing and Authority..................................................... 22 SECTION 3.2. Capitalization........................................................................... 22 SECTION 3.3. Subsidiaries............................................................................. 23 SECTION 3.4. Actions and Proceedings.................................................................. 23 SECTION 3.5. No Conflict or Violation................................................................. 24 SECTION 3.6. Governmental Consents and Approvals...................................................... 24 SECTION 3.7. Financial Statements and Statutory Statements............................................ 25 SECTION 3.8. Intellectual Property.................................................................... 26 SECTION 3.9. Compliance with Laws..................................................................... 27 SECTION 3.10. Permits, Licenses and Franchises......................................................... 27 SECTION 3.11. Contracts................................................................................ 27 SECTION 3.12. Absence of Certain Changes............................................................... 28 SECTION 3.13. Environmental Matters.................................................................... 28 SECTION 3.14. Taxes.................................................................................... 29 SECTION 3.15. Employee Benefit Plans; ERISA............................................................ 30 SECTION 3.16. Labor Relations and Employment........................................................... 32 SECTION 3.17. Real Property............................................................................ 33 SECTION 3.18. Affiliated Transactions; Indemnification Agreements...................................... 34 SECTION 3.19. Warranties............................................................................... 35 SECTION 3.20. Inappropriate Payments................................................................... 35 SECTION 3.21. Brokers.................................................................................. 35 SECTION 3.22. Assets................................................................................... 35 SECTION 3.23. Insurance................................................................................ 36 SECTION 3.24. Intercompany Services.................................................................... 36 SECTION 3.25. Government Contracts..................................................................... 36 SECTION 3.26. International Trade and Export Controls.................................................. 37 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS................................................... 38 SECTION 4.1. Ownership of Stock....................................................................... 38 SECTION 4.2. Authorization............................................................................ 38 SECTION 4.3. No Conflict or Violation................................................................. 38 SECTION 4.4. Governmental Consents and Approvals...................................................... 39 SECTION 4.5. Compliance with Laws..................................................................... 39 SECTION 4.6. Obligations of the Company to the Stockholders........................................... 39
i ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................................................... 40 SECTION 5.1. Organization, Standing and Authority..................................................... 40 SECTION 5.2. Authorization............................................................................ 40 SECTION 5.3. Actions and Proceedings.................................................................. 40 SECTION 5.4. No Conflict or Violation................................................................. 41 SECTION 5.5. Governmental Consents and Approvals...................................................... 41 SECTION 5.6. Compliance with Laws..................................................................... 41 SECTION 5.7. Financing................................................................................ 41 SECTION 5.8. Sophisticated Investor................................................................... 42 SECTION 5.9. Other Investment Representations......................................................... 42 SECTION 5.10. Brokers.................................................................................. 43 SECTION 5.11. Information Supplied..................................................................... 43 ARTICLE VI. COVENANTS............................................................................................ 43 SECTION 6.1. Conduct of the Business Pending the Closing.............................................. 43 SECTION 6.2. Certain Transactions..................................................................... 46 SECTION 6.3. Investigations; Pre-Closing Access....................................................... 47 SECTION 6.4. HSR Act Filings; Consents................................................................ 48 SECTION 6.5. Further Assurances....................................................................... 49 SECTION 6.6. Transaction Expenses; Defeasance Costs................................................... 50 SECTION 6.7. Employee Matters......................................................................... 51 SECTION 6.8. Indemnification of Directors and Officers; Releases...................................... 52 SECTION 6.9. Stock Options............................................................................ 53 SECTION 6.10. Custody of Share Certificates............................................................ 54 SECTION 6.11. Notes Tender Offer....................................................................... 54 SECTION 6.12. Estoppel Certificates.................................................................... 57 SECTION 6.13. Certain Tax Matters...................................................................... 57 ARTICLE VII. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO CLOSE.................................... 58 SECTION 7.1. Representations and Warranties........................................................... 59 SECTION 7.2. Compliance with Covenants................................................................ 59 SECTION 7.3. Governmental and Regulatory Consents and Approvals....................................... 59 SECTION 7.4. Injunction............................................................................... 59 SECTION 7.5. Materiality of Conditions................................................................ 60 SECTION 7.6. Financing................................................................................ 60 SECTION 7.7. Notes Satisfaction Condition; Indebtedness and Encumbrances.............................. 60 SECTION 7.8. Documents................................................................................ 60 SECTION 7.9. Opinions of Counsel to the Company....................................................... 61 SECTION 7.10. Termination of Certain Affiliate Agreements.............................................. 61 SECTION 7.11. No Plan Termination...................................................................... 62 SECTION 7.12. Confirmation Letters..................................................................... 62 ARTICLE VIII. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE STOCKHOLDERS TO CLOSE................................ 62 SECTION 8.1. Representations and Warranties........................................................... 62 SECTION 8.2. Compliance with Covenants................................................................ 63
ii SECTION 8.3. Governmental and Regulatory Consents and Approvals....................................... 63 SECTION 8.4. Cash Purchase Price...................................................................... 63 SECTION 8.5. Injunction............................................................................... 63 SECTION 8.6. Materiality of Conditions................................................................ 63 SECTION 8.7. Documents................................................................................ 64 SECTION 8.8. Opinion of Counsel to the Purchaser...................................................... 64 ARTICLE IX. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION............................... 64 SECTION 9.1. Survival of Representations, Warranties and Covenants.................................... 64 SECTION 9.2. Indemnification by the Significant Stockholders and the Stockholders..................... 65 SECTION 9.3. Limitations on Indemnification by the Significant Stockholders and the Stockholders............................................................................ 66 SECTION 9.4. Indemnification by the Purchaser Indemnitors............................................. 68 SECTION 9.5. Limitations on Indemnification by the Purchaser Indemnitors.............................. 68 SECTION 9.6. Procedures............................................................................... 69 SECTION 9.7. Remedies Not Affected by Investigation, Disclosure or Knowledge.......................... 71 SECTION 9.8. Indemnity Escrow Fund.................................................................... 71 SECTION 9.9. Exclusive Remedy; Additional Limitations................................................. 72 SECTION 9.10. Subrogation.............................................................................. 72 SECTION 9.11. Appointment of the Representatives....................................................... 73 ARTICLE X. TERMINATION PRIOR TO CLOSING.......................................................................... 74 SECTION 10.1. Termination of Agreement................................................................. 74 SECTION 10.2. Survival................................................................................. 75 ARTICLE XI. MISCELLANEOUS........................................................................................ 75 SECTION 11.1. Publicity................................................................................ 75 SECTION 11.2. Confidentiality.......................................................................... 76 SECTION 11.3. Notices.................................................................................. 76 SECTION 11.4. Governing Law............................................................................ 77 SECTION 11.5. Entire Agreement......................................................................... 77 SECTION 11.6. Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies............... 78 SECTION 11.7. Binding Effect; Assignment............................................................... 78 SECTION 11.8. Interpretation........................................................................... 78 SECTION 11.9. No Third Party Beneficiaries............................................................. 78 SECTION 11.10. Counterparts............................................................................. 79 SECTION 11.11. Other Agreements, Exhibits and Schedules................................................. 79 SECTION 11.12. Headings................................................................................. 79 SECTION 11.13. Investigation by Purchaser............................................................... 79
iii INDEX OF EXHIBITS Exhibit A - List of Stockholders Exhibit B - Knowledge Groups Exhibit C - Form of Indemnity Escrow Agreement Exhibit D - Commitment Letters Exhibit E - Form of Employment Agreements Exhibit F - Form of Joinder Agreement Exhibit G - Required Permits Exhibit H - Forms of Opinions of Company's Counsel Exhibit I - Affiliate Agreements to be Terminated Exhibit J - Form of Noncompetition Agreement Exhibit K - Form of Opinion of Purchaser's Counsel Exhibit L - Form of Custody Agreement Exhibit M - Form of Option Termination Agreement Exhibit N - Form of Estoppel Certificate Exhibit O - Pro Rata Portions Exhibit P - Defeasance Costs Tax Note Exhibit Q - Airplane Use and Reimbursement Agreement INDEX OF SCHEDULES Schedule 1.1 - Persons Subject to Noncompetition Agreements Schedule 3.1(b) - Jurisdictions of Foreign Qualification Schedule 3.2(b) - Capitalization Schedule 3.3 - Subsidiaries Schedule 3.4 - Actions or Proceedings Schedule 3.5 - Conflicts or Violations Schedule 3.6 - Governmental Consents and Approvals Required Schedule 3.8 - Exceptions to Intellectual Property Schedule 3.9 - Alleged Violations of Laws or Regulations Schedule 3.10 - Permits, Licenses and Franchises Schedule 3.11 - Contracts Schedule 3.12 - Material Changes Schedule 3.13 - Environmental Matters Schedule 3.14 - Taxes Schedule 3.15 - Employee Benefit Plans; ERISA Schedule 3.16 - Labor Relations and Employment Schedule 3.17 - Real Property Schedule 3.18 - Affiliated Transactions Schedule 3.22 - Assets Schedule 3.21 Brokers Schedule 3.23 - Insurance Schedule 3.24 - Intercompany Services Schedule 3.25 - Government Contracts Schedule 3.26 - International Trade and Export Controls iv Schedule 4.4 - Governmental Consents and Approvals Required Schedule 4.6 - Obligations of the Company to the Stockholders Schedule 4.7 - Ownership of Notes Schedule 5.4 - Conflicts Schedule 5.10 - Brokers Schedule 6.1 - Exceptions to Conduct of the Business Pending the Closing Schedule 6.1(xii) - Permitted Capital Expenditures Schedule 6.4 - Required Approvals and Consents Schedule 6.7(b) - Key Employees Schedule 6.11 - Certain Indenture Covenants Schedule 7.7 - Permitted Closing Date Indebtedness Schedule 9.2(a)(iii) - Certain Environmental Matters v STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of October 15, 2004, is entered into by and among AAKF Acquisition, Inc., a Delaware corporation (the "Purchaser"), K&F Industries, Inc., a Delaware corporation (the "Company"), and the stockholders of the Company listed on Exhibit A (each individually a "Stockholder" and collectively, the "Stockholders"). WHEREAS, the Stockholders own all of the outstanding shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"); WHEREAS, the Purchaser desires to purchase from the Stockholders, and the Stockholders desire to sell to the Purchaser, all of the shares of Common Stock owned by the Stockholders, which number of shares owned by each Stockholder is set forth opposite such Stockholder's name on Exhibit A, in each case on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, concurrent with the execution of this Agreement, Aurora Equity Partners II, L.P., a Delaware limited partnership ("AEP"), and Aurora Overseas Equity Partners II, L.P., a Cayman Islands limited Partnership ("AOEP" and collectively with AEP, the "Aurora Partnerships"), are executing and delivering to the Company a Limited Guarantee of even date herewith (the "Aurora Guarantee") pursuant to which the Aurora Partnerships have severally guaranteed, until the Closing shall have occurred, certain of the obligations of the Purchaser under this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I. DEFINITIONS SECTION 1.1. DEFINITIONS. The following terms shall have the respective meanings set forth below throughout this Agreement: "Accounting Referee" has the meaning set forth in Section 2.3(d). "Additional Purchaser Stockholder Investment" means, as of any date, the sum of the Fair Market Value of any additional capital invested in the Purchaser by any Person for Capital Stock of the Purchaser after the Closing Date (including the Fair Market Value of any indebtedness exchanged for or converted into such Capital Stock). "AEP" has the meaning set forth in the recitals to this Agreement. "Affiliate" means, with respect to any Person, at the time in question, any other Person controlling, controlled by or under common control with such Person. "Control" means (i) in the case of a corporation, the ownership, directly or indirectly, of 50% or greater of the capital stock in that corporation, and the ability to elect 50% or greater of such corporation's Board of Directors, and (ii) in the case of a Person other than a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of the Person, whether through the ownership of a voting equity interest, by contract or otherwise. "Agreement" has the meaning set forth in the preamble to this Agreement. "Aggregate Purchaser Stockholder Distributions" means, as of any date, the aggregate Fair Market Value of all amounts of cash, securities or other property (other than Capital Stock of the Purchaser) paid or distributed by the Purchaser subsequent to the Closing Date and through such date to the stockholders of the Purchaser in their capacities as such by way of distributions, dividends, repurchases of securities or otherwise. "Airplane Use and Reimbursement Agreement" means the Airplane Use and Reimbursement Agreement, in the form of Exhibit Q attached hereto, between the Company and Bernard L. Schwartz. "Amended and Restated Credit Agreement" means the Amended and Restated Credit Agreement, dated as of December 20, 2002, among Aircraft Braking Systems Corporation, Engineered Fabrics Corporation and the other parties thereto. "Ancillary Agreements" means the Indemnity Escrow Agreement, the Noncompetition Agreement, the Airplane Use and Reimbursement Agreement, each of the Employment Agreements, the Custody Agreement, any Joinder Agreement, each of the Option Termination Agreements, the Defeasance Costs Tax Note and the Aurora Guaranty. "Antitrust Division" has the meaning set forth in Section 6.4. "AOEP" has the meaning set forth in the recitals to this Agreement. "Applicable Law" means any foreign, federal, state or local statute, law, ordinance, regulation, order, writ, injunction, directive, judgment or decree applicable to the parties hereto, or any of their respective Affiliates, properties or assets, as the case may be. "Applicable Limitation Date" has the meaning set forth in Section 9.1. "Applicable Indenture" has the meaning set forth in Section 6.11(d). "Assets" has the meaning set forth in Section 3.22. "Aurora Guarantee" has the meaning set forth in the recitals to this Agreement. "Aurora Partnerships" has the meaning set forth in the recitals to this Agreement. "Benefit Plans" has the meaning set forth in 3.15(a). 2 "Bid" means any quotation, bid or proposal by the Company or any of its Subsidiaries which, if accepted or awarded, would lead to a contract with the U. S. Government or any other Person, including a prime contractor or a higher tier subcontractor to the U. S. Government, for the design, manufacture or sale of products or the provision of services by the Company or any of its Subsidiaries. "Business Day" means any day other than a Saturday, Sunday, a day on which banking institutions in the State of New York are permitted or obligated by law to be closed or a day on which the New York Stock Exchange is closed for trading. "Capital Stock" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing. "Cash Purchase Price" has the meaning set forth in Section 2.1. "Change of Control" means (a) the Initial Purchaser Equityholders shall cease to collectively beneficially own and control at least 51%, on a fully diluted basis, of the outstanding Capital Stock of the Purchaser entitled (without regard to the occurrence of any contingency) to vote for the election of members of the board of directors (or similar governing body) of the Purchaser (which term shall, for purposes of this definition, include the survivor of any merger or consolidation of the Purchaser with or into any one or more of the Company, Aircraft Braking Systems Corporation or Engineered Fabrics Corporation), unless the Initial Purchaser Equityholders collectively beneficially own and control (i) at least 35%, on a fully diluted basis, of the outstanding Capital Stock of the Purchaser entitled (without regard to the occurrence of any contingency) to vote for the election of members of the board of directors (or similar governing body) of the Purchaser and (ii) on a fully diluted basis, more of the outstanding Capital Stock of the Purchaser entitled (without regard to the occurrence of any contingency) to vote for the election of members of the board of directors (or similar governing body) of the Purchaser than any other Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act); (b) any Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) other than the Initial Purchaser Equityholders collectively shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of the Purchaser; (c) the Purchaser shall cease to beneficially own and control 100% on a fully diluted basis of the Capital Stock of the Company, Aircraft Braking Systems Corporation or Engineered Fabrics Corporation (other than by reason of any merger or mergers or consolidation or consolidations of any of the Purchaser, the Company, Aircraft Braking Systems Corporation or Engineered Fabrics Corporation into one or more of the others); (d) the Purchaser shall sell all or substantially all of the assets of the Purchaser, the Company, Aircraft Braking Systems Corporation or Engineered Fabrics Corporation, whether in one transaction or a series of related transactions; or (e) the majority of the seats (other than vacant seats) on the board of directors (or similar governing body) of the Purchaser cease to be occupied by Persons who either (a) were members of the board of directors of the Purchaser on the Closing Date or (b) were nominated for election by the board of directors 3 of the Purchaser, a majority of whom were directors on the Closing Date or whose election or nomination for election was previously approved by a majority of such directors. "Change of Control Date" means the date as of which a Change of Control shall occur. "Closing" has the meaning set forth in Section 2.2(a). "Closing Date" has the meaning set forth in Section 2.2(a). "Closing Date Cash Balance" means the sum of all cash and cash equivalents as defined by GAAP held by the Company and its Subsidiaries as of the close of business, New York, New York time, one Business Day prior to the Closing Date. "Closing Date Cash Purchase Price" means the Cash Purchase Price minus the Indemnity Escrow Fund. "Closing Date Indebtedness" means, as of the close of business, New York, New York time, one Business Day prior to the Closing Date, the aggregate amount of the principal of, and any accrued but unpaid interest on, the Indebtedness of the Company and its Subsidiaries outstanding under the 9 1/4% Notes, the 9 5/8% Notes and the Loans (as defined in the Amended and Restated Credit Agreement). "COBRA" has the meaning set forth in Section 3.15. "Code" means the Internal Revenue Code of 1986, as amended, and any citation to a provision of the Code includes a citation to any successor provision. "Common Indemnification Claims" has the meaning set forth in Section 9.11(a). "Common Stock" has the meaning set forth in the recitals to this Agreement. "Company" has the meaning set forth in the preamble to this Agreement. "Company Indemnified Party" and "Company Indemnified Parties" have the meanings set forth in Section 6.8(a). "Company Reports" has the meaning set forth in Section 3.7. "Company Transaction Expenses" means any fees, costs and expenses incurred by the Company or any of its Subsidiaries, or by the Company or any of its Subsidiaries on behalf of any Securityholder, in each case relating to the Subject Transactions or the proposed sale of the Company as a result of commitments made prior to the Closing (whether incurred prior to or after the date hereof), including fees and disbursements of counsel, financial advisors, consultants, accountants, actuaries and other advisors plus any special, closing or sale bonuses (exclusive of any bonuses paid in the ordinary course of business, consistent with past practice, under established Benefit Plans or written employment agreements), if any, payable at any time by the Company or any of its Subsidiaries in connection with or as a result of the consummation 4 of the Subject Transactions, including, without limitation, any such amounts payable pursuant to the agreements listed on Exhibit I attached hereto or any other agreement, arrangement or understanding between the Company and its Subsidiaries, on the one hand, and any Affiliates of the Company and its Subsidiaries, on the other hand; provided, however, that no Defeasance Costs shall constitute Company Transaction Expenses. Without limiting the generality of the foregoing, the Company Transaction Expenses shall include, and the Company shall reimburse or pay directly, all such fees, costs and expenses of any of the Significant Stockholders incurred on or before the Closing Date to the extent provided in Section 6.6. "Computer Software" means all computer software and databases, except commercially available software, used in or reasonably necessary for the conduct of the business of the Company and its Subsidiaries. "Confidentiality Agreement" means that certain confidentiality agreement, dated November 14, 2003, by and between the Company and Aurora Capital Group. "Consent Date" has the meaning set forth in Section 6.11(b). "Consent Payment(s)" has the meaning set forth in Section 6.11(b) "Contracts" means agreements, contracts and commitments of the following types, to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets is bound (but expressly excluding the Real Property Leases): (a) any mortgage, indenture, loan or credit agreement, security agreement, guarantee or other agreement or instrument relating to any Indebtedness or the deferred purchase price of property (whether incurred, assumed, guaranteed or secured by any asset) (other than intercompany loans and vehicle financing contracts entered into in the ordinary course of business), (b) any collective bargaining agreement, (c) any agreement with any Person containing any provision or covenant currently or hereafter in effect (i) limiting the ability of the Company or any of its Subsidiaries to (A) sell any products or services of or to any other Person, (B) engage in any line of business, or (C) compete with or obtain products or services from any Person or (ii) limiting the ability of any Person to compete with or to provide products or services to the Company or any of its Subsidiaries, in the case of clauses (i) and (ii), except for confidentiality or marketing and distribution agreements pursuant to which the Company or any of its Subsidiaries agreed that it will not use information provided to, or provided by, the Company or any of its Subsidiaries, (d) all outstanding written proxies, powers of attorney or similar delegations of authority of the Company or any of its Subsidiaries (other than those that are immaterial), (e) all agreements with any present individual officer, director, employee, consultant or other similar representative of the Company or any of its Subsidiaries or former individual officer, director, employee, consultant or similar representative thereof (including for employment or relating to loans), other than any of the foregoing that are terminable without liability at the option of the Company or its relevant Subsidiary on written notice of ninety (90) days or less, (f) any other agreement, contract or commitment which, in any case, requires payment or incurrence of Liabilities, or the rendering of services, by the Company or any Subsidiary, subsequent to the date of this Agreement of more than Two Hundred Fifty Thousand Dollars ($250,000) annually other than purchase orders with customers and vendors entered into in the ordinary course of business, (g) all material license, sale, distribution, 5 commission, marketing, agent, franchise, technical assistance or similar agreements relating to or providing for the marketing and/or sale of the products or services, (h) all material acquisition, partnership, joint venture, teaming arrangements or other similar contracts, arrangements or agreements currently in effect, (i) all leases or subleases by the Company or any of its Subsidiaries, as landlord or sublandlord of the Leased Real Property or Owned Real Property, (j) all material licenses or other agreements relating to the use of Intellectual Property, and (k) all other existing agreements not otherwise covered by clauses (a) through (j) that are material to the conduct of the business of the Company or any of its Subsidiaries or the loss of which would result in a Material Adverse Effect. "Custodian" has the meaning set forth in Section 6.10. "Custody Agreement" has the meaning set forth in Section 6.10. "Debt Financing Documents" has the meaning set forth in Section 5.7. "Deductible" has the meaning set forth in Section 9.3(b). "Defeasance Costs" means any prepayment, redemption or defeasance costs or penalties associated with the redemption, repurchase or defeasance of the Closing Date Indebtedness incurred on or before the Closing Date, whether the same is incurred by the Company or any Subsidiary thereof or the Purchaser, including without limitation, (a) the amount by which the Tender Offer Consideration for any 9 1/4% Note or any 9 5/8% Note, as applicable, tendered pursuant to the relevant Tender Offer is greater than the principal of, and accrued interest on, such 9 1/4% Note or 9 5/8% Note on the Closing Date, (b) all Consent Payments that may be payable pursuant to the Tender Offers, (c) all fees and expenses of Persons providing services to the Company in respect of the Tender Offers, the Proposed Amendments and the Note Defeasances, including the Company's legal counsel, financial advisors, dealer managers, information agents and accountants; (d) the printing and mailing costs in respect of the Tender Offers, the Proposed Amendments and the Note Defeasances, and (e) fees and expenses of the relevant trustees and their legal counsel under the indentures for the 9 1/4% Notes or the 9 5/8% Notes, as applicable; provided, however, that Defeasance Costs shall not include the principal of, or interest accrued on, the 9 1/4% Notes or the 9 5/8% Notes on the Closing Date or any costs incurred as a result of a misrepresentation or breach by the Purchaser of any provision of this Agreement. Defeasance Costs shall also include the amount by which the amount necessary to covenant defease all 9 1/4% Notes and 9 5/8% Notes not purchased pursuant to the Tender Offers in accordance with the applicable provisions of the respective indentures governing the 9 1/4% Notes and the 9 5/8% Notes is greater than the principal of, and interest accrued through the Closing Date on, the 9 1/4% Notes and the 9 5/8% Notes not purchased pursuant to the Tender Offers on the Closing Date; provided, that in calculating such costs it shall be assumed that the 9 1/4% Notes and the 9 5/8% Notes are redeemed on the earliest dates following the Closing Date on which they may be redeemed pursuant to their respective indentures. "Defeasance Costs Tax Note" shall mean an unsecured promissory note, substantially in the form attached hereto as Exhibit P, issued on the Closing Date by the Purchaser to the Representatives for the benefit of the Stockholders, with the following terms: 6 (i) a maturity date of six (6) months from the Closing Date, (ii) interest to accrue from the Closing Date to the date of payment at a rate equal to the Prime Rate, and (iii) a principal amount equal to (A) 35.0% of the Defeasance Costs minus (B) the product of (1) $23,832 multiplied by (2) the number of days from and including October 1, 2004 through and including the Closing Date. "Determination Date" has the meaning set forth in Section 2.3(f). "Disputed Item" has the meaning set forth in Section 2.3(c). "Employment Agreements" means, collectively, the Employment Agreements, in substantially the forms attached hereto as Exhibit E. "Encumbrance" means any lien, encumbrance, easement, encroachment, right of first refusal, adverse claim or restriction of any kind, security interest, charge, mortgage, option, pledge or restriction on transfer (except for restrictions arising under the HSR Act or other antitrust or competition laws applicable to the Subject Transactions and except, in the case of shares of Common Stock, for restrictions arising under applicable securities laws) except for (a) liens or other imperfections of title that do not, individually or in the aggregate, materially interfere with the ordinary conduct of the business of the Company or its Subsidiaries as it is being conducted on the date of this Agreement; (b) liens and encumbrances for taxes, assessments or other government charges not yet due or payable; (c) zoning, building or other similar government restrictions that do not, individually or in the aggregate, materially interfere with the ordinary conduct of the business of the Company or its Subsidiaries as it is being conducted on the date of this Agreement; (d) easements, covenants, rights of way or other similar restrictions with respect to real property which do not, individually or in the aggregate, materially interfere with the ordinary conduct of the business of the Company or its Subsidiaries as it is being conducted on the date of this Agreement; and (e) mechanics', materialmen's and other encumbrances which arise or have arisen in the ordinary course of business. "Environmental Laws" means all Applicable Laws, which relate to: (a) protection of the environment; (b) the Management, Release, Remediation or exposure of Persons to Hazardous Substances; or (c) occupational health and safety, including, without limitation: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.; the Clean Water Act, 22 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq. (Title III of SARA); and the Occupational Safety and Health Act of 1970, 29 U.S.C. ss.6901, et seq. "Environmental Liabilities" means any Losses arising under any Environmental Laws. "Equity Financing Documents" has the meaning set forth in Section 5.7. 7 "Equity Investment" has the meaning set forth in Section 5.7. "Equity Value" means, as of a Change of Control Date, the sum of: (a) the aggregate Fair Market Value of all amounts of cash, securities or other property received by the stockholders of the Purchaser in their capacities as such in connection with such Change of Control (including any such cash, securities or other property received from the Purchaser) and to the extent that any one or more of the stockholders of the Purchaser immediately prior to such Change of Control remain as a stockholder of the Purchaser immediately following such Change of Control, the Fair Market Value of all Capital Stock of the Purchaser (such Fair Market Value to be determined immediately after giving effect to such Change of Control) that is held by such continuing stockholders both immediately before and immediately after giving effect to such Change of Control; plus (b) the sum of the Aggregate Purchaser Stockholder Distributions during the period commencing on the Closing Date and ending on such Change of Control Date; provided, however, in no event shall Equity Value be reduced by any fees paid by the Purchaser, the Company or any of their respective Subsidiaries to any Affiliate of the Purchaser (other than the Company or a wholly-owned Subsidiary of the Company) in connection with such Change of Control. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" has the meaning set forth in Section 3.15. "Exchange Act" has the meaning set forth in Section 3.7. "Fair Market Value" means: (a) in so far as the same relates to cash or cash equivalents, the amount of such cash and cash equivalents as converted into United States dollars utilizing the generally prevailing exchange rate as in effect on the relevant Change of Control Date as reported in the Western Edition of the Wall Street Journal; (b) in so far as the same consists of securities of a corporation or other entity: (i) if such securities or other securities of the same class of such corporation or other entity are traded on a securities exchange, the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) trading days prior to such Change of Control Date; (ii) if such securities or other securities of the same class of such corporation or other entity are actively traded over-the-counter, the average of the closing bid or sales prices as applicable over the thirty (30) day period ending three (3) trading days prior to such Change of Control Date; and 8 (iii) if there is no active public market for such securities or other securities of the same class of such corporation or other entity, the value thereof on such Change of Control Date as determined in accordance with the procedures set forth in Section 2.3; and (c) in so far as the same consists of property other than cash or cash equivalents or securities of a corporation or other entity, the value thereof on such Change of Control Date as determined in accordance with the procedures set forth in Section 2.3. "Finance Parties" means the parties, other than the Purchaser or any Affiliate of the Purchaser, to the Debt Financing Documents and the Equity Financing Documents. "Financial Statements" has the meaning set forth in Section 3.7. "Financing" has the meaning set forth in Section 5.7. "Financing Documents" has the meaning set forth in Section 5.7. "First Choice" has the meaning set forth in Section 2.3(d). "FTC" has the meaning set forth in Section 6.4. "Fully Diluted Share Number" means the sum of (a) the number of shares of Common Stock outstanding at the time of the Closing and (b) the number of shares of Common Stock issuable upon the exercise of all Options outstanding (whether or not then exercisable) at the time of the Closing (before giving effect to the termination thereof in accordance of the relevant Option Termination Agreement). "Final Calculation" has the meaning set forth in Section 2.3(f). "Fundamental Representations and Warranties" has the meaning set forth in Section 9.1. "GAAP" means United States generally accepted accounting principles consistently applied. "Goodyear" has the meaning set forth in Section 9.10(a). "Government Entity" means any federal, state, local, municipal, county, foreign or other governmental, quasi-governmental, administrative or regulatory authority, body, agency, court, tribunal, commission or other similar governmental entity (including any branch, department, agency or political subdivision thereof) or any self-regulating body of similar standing. "Government Contract" means any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, letter contract, purchase order, delivery order, task order, grant, cooperative agreement, Bid, change order, arrangement or other commitment or funding vehicle of any kind relating to the business of the Company or 9 any of its Subsidiaries between the Company or any of its Subsidiaries and (a) the U. S. Government, (b) any prime contractor to the U. S. Government or (c) any subcontractor with respect to any contract described in clause (a) or (b). "Hazardous Substance" means any substance or material: (a) that is defined as a "pollutant," "contaminant," "solid waste," "hazardous waste," "hazardous material" or "hazardous substance" under any Environmental Law; (b) that is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic; or (c) without limiting the foregoing, that contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenols (PCBs) or asbestos. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder. "Indebtedness" means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations (contingent or otherwise) of such Person for the deferred purchase price of assets, property or services other than trade payables incurred in the ordinary course of business, (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under leases that have been, in accordance with GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (g) all Indebtedness of others referred to in clauses (a) through (f) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (h) all Indebtedness referred to in clauses (a) through (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, in each case together with all accrued interest and accrued fees thereon. "Indemnified Party" has the meaning set forth in Section 9.6(a). "Indemnifying Party" has the meaning set forth in Section 9.6(a). 10 "Indemnity Escrow Agent" means the escrow agent acting from time to time under the Indemnity Escrow Agreement. "Indemnity Escrow Agreement" means the Escrow Agreement, in substantially the form attached hereto as Exhibit C, to be executed by the Significant Stockholders, the Purchaser, the Representatives and the Indemnity Escrow Agent. "Indemnity Escrow Fund" has the meaning set forth in Section 2.2(e)(i). "Initial Purchaser Equityholders" means those Persons who beneficially own and control Capital Stock of the Purchaser on the Closing Date and their Affiliates. "Initial Purchaser Stockholder Investment" means the sum of the Fair Market Value of any capital invested in the Purchaser by any Person for Capital Stock of the Purchaser on or before the Closing Date (including the Fair Market Value of any indebtedness exchanged for or converted into such Capital Stock). "Intellectual Property" means all trademarks and service marks, patents, patent applications, registered copyrights and copyright applications, trade secrets, designs, processes, inventions and invention disclosures (whether patentable or unpatentable), technology, know-how, Internet domain names and Computer Software owned or used by the Company or any of its Subsidiaries in the conduct of their respective businesses. "Key Employee" has the meaning set forth in Section 6.7. "Knowledge" shall be interpreted for the purposes of this Agreement as follows: (a) a matter will be deemed to be within the "Knowledge of the Company" if such matter is, as of the date of the execution of this Agreement or as of the Closing Date, as applicable, actually known to any of the Persons identified in Part I of Exhibit B attached hereto after reasonable inquiry; and (b) a matter will be deemed to be within the "Knowledge of the Purchaser" if such matter is, as of the date of the execution of this Agreement or as of the Closing Date, as applicable, actually known to any of the Persons identified in Part II of Exhibit B attached hereto after reasonable inquiry. "Leased Real Property" has the meaning set forth in Section 3.17. "Lehman Stockholders" means Lehman Brothers Merchant Banking Portfolio Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P., Lehman Brothers Offshore Investment Partnership - Japan L.P. and Lehman Brothers Capital Partners II, L.P. "Liability" means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person in accordance with GAAP or is disclosed on any schedule to this Agreement. "Liable Third Party" has the meaning set forth in Section 9.10(b). 11 "LMC" has the meaning set forth in Section 9.10(a). "Losses" has the meaning set forth in Section 9.2(a). "Management" means with respect to any Hazardous Substance, the use, possession, processing, manufacturing, generation, treatment, storage, recycling, transportation or disposal of such Hazardous Substance. "Material Adverse Effect" means any circumstance, change in or effect on the Company or any of its Subsidiaries that, individually or in the aggregate with all other circumstances, changes in or effects on the Company or any of its Subsidiaries, is materially adverse to the business, operations, assets or Liabilities, results of operations or the financial condition of the Company and its Subsidiaries taken as a whole; provided, however, that any such adverse effect from and after the date hereof shall not be considered a Material Adverse Effect unless such effect is unrelated to, and not caused by, the execution of this Agreement, the Subject Transactions or the announcement of this Agreement or the Subject Transactions. The following, to the extent occurring after the date hereof and not affecting the ability of any of the Stockholders to transfer their Common Stock to the Purchaser on the Closing Date free and clear of any Encumbrance, shall not be considered in any determination as to whether a Material Adverse Effect has occurred or may occur: (a) the effects of changes that are generally applicable to (i) one or more of the industries in which the Company and its Subsidiaries operate, or (ii) general economic, political or market conditions including (X) changes after the date of this Agreement in any Applicable Law or in the interpretation of any Applicable Law by any Government Entity, (Y) changes in GAAP and (Z) changes in the markets for equity or debt securities; (b) any facts or circumstances solely relating to the Purchaser; and (c) acts of terrorism or the effects of any force majeure event, in either such case not resulting in material physical damage to any premises occupied by the Company or any of its Subsidiaries. "Multiemployer Plan" has the meaning set forth in Section 3.15. "9 1/4% Notes" means the Company's outstanding 9 1/4% Senior Subordinated Notes due 2007. "9 1/4% Notes Tender Offer" has the meaning set forth in Section 6.11(a). "9 5/8% Notes" means the Company's outstanding 9 5/8% Senior Subordinated Notes due 2010. "9 5/8% Notes Tender Offer" has the meaning set forth in Section 6.11(a). "Noncompetition Agreement" means the Noncompetition Agreement, in the form of Exhibit J attached hereto, with Bernard L. Schwartz. "Noteholders" has the meaning set forth in Section 6.11(c). "Note Defeasance" has the meaning set forth in Section 6.11(f). "Notes Consents" has the meaning set forth in Section 6.11(b). 12 "Notes" means collectively the 9 5/8% Notes and the 9 1/4% Notes. "Notes Consent Condition" shall mean, with respect to either series of Notes, that the holders of at least a majority in aggregate principal amount of such Notes entitled to vote on the Proposed Amendments applicable to such series of Notes shall have validly consented in writing to the Proposed Amendments. "Notes Satisfaction Condition" means, contemporaneously with the Closing: (a) the Company shall have accepted for purchase all outstanding 9 5/8% Notes and 9 1/4% Notes that have been validly tendered and not validly withdrawn pursuant to the Tender Offers; and (b) with respect to each series of Notes either: (i) the Notes Consent Condition shall have been satisfied with respect to the Tender Offer applicable to such series of Notes and (ii) the Company and the trustee under the Applicable Indenture shall have executed and delivered a Supplemental Indenture with respect to such Applicable Indenture and such Supplemental Indenture shall be in full force and effect and shall become operative contemporaneously with the Closing; or (ii) if the Notes Consent Condition has not been satisfied with respect to the Tender Offer applicable to such series of Notes, the Company shall have (A) irrevocably deposited with the applicable trustee the amount required to satisfy the applicable "covenant defeasance" condition of such series of Notes, after giving effect to the Company's purchase of such Notes as have been validly tendered and not withdrawn pursuant to the Tender Offer applicable to such series of Notes and (B) complied with all other conditions to a "covenant defeasance" that are capable of being satisfied by the Closing Date. "Objection" has the meaning set forth in Section 2.3(c). "Objection Date" has the meaning set forth in Section 2.3(c). "Offer to Purchase" means, with respect to each series of Notes, the Offer to Purchase and Consent Solicitation Statement prepared by the Company. "Option" and "Options" have the meanings set forth in Section 2.1. "Optionholders" means the individuals set forth on Schedule 3.2(b) but shall exclude any such individual who has agreed to be bound by this Agreement as a Stockholder pursuant to the execution of a joinder agreement in accordance with Section 6.9. "Option Plans" has the meaning set forth in Section 2.1. "Option Termination Agreements" means the option termination agreements in substantially the form attached hereto as Exhibit M. 13 "Owned Real Property" has the meaning set forth in Section 3.17. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereof. "Pension Plan" has the meaning set forth in Section 3.15. "Per Share Cash Purchase Price" has the meaning set forth in Section 2.1. "Permits" has the meaning set forth in Section 3.10. "Person" means any individual, corporation, partnership, limited liability company, limited liability partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, governmental, judicial or regulatory body, business unit, division or other entity of any kind or nature. "Prime Rate" means the "Prime Rate" as listed in The Wall Street Journal on the Closing Date. "Proposed Amendments" has the meaning set forth in Section 6.11(b). "Proposed Calculation" has the meaning set forth in Section 2.3(b). "Pro Rata Portion" means, with respect to any Significant Stockholder, the percentage set forth after such Significant Stockholder's name on Exhibit O attached hereto. "Purchaser" has the meaning set forth in the preamble to this Agreement. "Purchaser Indemnified Parties" has the meaning set forth in Section 9.2(a). "Purchaser Indemnifiable Matter" means any matter with respect to which it is finally determined that any Purchaser Indemnified Party is entitled to indemnification by the Significant Stockholders or the Stockholders pursuant to Article IX hereof, or would otherwise be entitled to such indemnification but for the application of the Significant Stockholders' Cap, the Deductible and/or the survival periods set forth in Section 9.1 hereof. "Purchaser Indemnitors" has the meaning set forth in Section 9.4. "Purchaser Material Adverse Effect" means a material adverse effect on the Purchaser's ability to consummate the Subject Transactions or to perform its obligations under this Agreement or any of the Ancillary Agreements. "Purchaser Tax Group" has the meaning set forth in Section 6.13. "Purchaser Transaction Expenses" means any fees, costs and expenses incurred by the Purchaser relating to the Subject Transactions (whether incurred prior to or after the date hereof), including fees and disbursements of counsel, financial advisors, consultants, accountants, actuaries and other advisors, including the filing fees in connection with the 14 notifications and filings by any of the parties hereto made pursuant to Section 6.4(a), but shall not include any Defeasance Costs or Transfer Taxes. "Purchaser's Cap" has the meaning set forth in Section 9.5(a). "Real Property" has the meaning set forth in Section 3.17. "Real Property Leases" has the meaning set forth in Section 3.17. "Related Party" has the meaning set forth in Section 3.18. "Release" when used in connection with Hazardous Substances, shall have the meaning ascribed to that term in 42 U.S.C. 9601(22), but not subject to the exceptions in Subsection (A) of 42 U.S.C. 9601(22). "Remediation" means (a) any remedial action, response or removal as those terms are defined in 42 U.S.C. Section 9601; or (b) any "corrective action" as that term has been construed by Governmental Entities having jurisdiction over the Company and its Subsidiaries pursuant to 42 U.S.C. Section 6924. "Representatives" has the meaning set forth in Section 9.11(a). "SEC" means the Securities and Exchange Commission. "Securities Act" has the meaning set forth in Section 3.7. "Securityholder" means any Stockholder and any Optionholder. "Securityholder Parties" has the meaning set forth in Section 9.4. "Significant Stockholders" means Bernard L. Schwartz, The Bernard L. Schwartz 2004 Grantor Retained Annuity Trust No. 2, Lehman Brothers Merchant Banking Portfolio Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P., Lehman Brothers Offshore Investment Partnership -- Japan L.P. and Lehman Brothers Capital Partners II, L.P. "Significant Stockholders' Cap" means (a) with respect to claims made on or prior to the 18-month anniversary of the Closing Date, Thirty Million Dollars ($30,000,000) and (b) with respect to claims made thereafter, Twenty Million Dollars ($20,000,000) less the excess, if any, of (i) the aggregate amount of payments made by the Significant Stockholders with respect to indemnification claims made pursuant to Section 9.2(a) (but excluding payments made with respect to Losses resulting from breaches of any Fundamental Representations and Warranties) through the 18-month anniversary date over (ii) Ten Million Dollars ($10,000,000). "Stockholders" has the meaning set forth in the preamble to this Agreement and shall include any Optionholder who has agreed to be bound by this Agreement as a Stockholder pursuant to the execution of a joinder agreement in accordance with Section 6.9, but shall not include any other Optionholder. 15 "Straddle Period" means any taxable year or period for any taxable year or period that commences before and ends after the Closing Date. "Subject Transactions" means the transactions contemplated by this Agreement and the Ancillary Agreements (exclusive of the equity financing and the debt financing of the transactions contemplated by this Agreement and the Ancillary Agreements). "Subsidiary" means any corporation, limited liability company, partnership or other entity as to which the Company owns, directly or indirectly, at least 50% of the stock, membership interests, partnership interests or other equity interests. "Supplemental Indenture" has the meaning set forth in Section 6.11(d). "Tax Return" means any return, report, claim for refund, information return or other document (including any schedule attached thereto) filed, or required to be filed, in connection with the assessment or collection of any Taxes. "Tax" (or "Taxes" as the context may require) means all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, escheat, unclaimed property, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalty, addition to tax or additional amount with respect thereto imposed by any Taxing Authority. "Taxing Authority" means any agency or political subdivision of any foreign, federal, state, local or municipal Government Entity with the authority to impose any Tax. "Tax Refund/Reduction" has the meaning set forth in Section 6.13. "Tender Offer Consideration" has the meaning set forth in Section 6.11(a). "Tender Offer Documents" has the meaning set forth in Section 6.11(c). "Tender Offers" has the meaning set forth in Section 6.11(a). "Third Party Claim" has the meaning set forth in Section 9.6(a). "Transfer Taxes" means all excise, sales, use, transfer, stamp, documentary, filing, recordation and other similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties, resulting directly from the Subject Transactions; provided, however, that Transfer Taxes shall not include any recordation or other similar Taxes that result solely from the financing of the Subject Transactions by the Purchaser or any Affiliate of the Purchaser. "U.S. Government" means any United States governmental entity, agency or body, including United States Government corporations and non-appropriated fund activities. 16 ARTICLE II. SALE OF SHARES SECTION 2.1. PURCHASE AND SALE OF THE COMMON STOCK. (a) The Purchaser and the Stockholders hereby severally agree that at the Closing (as defined below), upon the terms and subject to the satisfaction or waiver, if permissible, of the conditions hereof, (i) each of the Stockholders shall sell, transfer and deliver to the Purchaser, and the Purchaser shall purchase from the Stockholders, all shares of Common Stock owned by such Stockholder and (ii) each outstanding option to purchase shares of Common Stock (each, an "Option", and collectively, the "Options") granted under any of the Company's stock option plans, each as amended (collectively, the "Option Plans"), whether or not vested or exercisable, shall be cancelled and converted into the right to receive the consideration set forth herein. The aggregate "Cash Purchase Price" shall be equal to (A) One Billion Sixty Million Dollars ($1,060,000,000), (B) plus the Closing Date Cash Balance, (C) minus the Closing Date Indebtedness, (D) minus the sum of all Defeasance Costs and Transfer Taxes that have not been paid prior to the determination of the Closing Date Cash Balance, (E) plus the aggregate amount payable to the Company upon the exercise of all Options outstanding (whether or not then exercisable) at the time of the Closing (before giving effect to the termination thereof in accordance of the relevant Option Termination Agreement) and (F) minus the amount of any Company Transaction Expenses that have not been paid prior to the determination of the Closing Date Cash Balance. The aggregate consideration hereunder shall be the sum of the Cash Purchase Price and the Defeasance Costs Tax Note. The individual allocations of the Cash Purchase Price amongst the Stockholders and Optionholders is set forth in Sections 2.1(c) and (d) hereof. The obligations of the Stockholders hereunder are several obligations; provided, however, that the Purchaser shall have no obligation to consummate the Subject Transactions unless all of the shares of Common Stock to be sold by the Stockholders are transferred and delivered to the Purchaser on the Closing Date and each Option that is outstanding on the Closing Date is cancelled and terminated pursuant to an Option Termination Agreement duly executed and delivered to the Purchaser by the holder thereof. (b) Immediately after the close of business, New York, New York time, one (1) Business Day prior to the Closing Date, the Company and the Purchaser will prepare a schedule of (i) the Closing Date Cash Balance, (ii) the Closing Date Indebtedness, (iii) a reasonably detailed reconciliation of all Defeasance Costs (as the same shall exist on the Closing Date after giving effect to the consummation of the Tender Offers and/or any required "covenant defeasance" of the 9 5/8% Notes or the 9 1/4% Notes, as applicable), (iv) the aggregate amount payable to the Company upon the exercise of all Options that remain outstanding as of such time (whether or not then exercisable), (v) a detailed reconciliation of all Transfer Taxes, and (vi) a reasonably detailed reconciliation of all Company Transaction Costs that have not been paid prior to the determination of the Closing Date Cash Balance (including any Company Transaction Expenses that will become payable on the Closing Date). The Company shall provide the Purchaser with such documents, certificates and other information and evidence as the Purchaser may reasonably request for purposes of determining and preparing the same. 17 (c) Upon the surrender by a Stockholder of all of such Stockholder's certificates representing shares of Common Stock at or any time after the Closing, such Stockholder will be entitled to receive, in accordance with the terms and conditions of this Agreement, in exchange for each share of Common Stock surrendered by such Stockholder, an amount (without interest) equal to (i) the Cash Purchase Price divided by (ii) the Fully Diluted Share Number (the "Per Share Cash Purchase Price"); provided, however, that the amount to be paid to each Significant Stockholder shall be reduced by an amount equal to such Significant Stockholder's Pro Rata Portion of the amount being deposited in the Indemnity Escrow Fund. (d) Upon the execution and delivery by an Optionholder to the Purchaser at or any time after the Closing of an Option Termination Agreement and any agreements pertaining to the Options held by such Optionholder, such Optionholder shall be entitled to receive, in accordance with the terms and conditions of this Agreement, in exchange for the cancellation of each Option held by such Optionholder (whether or not then exercisable) an amount (without interest) equal to the product of (i) the number of shares of Common Stock subject to such Option multiplied by (ii) the amount, if any, by which the Per Share Cash Purchase Price exceeds the exercise price of the Common Stock subject to such Option. All payments in respect of the cancellation of Options, whether payable at or after Closing, shall be net of applicable withholding Taxes. SECTION 2.2. CLOSING. (a) The closing of the purchase and sale of the shares of Common Stock and the other transactions contemplated hereby (the "Closing") shall be held at the offices of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York, at 10:00 a.m. eastern standard time on the fifth Business Day following the satisfaction or waiver of all of the conditions set forth in Sections 7.3 and 8.3 upon notice by either party of such satisfaction or waiver; provided, however, that (i) the Closing may occur on such other date or at such other time and place as the parties may mutually agree in writing and (ii) the Closing shall not occur prior to the 45th day after the date hereof. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date." (b) At the Closing, each Stockholder shall: (i) deliver, or cause the Custodian to deliver, to the Purchaser stock certificate(s) with appropriate transfer stamps, if any, affixed thereto, representing the shares of Common Stock owned by such Stockholder with appropriate stock powers duly endorsed in blank or accompanied by other duly executed instruments of transfer; and (ii) deliver all other documents required to be delivered by such Stockholder on or prior to the Closing Date pursuant to this Agreement or any Ancillary Agreement to which such Stockholder is or is required to be a party pursuant to the terms of this Agreement. (c) At the Closing, each Optionholder shall: 18 (i) deliver, or cause the Custodian to deliver, to the Purchaser an Option Termination Agreement and any agreements pertaining to the Options held by such Optionholder; and (ii) deliver all other documents required to be delivered by such Optionholder on or prior to the Closing Date pursuant to this Agreement or such Option Termination Agreement or any Ancillary Agreement to which such Optionholder is or is required to be a party pursuant to the terms of this Agreement. (d) At the Closing, the Company shall deliver to the Purchaser all documents required to be delivered by the Company on or prior to the Closing Date pursuant to this Agreement or any of the Ancillary Agreements. (e) At the Closing, the Purchaser shall: (i) deposit with the Indemnity Escrow Agent the sum of Thirty Million Dollars ($30,000,000) (the "Indemnity Escrow Fund") to be released in accordance with the provisions of Article IX hereof and the Indemnity Escrow Agreement; (ii) deliver to each of the Stockholders the amount to be paid to such Stockholder as determined in accordance with Section 2.1(c), but in each such case subject to the satisfaction of the conditions specified therein; provided, however, that the amount to be paid to each Significant Stockholder shall be reduced by an amount equal to such Significant Stockholder's Pro Rata Portion of the Indemnity Escrow Fund; (iii) deliver to each of the Optionholders the amount to be paid to such Optionholder as determined in accordance with Section 2.1(d), but in each such case subject to the satisfaction of the conditions specified therein; and (iv) deliver all other documents, including without limitation the Defeasance Cost Tax Note, required to be delivered by the Purchaser on or prior to the Closing Date pursuant to this Agreement or any Ancillary Agreement to which the Purchaser is or is required to be a party pursuant to the terms of this Agreement. (f) All payments to be made by the Purchaser pursuant to Section 2.2(e)(ii) and (iii) shall be made by wire transfer of immediately available funds to such bank account or bank accounts as designated by each Stockholder or Optionholder at least three (3) Business Days prior to the Closing Date. SECTION 2.3. SUBSEQUENT CHANGE OF CONTROL. (a) The Purchaser agrees that if a Change of Control shall occur within nine (9) months after the Closing Date, the Purchaser will pay, within ten (10) Business Days after the Determination Date, to each Stockholder and Optionholder with respect to the first such Change of Control an amount in cash (the aggregate of which shall be considered to be additions to the Cash Purchase Price) equal to: 19 (i) the quotient that results when (i) the number of shares of Common Stock surrendered by such Stockholder to the Purchaser pursuant hereto or the number of shares of Common Stock subject to the Options held by such Optionholder that are cancelled pursuant hereto, as applicable, is divided by (ii) the Fully Diluted Share Number, is multiplied by (ii) twenty percent (20%) of the amount, if any, by which (A) the Equity Value on such Change of Control Date is greater than (B) the sum of (1) the Initial Purchaser Stockholder Investments made on or prior to the Closing Date, plus (2) the amount of Additional Purchaser Stockholder Investments made from the Closing Date through such Change of Control Date, plus (3) the aggregate of the amounts, calculated like interest calculated utilizing an annual rate of interest equal to twenty percent (20%) on the daily amount, for each day occurring during the period from the Closing Date through such Change of Control Date, by which the sum of the amounts specified in clauses (1) and (2) above as of such date is greater than the Aggregate Purchaser Stockholder Distributions through such date. (b) Not later than fifteen (15) days after the occurrence of the first Change of Control Date, the Purchaser shall deliver to the Representatives a calculation (the "Proposed Calculation") setting forth in reasonable detail a calculation of the amount of the payments to be made to the Stockholders and Optionholders pursuant to Section 2.3(a). Such statement shall be accompanied by the Purchaser's most recent audited or unaudited financial statements for the most recent period ended prior to or coinciding with such Change of Control Date unless such financial statements are not relevant to the determination of the amounts payable by the Purchaser under Section 2.3(a). (c) The Representatives shall have thirty (30) days from the date of their receipt of the Proposed Calculation to review the same. Upon expiration of such thirty (30) day period, the Representatives shall be deemed to have accepted on behalf of all such Stockholders and Optionholders, and all such Stockholders and Optionholders shall be bound by, the Proposed Calculation and the Purchaser's calculation of the amounts due to the Stockholders and Optionholders pursuant to Section 2.3(a) with respect to such Change of Control, as applicable, unless the Purchaser has been advised in writing prior to the expiration of such thirty (30) day period by the Representatives of their disagreement with the Proposed Calculation (an "Objection"), specifying each of the disputed items and setting forth in reasonable detail the basis for each such dispute (each, a "Disputed Item"). The Purchaser shall have twenty (20) days from the date on which it receives the Objection (the "Objection Date") to review and respond to such Objection. If the Purchaser and the Representatives are able to negotiate a mutually agreeable resolution to each Disputed Item, and sign a certificate to that effect, then the Proposed Calculation, as adjusted to reflect such agreement, shall be deemed final and binding for purposes of this Agreement. The Purchaser shall grant the Representatives access at reasonable times and places to all books, records and employees of the Purchaser reasonably requested by the Representatives in connection with (i) the Representatives' review of the Proposed Calculation and (ii) the preparation of any Objection. 20 (d) If the Purchaser and the Representatives are not able to resolve all of their disagreements with respect to the Disputed Items within thirty (30) days after the Objection Date, then the Disputed Items shall be referred for final determination to the Accounting Referee (as defined below) to make a final and non-appealable binding determination as to such Disputed Items. The "Accounting Referee" shall be PricewaterhouseCoopers (the "First Choice"). If the First Choice notifies the parties that it is not available, the Accounting Referee shall be such other independent accounting firm of national reputation selected by the mutual agreement of the Purchaser and the Representatives within ten (10) days of such notice of unavailability. If the Purchaser and the Representatives cannot agree on an Accounting Referee within such ten (10) day period, the parties (or either of them) shall request that it shall be chosen by the First Choice and shall be a nationally recognized firm. The Accounting Referee shall be directed to make a determination in accordance with Section 2.3(e) below of the Disputed Items promptly, but no later than thirty (30) days, after acceptance of its appointment. The Purchaser and the Representatives shall make readily available to the Accounting Referee all relevant books, records and employees of the Purchaser relating to the Proposed Calculation and all other items reasonably requested by the Accounting Referee in connection with the Accounting Referee's review of any Disputed Item. (e) If Disputed Items are referred to the Accounting Referee for resolution pursuant to Section 2.3(d) above, the Accounting Referee shall not assign a value to any item greater than the greatest value for such item claimed by the Purchaser or the Representatives or less than the smallest value for such item claimed by the Purchaser or the Representatives. Any finding by the Accounting Referee shall be a reasoned award stating the findings of fact and conclusions of law (if any) on which it is based, shall be final, non-appealable and binding upon the parties and shall be the sole and exclusive remedy between the parties regarding the Disputed Items so presented. The fees and expenses of the Accounting Referee shall be borne by the Representatives and the Purchaser in the same proportion that the dollar amount of Disputed Items which are not resolved in favor of the Representatives or the Purchaser (as applicable) bears to the total dollar amount of Disputed Items resolved by the Accounting Referee. For illustration purposes only, (i) if the total amount of Disputed Items by the Representatives is $1,000,000, and the Representatives are awarded $500,000 by the Accounting Referee, the Representatives, on the one hand, and the Purchaser, on the other hand, shall bear the Accounting Referee's fees and expenses equally; or (ii) if the total amount of Disputed Items by the Representatives is $1,000,000, and the Representatives are awarded $250,000 by the Accounting Referee, the Representatives shall bear 75 percent and the Purchaser shall bear 25 percent of the Accounting Referee's fees and expenses. Each of the Purchaser and the Representatives shall bear the fees, costs and expenses of their respective accountants and all of their other respective expenses incurred in connection with the matters contemplated by this Section 2.3. (f) The Proposed Calculation, as finally determined pursuant to this Section 2.3, is referred to herein as the "Final Calculation." The date upon which the Proposed Calculation, with respect to a Change of Control, is finally determined is referred to herein as the "Determination Date" with respect to such Change of Control. 21 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as disclosed in the Company Reports filed by the Company with the SEC and publicly available prior to the date of this Agreement or as set forth in the disclosure schedules referred to herein, the Company hereby represents and warrants to the Purchaser as follows: SECTION 3.1. ORGANIZATION, STANDING AND AUTHORITY. (a) Each of the Company and each Subsidiary is duly incorporated (or organized), validly existing and in good standing under the laws of its jurisdiction of incorporation (or organization). The Company and each Subsidiary (i) has all requisite power and authority to own, operate or lease all of its properties and assets and to carry on its business as it is now being conducted. The Company has delivered to the Purchaser a true and complete copy of the certificate of incorporation (or similar organizational documents) and all amendments thereto of the Company and each Subsidiary and a true and complete copy of each such Person's by-laws (or similar organizational documents) and all amendments thereto, each as in effect on the date hereof. (b) Each of the Company and each Subsidiary is qualified or otherwise authorized to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the properties owned or held by it under lease or license or its business requires such qualification or authorization, except where the failure so to qualify or be authorized would not, individually or in the aggregate, have a Material Adverse Effect. All such jurisdictions in which the Company or any Subsidiary is qualified to do business are set forth in Schedule 3.1(b). (c) The Company has full right, power and authority and has taken all corporate action necessary to execute and deliver this Agreement and the Ancillary Agreements, to perform its obligations hereunder and thereunder and to consummate the Subject Transactions. This Agreement has been duly executed and delivered by the Company and, subject to due authorization, execution and delivery by the other parties, this Agreement is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in proceedings at law or in equity). SECTION 3.2. CAPITALIZATION. (a) As of the date hereof, the authorized capital stock of the Company consists of 1,000,000 shares of Common Stock, of which 740,398 shares are issued and outstanding. All of the outstanding shares of Common Stock are, as of the date hereof, owned of record by the Stockholders, and have been duly authorized and validly issued and are fully paid and nonassessable. The issued and outstanding Common Stock constitutes all of the issued and outstanding capital stock of the Company. 22 (b) Except for rights created pursuant to this Agreement and for the Options granted under the Option Plans and evidenced by option agreements set forth on Schedule 3.2(b), there are currently no outstanding and, as of the Closing, there will be no outstanding (i) securities convertible into or exchangeable for any capital stock of the Company, (ii) options, warrants or other rights to purchase or subscribe to capital stock of the Company or securities convertible into or exchangeable for capital stock of the Company, or (iii) except as set forth on Schedule 3.2(b), contracts, commitments, agreements, understandings, arrangements, calls or claims of any kind relating to the issuance of any capital stock of the Company. Schedule 3.2(b) identifies, as of the date hereof, the option holder, the number of shares of Common Stock subject to each Option, the exercise price, the vesting schedule and the expiration date of each outstanding Option to purchase capital stock of the Company. Except as set forth on Schedule 3.2(b), to the Knowledge of the Company, there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Common Stock or as to the election or nomination of any person as a director of the Company. (c) Neither the Company nor any of its Subsidiaries has outstanding, nor will any of them have outstanding on the Closing Date, any Indebtedness other than the Indebtedness of the Company and its Subsidiaries outstanding under the 9 1/4% Notes, the 9 5/8% Notes and the Loans (as defined in the Amended and Restated Credit Agreement). SECTION 3.3. SUBSIDIARIES. Schedule 3.3 sets forth a true and complete list of all Subsidiaries of the Company, listing for each Subsidiary its name, its jurisdiction of organization, its authorized, issued and outstanding capital stock and the record and beneficial holders thereof. Except as set forth on Schedule 3.3, the Company does not, directly or indirectly, own any beneficial interest in any Person other than its Subsidiaries. Except as set forth on Schedule 3.3, all issued and outstanding shares of capital stock of each of the Subsidiaries of the Company are duly authorized and validly issued and are fully paid and non-assessable, and (i) as of the date hereof, are owned, directly or indirectly, by the Company, and (ii) as of the Closing will be owned, directly or indirectly, by the Company, in each case free and clear of all Encumbrances, except for such Encumbrances which have been created by or on behalf of the Purchaser. There are currently no outstanding and, as of the Closing, there will be no outstanding (i) securities convertible into or exchangeable for any capital stock of any of the Company's Subsidiaries, (ii) options, warrants or other rights to purchase or subscribe to capital stock of any of the Company's Subsidiaries or securities convertible into or exchangeable for capital stock of any of the Company's Subsidiaries, or (iii) contracts, commitments, agreements, understandings, arrangements, calls or claims of any kind relating to the issuance of any capital stock of any of the Company's Subsidiaries. There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of shares of capital stock or other interests in any Subsidiary. SECTION 3.4. ACTIONS AND PROCEEDINGS. Except as set forth on Schedule 3.4, to the Knowledge of the Company, there are no outstanding orders, decrees or judgments by or with any Government Entity to which the 23 Company or any of its Subsidiaries is a party or as to which any of their respective assets are subject that would, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.4, there are no actions, suits, arbitrations or legal, administrative or other proceedings pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective assets, at law or in equity, by or before any Government Entity, that (a) seek to enjoin or rescind the Subject Transactions or (b) could reasonably be expected to result in a Liability or Loss to the Company or any of its Subsidiaries of more than One Hundred Thousand Dollars ($100,000) for any such action, suit or proceeding. SECTION 3.5. NO CONFLICT OR VIOLATION. Except as set forth on Schedule 3.5, in Section 3.6 or on Schedule 3.6, the execution, delivery and performance by the Company of this Agreement and the Ancillary Agreements to which it will be a party as of the Closing Date and the consummation of the Subject Transactions in accordance with the terms hereof will not (a) violate any provision of the charter, bylaws or other organizational documents of the Company or its Subsidiaries, (b) violate, conflict with or result in a breach of any of the terms of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrances on any of the Common Stock or on any of the assets or properties of the Company or any Subsidiary pursuant to, any agreement, license or contract to which the Company or any of its Subsidiaries is a party or by or to which the Company or any of its Subsidiaries or any of their assets or properties may be bound or subject, (c) violate any Applicable Law or any order, judgment, injunction, award or decree of any court, arbitrator or Government Entity against, or binding upon, the Company or any of its Subsidiaries, (d) violate any statute, law or regulation of any jurisdiction applicable to the Company or any of its Subsidiaries or (e) result in a breach or violation of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment or revocation of, any Permit, except in the case of each of the foregoing clauses (b), (c) and (d) for such violations, conflicts, breaches, defaults, impairments or revocations that would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.6. GOVERNMENTAL CONSENTS AND APPROVALS. The execution, delivery and performance by the Company of this Agreement and the Ancillary Agreements to which it will be a party as of the Closing Date and the consummation of the Subject Transactions in accordance with the terms hereof do not require the Company or any of its Subsidiaries to obtain any consent or approval of, make any filing with, or give any notice to, any Government Entity, except (i) as required under the HSR Act or any competition law or similar statute or regulation of any foreign jurisdiction, (ii) as otherwise set forth on Schedule 3.6 and (iii) for such consents, approvals, filings or notices the failure to obtain, make or give which would not, individually or in the aggregate, have a Material Adverse Effect. 24 SECTION 3.7. FINANCIAL STATEMENTS AND STATUTORY STATEMENTS. (a) The Company has delivered or made available to the Purchaser each form, registration statement, report and document prepared by it (other than preliminary material) required to be filed by the Company with the SEC, each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively, the "Company Reports"). As of their respective dates, each of the Company Reports complied and, in the case of filings after the date hereof, will comply as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and the rules and regulations thereunder. None of the Company Reports contained (as of their respective filing dates) any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstance under which they were made, not misleading. The Company has filed with the SEC all forms, reports and documents required to be filed under Sections 13, 14 and 15(d) of the Exchange Act. None of the Subsidiaries is required to file any forms, reports, schedules, statements or other documents with the SEC. (b) The Company has responded to all comment letters, if any, received from the SEC since December 31, 2001 relating to the Company Reports and the SEC has not asserted that any of such responses are inadequate, insufficient or otherwise non-responsive. The Company has delivered to the Purchaser correct and complete copies of all such comment letters and related correspondence with the SEC occurring since December 31, 2001. (c) The consolidated balance sheets of the Company and the related statements of operations, cash flows and stockholders equity (deficiency) included in or incorporated by reference into the Company Reports and, in the case of annual financial statements, certified by Deloitte & Touche LLP (the "Financial Statements"), (i) were prepared from and are in accordance with the books and records of the Company and its consolidated Subsidiaries and (ii) were prepared in accordance with GAAP consistently applied and on a consistent basis with prior periods (except as stated in such Financial Statements). The Financial Statements fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as at the respective dates thereof and the consolidated results of operations, cash flows and stockholders equity (deficiency) of the Company and its consolidated Subsidiaries for the periods indicated, except that the unaudited interim Financial Statements were or are subject to normal and recurring year-end adjustments (which in the aggregate are not and will not be material in amount). Except as reflected or reserved against in the Financial Statements included in the most recent Company Report or as disclosed therein, neither the Company nor any of its Subsidiaries had as of such date any liability of any nature (whether accrued, absolute, contingent or otherwise) which would be required in accordance with GAAP to be disclosed in the Financial Statements and which, in the aggregate, would be material. The reserves reflected on the balance sheet included in the most recent Company Report have been calculated in accordance with GAAP. (d) None of the information supplied or to be supplied by the Company or any of the Stockholders specifically for inclusion or incorporation by reference in the Tender Offer Documents will, at the time the Offer to Purchase first is mailed to holders of the Notes, at any 25 time it is amended or supplemented or at any time prior to the expiration of the Tender Offers, 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 are made, not misleading. The Tender Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act. Notwithstanding the foregoing, no representation or warranty is made by the Company with respect to statements made or incorporated by reference in the Tender Offer Documents based on written information supplied by the Purchaser specifically for inclusion or incorporation by reference in the Tender Offer Documents. SECTION 3.8. INTELLECTUAL PROPERTY. Except as set forth on Schedule 3.8: (a) to the Knowledge of the Company, the Company and its Subsidiaries, as applicable, own, free and clear of all Encumbrances and exclusive licenses, all right, title and interest in and to, or have valid written licenses to use, all the Intellectual Property that is material to the conduct of the business of the Company or its Subsidiaries; (b) Schedule 3.8 sets forth a true, accurate and complete list of all patents, patent applications, registered trademarks, trademark applications, domain name registrations and copyright applications and registrations anywhere in the world owned by the Company or any of its Subsidiaries; (c) to the Knowledge of the Company, there are no infringements of the Intellectual Property by any third party; (d) there are no claims pending or, to the Knowledge of the Company, threatened: (i) alleging that the business of the Company or any of its Subsidiaries as currently conducted infringes upon or constitutes an unauthorized use or violation of any third party's intellectual property or other proprietary rights; or (ii) challenging the ownership, validity or enforceability of any of the Intellectual Property, except for such claims which would not, individually or in the aggregate, have a Material Adverse Effect, nor, to the Knowledge of the Company, is there a reasonable basis for any such claim; and (e) Schedule 3.8 sets forth a true, accurate and complete list of all material agreements relating to the Intellectual Property or to the right of the Company or any of its Subsidiaries to use the intellectual property or other proprietary rights of any third party. Except as set forth on Schedule 3.8, neither the Company nor any of its Subsidiaries is under any obligation to pay royalties or other payments in connection with any agreement nor are any of them restricted from assigning any of their rights respecting Intellectual Property, nor will the Company or any of its Subsidiaries otherwise be, as a result of the execution, delivery and performance of this Agreement by the Stockholders, in breach of any agreement relating to any of the Intellectual Property, except for such royalties, payments, restrictions on assignment or breach of agreement that would not, individually or in the aggregate, have a Material Adverse Effect. 26 SECTION 3.9. COMPLIANCE WITH LAWS. The business of the Company and its Subsidiaries is not being conducted in violation of any Applicable Law or any other requirement of any Government Entity, except for those violations, if any, which would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.9, (i) neither the Company nor any of its Subsidiaries has received any outstanding or uncured written notice alleging any violation of any such Applicable Law or directing the Company or any of its Subsidiaries to take any remedial action with respect to any such Applicable Law and (ii) to the Knowledge of the Company, there are no facts, events or conditions that may constitute potential defaults or violations of any Applicable Law, except as would, with respect to (i) or (ii), individually or in the aggregate, not have a Material Adverse Effect. SECTION 3.10. PERMITS, LICENSES AND FRANCHISES. All permits, licenses, approvals, franchises, authorizations, exemptions, classifications, registrations, and similar documents or instruments issued by any Government Entity to the Company or any of its Subsidiaries, the loss, revocation, termination or expiration of which would, individually or in the aggregate, have a Material Adverse Effect, are listed on Schedule 3.10 (collectively, the "Permits"). Except as set forth on Schedule 3.10, all Permits are valid and in full force and effect. The Company and its Subsidiaries are in compliance in all material respects with all terms required for the continued effectiveness of each such Permit, and there is no pending or, to the Knowledge of the Company, threatened, revocation or involuntary non-renewal of any such Permit. SECTION 3.11. CONTRACTS. Schedule 3.11 sets forth a true and complete list of all Contracts to which the Company or any of its Subsidiaries is a party or by which any of their respective assets may be bound as of the date hereof. The Company has delivered or made available to the Purchaser copies of all written Contracts and written descriptions of all oral Contracts listed on Schedule 3.11. Neither the Company nor any Subsidiary party to any Contract, nor, to the Knowledge of the Company, any other party thereto, is in breach thereof or default thereunder, or has given notice of breach or default to any other party thereunder, except for such breaches or defaults as would not, individually or in the aggregate, have a Material Adverse Effect. Each such Contract is in full force and effect and constitutes a legal, valid and binding obligation of the Company or the relevant Subsidiary, as the case may be (and, to the Knowledge of the Company, each other party thereto), subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. Except as would not, individually or in the aggregate, have a Material Adverse Effect, none of the Company nor any of its Subsidiaries has received any notice, whether written or oral, of termination or intention to terminate from any other party to any such Contract. Except to the extent that any consents set forth on Schedule 3.5 are not obtained and except as contemplated by Section 7.10, the consummation of the Subject Transactions will not result in any Contract failing to continue in full force and effect after the consummation of the Subject Transactions without material penalty or other material adverse consequence. 27 SECTION 3.12. ABSENCE OF CERTAIN CHANGES. Except as contemplated or required by this Agreement or as set forth on Schedule 3.12, since December 31, 2003, there has been no event which, individually or in the aggregate, has had or would have a Material Adverse Effect. SECTION 3.13. ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.13 or as disclosed in those studies and reports that the Purchaser independently obtained: (a) The Company and its Subsidiaries have obtained all Permits under Environmental Laws required for the conduct and operation of their respective businesses and are in material compliance with the terms and conditions contained therein and are in material compliance with applicable Environmental Laws. (b) There is no environmental condition on any property currently or formerly owned, leased or operated by the Company or any of its Subsidiaries or, to the Knowledge of the Company, any of their respective predecessors in interest whose liability is attributable to the Company or any of its Subsidiaries as a successor that would reasonably be expected to result in any Environmental Liabilities for the Company or any of its Subsidiaries. (c) Neither the Company nor any of its Subsidiaries has received any written notice of violation or notice of potential liability from any Governmental Entity or other Person pursuant to any Environmental Law, except for those which have either been resolved or which are not material, and neither the Company nor any of its Subsidiaries is aware of any pending, nor, to the Knowledge of the Company, is there any threatened, material order, claim, suit, action, judgment or proceeding by any Governmental Entity or other Person against the Company or any of its Subsidiaries pursuant to any Environmental Laws. (d) No Hazardous Substance has been Released by the Company, any of its Subsidiaries, or, to the Knowledge of the Company, any of their respective predecessors in interest whose liability is attributable to the Company or any of its Subsidiaries as a successor, or any other Person, in concentrations or volumes requiring Remediation under Environmental Law at, on, about or under any property now or formerly owned, operated, leased or used as a waste disposal site by the Company, any of its Subsidiaries or, to the Knowledge of the Company, any of their respective predecessors in interest whose liability is attributable to the Company or any of its Subsidiaries as a successor. (e) The Company has delivered to the Purchaser all environmental studies and reports (including without limitation, Phase I and Phase II investigation reports) set forth on Schedule 3.13 (except for those studies and reports that the Purchaser independently obtained as noted on Schedule 3.13) and there are no other material reports in the possession of the Company or any of its Subsidiaries relating to: (i) any facilities or real property ever owned, operated or leased by the Company, any of its Subsidiaries or any of their respective predecessors in interest whose liability is attributable to the Company or any of its Subsidiaries as a successor; or (ii) any Environmental Liability of the Company or any of its Subsidiaries or any of their respective 28 predecessors in interest whose liability is attributable to the Company or any of its Subsidiaries as a successor. SECTION 3.14. TAXES. Except as set forth on Schedule 3.14: (a) the Company and each Subsidiary have filed (or joined in the filing of) when due all Tax Returns required by Applicable Law to be filed with respect to the Company and each Subsidiary and all such Tax Returns were true, correct and complete as of the time of each such filing; (b) all Taxes required to have been paid by the Company and each Subsidiary, whether or not shown on any Tax Return, on or before the Closing Date have been (or will be as of the Closing Date) timely paid (except for Taxes that are being contested in good faith); (c) any liability of the Company or any Subsidiary relating to periods on or before the Closing Date, whether or not shown on any Tax Return, for Taxes not yet due and payable, or that is being contested in good faith, has been provided for on the Financial Statements in accordance with GAAP; (d) all Taxes of the Company and any Subsidiary accrued following the end of the most recent period covered by the Financial Statements have been accrued in the ordinary course of business and do not exceed comparable amounts incurred in similar periods in prior years (taking into account any changes in operating results of the Company or its Subsidiaries); (e) there is no action, suit, proceeding, investigation, audit or claim now pending, nor, to the Knowledge of the Company, likely to be asserted, against, or with respect to, the Company or any Subsidiary in respect of any Tax or assessment; (f) there is no outstanding request by the Company or any Subsidiary for any extension of time within which to pay any Tax or file any Tax Return, and there has been no waiver or extension of any applicable statute of limitations for the assessment or collection of any Tax of the Company or any Subsidiary; (g) neither the Company nor any Subsidiary is a party to or bound by any closing agreement or offer in compromise with any Taxing Authority; (h) neither the Company nor any Subsidiary is a party to or bound by any agreement, whether written or unwritten, providing for the payment of Taxes, payment for Tax losses, entitlements to refunds, indemnity, sharing, or allocation in respect of Taxes, or similar Tax matters; (i) neither the Company nor any Subsidiary has any liability for Taxes as transferee or successor, by contract or otherwise; 29 (j) the Company and each Subsidiary has withheld and paid over to the applicable Taxing Authority all Taxes required to be withheld in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party; (k) neither the Company nor any Subsidiary has any liability for Taxes under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), as a member of any consolidated, combined or unitary group, other than one for which the Company was the common parent; (l) there are no liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company or any Subsidiary; (m) neither the Company nor any Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any adjustment under Section 481(a) or Section 263A of the Code or any comparable provision of state, local or foreign Tax laws by reason of a change in accounting method or otherwise; (n) neither the Company nor any Subsidiary is a party to any agreement, contract, arrangement or plan that (i) has resulted or would result, separately or in the aggregate, in connection with this Agreement or any Change of Control of the Company or any Subsidiary, in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code or (ii) could obligate the making of any payment that will not be fully deductible under Section 162(m) of the Code; (o) to the Knowledge of the Company, neither the Company nor any Subsidiary is a party to any joint venture, partnership, or other arrangement or contract that could be treated as a partnership for federal income tax purposes. Schedule 3.14(o) sets forth all elections pursuant to Treas. Reg. Section 301.7701-3 that have been made by business entities in which the Company or any Subsidiary owns an equity interest; (p) neither the Company nor any Subsidiary has been a "distributing corporation" or a "controlled corporation" in connection with a distribution described in Section 355 of the Code; and (q) neither the Company nor any Subsidiary has engaged, at any time, in a "listed transaction" within the meaning of Treas. Reg. Sections 1.6011-4(b)(2), 301.6111-2(b)(2), and 301.6112-1(b)(2). SECTION 3.15. EMPLOYEE BENEFIT PLANS; ERISA. (a) Schedule 3.15(a) sets forth all "employee benefit plans," as defined in Section 3(3) of ERISA, and all other material employee benefit arrangements, programs, policies or payroll practices, including, without limitation, severance pay, sick leave, vacation pay, salary continuation for disability, retirement, deferred compensation, bonus, stock purchase, stock option, hospitalization, medical insurance, cafeteria, life insurance, tuition reimbursement and scholarship programs, maintained for the benefit of or to which contributions are made on behalf of current or former employees of the Company or any Subsidiary (which plans, arrangements, 30 programs, policies and payroll practices are collectively referred to herein as the "Benefit Plans"). True, correct and complete copies of the following documents relating to the Benefit Plans, to the extent applicable, have been delivered or made available to the Purchaser: (i) the plan document and its related trust instrument, including any amendments thereto, (ii) the most recent annual report filed on Form 5500, including all related schedules, (iii) any summary plan description and (iv) the most recent actuarial report. (b) None of the Benefit Plans is a "multiemployer plan," as defined in Section 3(37) of ERISA ("Multiemployer Plan"). None of the Company, any Subsidiary or any trade or business (whether or not incorporated) which is or has ever been treated as a single employer with the Company or any Subsidiary under Section 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") has incurred any liability due to a complete or partial withdrawal from a Multiemployer Plan or due to the termination or reorganization of a Multiemployer Plan, except for any such liability which has been satisfied in full, and no events have occurred and no circumstances exist that would result in any such liability to the Company or any Subsidiary. (c) Except as set forth on Schedule 3.15(c), none of the Benefit Plans is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of ERISA ("Pension Plan"). With respect to each Pension Plan sponsored by, or to which contributions are required of, the Company, any Subsidiary or any ERISA Affiliate, there does not exist any accumulated funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA, whether or not waived. None of the Company, any Subsidiary or any ERISA Affiliate has any outstanding liability under Section 4062 of ERISA to the PBGC or to a trustee appointed under Section 4042 of ERISA, and no events have occurred and no circumstances exist that would result in any such liability to the Company or any Subsidiary. Except as set forth on Schedule 3.15(c), in respect of any Pension Plans (i) no Encumbrances have arisen under Section 412(n) of the Code or Section 302(f) of ERISA, (ii) no Liabilities for security have arisen under Section 401(a)(29) of the Code and (iii) there have been no agreements or proceedings with the PBGC. (d) With respect to each Benefit Plan that is intended to qualify under Code Section 401(a), such Benefit Plan, and its related trust, has received, has an application pending or remains within the remedial amendment period for obtaining, a determination letter from the Internal Revenue Service that it is qualified under Section 401(a) of the Code and that its related trust is exempt from tax under Section 501(a) of the Code and, to the Knowledge of the Company, no facts or set of circumstances exist that would affect such qualification or tax exemption. (e) All contributions (including all employer contributions and employee contributions) required to have been made under the Benefit Plans or by law to any funds or trusts established thereunder or in connection therewith have been made by the due date thereof (including any valid extensions). (f) There has been no violation of ERISA or the Code with respect to the filing of applicable documents, notices or reports (including, but not limited to, annual reports filed on Form 5500) relating to the Benefit Plans with the Department of Labor or the Internal Revenue Service, or the furnishing of any required documents to the participants or beneficiaries 31 of the Benefit Plans, other than violations which would not, individually or in the aggregate, have a Material Adverse Effect. (g) Except as set forth on Schedule 3.15(g), there are no material pending actions, claims or lawsuits which have been asserted, instituted or, to the Knowledge of the Company, threatened, against the Benefit Plans, the assets of any of the trusts under the Benefit Plans or the sponsor or the administrator of the Benefit Plans, or, to the Knowledge of the Company, against any fiduciary of the Benefit Plans with respect to the operation of the Benefit Plans (other than routine benefit claims). (h) The Benefit Plans have been maintained, in all material respects, in accordance with their express terms and with all provisions of ERISA and the Code (including rules and regulations thereunder) and other applicable federal and state laws and regulations, and, to the Knowledge of the Company, no "party in interest" or "disqualified person" with respect to any Benefit Plan has engaged in a non-exempt "prohibited transaction," as defined in Section 4975 of the Code or Section 406 of ERISA, or taken any actions, or failed to take any actions, which could reasonably result in any material liability to the Company or any Subsidiary under ERISA or the Code. (i) The Company and its Subsidiaries have complied in all material respects with the notice and coverage continuation requirements of Section 4980B of the Code and Section 601 of ERISA, and the regulations thereunder ("COBRA"). Except as set forth on Schedule 3.15(i), none of the Benefit Plans provide retiree health or life insurance benefits except as may be required by COBRA (or any applicable state law) or at the expense of the participant or the participant's beneficiary. (j) Except as required by Applicable Law or as disclosed on Schedule 3.15(j), neither the Company nor any of its Subsidiaries provides any post-employment welfare benefits. SECTION 3.16. LABOR RELATIONS AND EMPLOYMENT. (a) Except as set forth on Schedule 3.16, as of the date hereof (i) to the Knowledge of the Company, there is no labor strike, slowdown, stoppage or lockout pending or threatened against or affecting the Company or any of its Subsidiaries; (ii) neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining or similar agreement with any labor organization applicable to the employees of the Company or any of its Subsidiaries; and (iii) there are no union organizing campaigns or activities or representation proceedings in process or, to the Knowledge of the Company, threatened with respect to any employees of the Company or any of its Subsidiaries. (b) Except as set forth on Schedule 3.16, neither the Company nor any of its Subsidiaries has any pending or, to the Knowledge of the Company, threatened, any lawsuit, claim, administrative proceeding, arbitration or governmental investigation relating to any wage and hour claim, unfair labor practice charge, wrongful termination, or illegal discrimination complaint with respect to any of their respective employees or former employees and, to the Knowledge of the Company, there is no basis for such lawsuit, claim, proceeding or investigation. 32 SECTION 3.17. REAL PROPERTY. (a) Schedule 3.17(a) sets forth a list of all real properties owned by any of the Company and its Subsidiaries (the "Owned Real Property"), such list setting forth for informational purposes only the location of each parcel of such Owned Real Property, the record owner thereof, the approximate acreage and a brief description of the improvements thereon and the nature of the activities conducted on such Owned Real Property. To the Knowledge of the Company, the Company and/or its Subsidiaries have good and valid fee simple title to the Owned Real Property that is necessary for the conduct of the business of the Company or its Subsidiaries, as currently conducted, free of any Encumbrances other than as set forth in the title reports set forth on Schedule 3.17(a). With respect to each parcel of Owned Real Property, except as set forth on Schedule 3.17(a), (i) there are no leases, subleases, licenses, or other agreements granting any Person the right to use or occupy all or any portion of such Owned Real Property, and (ii) there are no Persons (other than the Company or its Subsidiaries) in possession of such Owned Real Property. (b) Schedule 3.17(b) contains a complete and correct list of all leases of real property, occupancy agreements or similar agreements (the "Real Property Leases") under which the Company or any of its Subsidiaries is a lessee, sub-lessee, tenant, licensee or assignee of any real property owned by any third Person (the "Leased Real Property", and. collectively with the Owned Real Property, the "Real Property"), such list setting forth for informational purposes only the location of each parcel of such Leased Real Property, the landlord thereof, the approximate acreage and a brief description of the improvements thereon and the nature of the activities conducted on such Leased Real Property. The Company has delivered to the Purchaser true, correct and complete copies of each Real Property Lease. Except as set forth on Schedule 3.17(b), with respect to the Real Property Leases, (i) to the Knowledge of the Company, there exist no defaults under the Real Property Leases by the Company or any of its Subsidiaries and the Company has not received written notice of any such defaults; and (ii) to the Knowledge of the Company, there exists no default by any third party thereunder. Except as set forth on Schedule 3.17(b), each Real Property Lease is a legal, valid and binding obligation of either the Company or a Subsidiary, and, to the Knowledge of the Company, each other party thereto, enforceable against each such other party thereto in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and subject to general principles of equity. Except as set forth on Schedule 3.17(b) hereto, the consummation of the Subject Transactions will not result in any default, penalty, right to terminate, increase in the amounts payable under or modification to any Real Property Lease. To the Knowledge of the Company, the Company and/or its Subsidiaries, as applicable, hold good and valid leasehold estates in the Leased Real Property that is necessary for the conduct of business of the Company or its Subsidiaries, as applicable, as currently conducted, free and clear of all Encumbrances. (c) Except as set forth on Schedule 3.17(c), (i) none of the Real Property is subject to any right or option granted by the Company in favor of any Person to purchase or otherwise obtain title to such property, (ii) there is no pending or, to the Knowledge of the Company, threatened condemnation (or similar proceedings) of any part of the Owned Real Property or the Leased Real Property, (iii) the Company and/or its Subsidiaries, as applicable, have not assigned their interests under any Real Property Lease to any third party, (iv) no option 33 has been exercised under any Real Property Lease, except options the exercise of which have been evidenced by a written document set forth on Schedule 3.17(c), (v) neither the Company nor any of its Subsidiaries has received written notice within the last three (3) years asserting that the utilities, access or parking for any parcel of Real Property are inadequate for the current use and operation of such parcel, nor does the Company have any Knowledge of any fact or condition which could reasonably be expected to result in such utilities, access or parking for any parcel of Real Property becoming inadequate for the current use and operation of such parcel, which inadequacy, individually or in the aggregate, would not have a Material Adverse Effect, (vi) to the Knowledge of the Company, there are no zoning, building code, occupancy restriction or other land-use regulation proceedings or any proposed change in any Applicable Laws that could, individually or in the aggregate, result in a Material Adverse Effect, nor has the Company or any of its Subsidiaries received any notice of any special assessment proceedings affecting any Real Property, or applied for any change to the zoning or land use status of any Real Property, (viii) the Company has no actual knowledge that the landlord named on any of the Real Property Leases set forth on Schedule 3.17(b) hereto does not have good and valid fee simple title in each such parcel of real property subject to any applicable Real Property Lease or that such title is subject to any exceptions that materially affect the current use or operation thereof or that such title is subject to any monetary encumbrances, except where the encumbrancer has granted non-disturbance protection to the lessee under the applicable Real Property Lease and (ix) the Company has no actual knowledge that there are any defects, structural or otherwise, with respect to any of the Real Property (or any improvements located thereon), which could reasonably be anticipated to have a material adverse impact on the value or utility of any such item of Real Property. SECTION 3.18. AFFILIATED TRANSACTIONS; INDEMNIFICATION AGREEMENTS. (a) Except as set forth on Schedule 3.18, to the Knowledge of the Company, no Related Party of the Company or any of its Subsidiaries, either currently or at any time since December 31, 2001: (i) has or has had any interest in any property (real or personal, tangible or intangible) that the Company or any of its Subsidiaries uses or has used in or pertaining to the business of the Company or any of its Subsidiaries; or (ii) has or has had any business dealings or a financial interest in any transaction with the Company or any of its Subsidiaries or involving any assets or property of the Company or any of its Subsidiaries, other than business dealings or transactions conducted in the ordinary course of business at prevailing market prices and on prevailing market terms. For purposes of this Agreement, the term "Related Party" shall mean as of any time: an executive officer or director, 10% stockholder (including any executive officers or directors thereof) or Affiliate of the Company or any of its Subsidiaries at such time, any present or former known spouse of any such executive officer, director or Affiliate of the Company or any of its Subsidiaries or any trust or other similar entity for the benefit of any of the foregoing Persons. (b) Schedule 3.18(b) sets forth a true and correct list of all contracts, agreements or arrangements between the Company or any of its Subsidiaries, on the one hand, and any of their respective officers, directors, employees or agents or any Securityholder, on the other hand, pursuant to which the Company or any of its Subsidiaries has agreed to indemnify or hold harmless any of such Persons. 34 SECTION 3.19. WARRANTIES. Except as set forth on Schedule 3.19, there are no material claims pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries with respect to any product alleged to have been manufactured, distributed or sold by the Company or any of its Subsidiaries to others, and alleged to have been defective or improperly designed or manufactured or in breach of any express or implied product warranty, except to the extent reflected or reserved for in the Financial Statements included in the Company Report most recently filed with the SEC prior to the date of this Agreement, and, to the Knowledge of the Company, there is no reasonable basis for any such suit, inquiry, action, proceeding, investigation or claim. To the Knowledge of the Company, there exists no latent defect in the design or manufacture of any of the products of the Company or any of its Subsidiaries. The Company has heretofore delivered to the Purchaser copies of the Contracts and other documents describing terms and conditions of sale or lease of the products and services of the Company and its Subsidiaries (containing applicable guaranty, warranty and indemnity provisions) and other than such terms and conditions, there are no express product or service warranties relating to the businesses of the Company and its Subsidiaries enforceable against the Company or any of its Subsidiaries. SECTION 3.20. INAPPROPRIATE PAYMENTS. Since December 31, 2003, neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any of their respective officers, directors, employees, agents or representatives has made, directly or indirectly, with respect to the Company, any of its Subsidiaries or any of their respective business activities, any bribes or kickbacks, illegal political contributions, payments from corporate funds not recorded on the books and records of the Company or its Subsidiaries, payments from corporate funds to governmental officials, in their individual capacities, for the purpose of affecting their action or the action of the government they represent, to obtain favorable treatment in securing business or licenses or to obtain special concessions, or illegal payments from corporate funds to obtain or retain business. SECTION 3.21. BROKERS. No broker, investment bank, finder, financial advisor or other Person has acted as such for, or is entitled to any compensation from, the Company or any of its Subsidiaries in connection with this Agreement or the Subject Transactions, except as set forth on Schedule 3.21. SECTION 3.22. ASSETS. Except as set forth on Schedule 3.22, the tangible assets (including real and personal property) of the Company and its Subsidiaries that are currently used in and are material to the operation of their respective businesses (the "Assets") are owned or leased by the Company or a Subsidiary and are in the possession or under the control of the Company or such Subsidiary, and are operating in the ordinary course of business, subject to normal maintenance and repair (as applicable). 35 SECTION 3.23. INSURANCE. Schedule 3.23 sets forth a true and complete list of all material insurance policies in force with respect to the Company and its Subsidiaries. The Company has heretofore provided the Purchaser with a brief summary of the coverage and terms of each such policy. All such policies are in full force and effect. All premiums with respect thereto have been paid to the extent due. No notice of cancellation, termination or reduction of coverage has been received with respect to any such policy. Except as set forth on Schedule 3.23, no claim currently is pending under any such policy involving an amount in excess of Fifty Thousand Dollars ($50,000). All claims currently pending have been timely made and no claim has been denied by the insuring party or is being defended under a reservation of such insuring party's rights. SECTION 3.24. INTERCOMPANY SERVICES. Schedule 3.24 sets forth a true and correct description of all material services provided within the last twelve months to the Company and any of its Subsidiaries by their respective Affiliates (other than the Company and its Subsidiaries) and by the Company and its Subsidiaries to their respective Affiliates (other than the Company and its Subsidiaries), and the charges assessed for all services provided during such time. Except as set forth on Schedule 3.11, there are no agreements (oral or written) between the Company or any of its Subsidiaries, on the one hand, and any Affiliate thereof (other than Affiliates that are the Company or any of its Subsidiaries), on the other hand. SECTION 3.25. GOVERNMENT CONTRACTS. Except as set forth on Schedule 3.25: (a) To the Knowledge of the Company, with respect to each executory Government Contract or outstanding Bid to which the Company or any of its Subsidiaries is a party: (i) the Company and each of its Subsidiaries has complied in all material respects with all terms and conditions of such Government Contract or Bid; (ii) the Company and each of its Subsidiaries has complied in all material respects with all requirements of statute, rule, regulation, order or agreement with the U.S. Government pertaining to such Government Contract or Bid; (iii) all representations and certifications executed, acknowledged or set forth in or pertaining to such Government Contract or Bid were current, accurate and complete as of their effective date, and the Company and each of its Subsidiaries has complied in all material respects with all such representations and certifications; (iv) neither the U.S. Government, nor any prime contractor, subcontractor or other Person, has notified the Company or any of its Subsidiaries, in writing, that the Company or any of its Subsidiaries has breached or violated any statute, rule, regulation certification, representation, clause, provision or requirement; and (v) no termination for default has been issued, and no cure notice or show cause notice has been issued and not resolved or cured. For purposes of this Section 3.25, "executory Government Contract" means a Government Contract that has not been closed by the U.S. Government, prime contractor or subcontractor, as appropriate. (b) To the Knowledge of the Company: (i) neither the Company nor any of its Subsidiaries nor any of the Company's or its Subsidiaries' directors, officers or employees is (or 36 for the last three years has been) under administrative, civil or criminal investigation, indictment or information, or audit (other than routine contract audits) or internal investigation with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Bid; or (ii) neither the Company nor any of its Subsidiaries nor any of the Company's or its Subsidiaries' directors, officers or employees has made a Voluntary Disclosure pursuant to the Department of Defense Fraud Voluntary Disclosure Program with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Bid that has led or could lead, either before or after the Closing Date, to any of the consequences set forth in subsection (i) above or any other material damages, assessment of penalties, recoupment of payment or disallowance of cost. (c) Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any of their respective directors, officers or employees is (or at any time during the last five years has been) suspended or debarred from doing business with the U.S. Government or declared nonresponsible or ineligible for U.S. Government contracting. To the Knowledge of the Company, there are no matters pending that are believed reasonably likely to lead to the institution of suspension or debarment proceedings against the Company or any of its Subsidiaries. Neither the Company nor any Subsidiary has, within the past five years, been terminated for default under any Government Contract. SECTION 3.26. INTERNATIONAL TRADE AND EXPORT CONTROLS. (a) Except as set forth on Schedule 3.26: (i) the Company is in material compliance with all Applicable Laws concerning the exportation of any products, technology, technical data and services, including those administered by, without limitation, the United States Department of Commerce, the United States Department of State, and the United States Department of the Treasury; (ii) the Company is in material compliance with United States and international economic and trade sanctions, including those administered by the Office of Foreign Assets Control ("OFAC") within the United States Department of the Treasury; (iii) the Company is in material compliance with the antiboycott regulations administered by the United States Department of Commerce, the Foreign Corrupt Practices Act, and all laws and regulations administered by the Bureau of Customs and Border Protection in the United States Department of Homeland Security. (b) To the Knowledge of the Company, no director, officer or employee of Company or any of its Subsidiaries is identified on any of the following documents: (i) the Office of Foreign Assets Control of the United States Department of the Treasury list of "Specially Designated Nationals and Blocked Persons" ("SDNs"); (ii) the Bureau of Industry and Security of the United States Department of Commerce "Denied Persons List, " "Entity List" or "Unverified List"; (iii) the Office of Defense Trade Controls of the United States Department of State "List of Debarred Parties"; (iv) the Financial Sanctions Unit of the Bank of England "Consolidated List"; (v) the Solicitor General of Canada's "Anti-Terrorism Act Listed Entities"; (vi) the Australian Department of Foreign Affairs and Trade "Charter of the United Nations (Anti-terrorism - Persons and Entities) List"; (vii) the United Nations Security Council Counter-Terrorism Committee "Consolidated List"; or (viii) European Union Commission Regulation No. 1996/2001 of October 11, 2001. To the Knowledge of the Company, neither the Company nor any of its Subsidiaries is involved in business arrangements or otherwise engages in 37 transactions with or involving countries subject to economic or trade sanctions imposed by the United States Government, or with or involving SDNs, in violation of the regulations maintained by OFAC. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Each Stockholder, severally and not jointly, hereby represents and warrants, as to such Stockholder, to the Purchaser as follows: SECTION 4.1. OWNERSHIP OF STOCK. Such Stockholder is the owner, beneficially and of record, of the shares of Common Stock set forth opposite such Stockholder's name on Exhibit A, free and clear of any Encumbrance. At the Closing, such Stockholder will transfer good and marketable title to such shares of Common Stock and the shares of Common Stock, if any, issued to such Stockholder after the date hereof upon valid exercise of Options, in each case free and clear of any Encumbrance. SECTION 4.2. AUTHORIZATION. Such Stockholder has full right, power and authority and has taken all action necessary to execute and deliver this Agreement and the Ancillary Agreements to which such Stockholder is to be a party, to perform its obligations hereunder and thereunder and to consummate the Subject Transactions. This Agreement has been, and by the Closing Date each Ancillary Agreement to which such Stockholder is to be a party will have been, duly executed and delivered by such Stockholder, and, subject to due authorization, execution and delivery by the other parties, this Agreement is, and each such Ancillary Agreement to which such Stockholder is to be a party will be, the legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally, and to general principles of equity (whether considered in a proceeding at law or in equity). SECTION 4.3. NO CONFLICT OR VIOLATION. The execution, delivery and performance by such Stockholder of this Agreement and the Ancillary Agreements to which such Stockholder is to be a party and the consummation of the Subject Transactions in accordance with their terms will not (a) if such Stockholder is not a natural Person, violate any provision of the charter, bylaws or other organizational documents of such Stockholder, (b) violate, conflict with or result in a breach of any of the terms of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrances on any of the Common Stock pursuant to, any agreement, license or contract to which such Stockholder is a party or by or to which it or any of its assets or properties may be bound or subject, (c) violate any order, judgment, injunction, award or decree of any court, 38 arbitrator or Government Entity against, or binding upon, such Stockholder, (d) violate any statute, law or regulation of any jurisdiction applicable to such Stockholder, or (e) result in a breach or violation of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment or revocation of, any Permit related to such Stockholder's business or necessary to conduct such business, except in the case of each of the foregoing clauses (b), (c), (d) and (e) for such violations, conflicts, breaches, defaults, impairments or revocations that would not, individually or in the aggregate, have a material adverse effect on such Stockholder's ability to consummate the Subject Transactions or to perform its obligations hereunder or under the Ancillary Agreements to which such Stockholder is to be a party. SECTION 4.4. GOVERNMENTAL CONSENTS AND APPROVALS. Except (a) as set forth on Schedule 4.4 and (b) as required under the HSR Act or any competition law or similar statute or regulation of any foreign jurisdiction, the execution, delivery and performance by such Stockholder of this Agreement and the Ancillary Agreements to which such Stockholder is to be a party, and the consummation of the Subject Transactions in accordance with their terms, do not require such Stockholder or any of its Affiliates to obtain any consent or approval of, make any filing with, or give any notice to, any Government Entity, except for such consents, approvals, filings or notices the failure to obtain, make or give which, as the case may be, would not, individually or in the aggregate, have a material adverse effect on such Stockholder's ability to consummate the Subject Transactions or to perform its obligations hereunder or under the Ancillary Agreements to which such Stockholder is to be a party. SECTION 4.5. COMPLIANCE WITH LAWS. Except for those violations, if any, which would not, individually or in the aggregate, have a material adverse effect on such Stockholder's ability to consummate the Subject Transactions or to perform its obligations hereunder, such Stockholder is not in violation of any Applicable Law or any other requirement of any Government Entity. Such Stockholder has not received any written notice from any Government Entity alleging any violation of any such Applicable Law or directing such Stockholder to take any remedial action with respect to such law, ordinance or regulation, in either case which would have a material adverse effect on such Stockholder's ability to consummate the Subject Transactions or to perform its obligations hereunder or under the Ancillary Agreements to which such Stockholder is to be a party. SECTION 4.6. OBLIGATIONS OF THE COMPANY TO THE STOCKHOLDERS. Except as set forth on Schedule 4.6, (a) neither such Stockholder nor any of its Affiliates (other than the Company or any of its Subsidiaries) is a party to any contract, agreement or arrangement with the Company or any of its Subsidiaries, and (b) none of the Company or any of its Subsidiaries has, has ever had or may hereafter have, any obligation or liability, contingent or otherwise, owing to such Stockholder or any of its Affiliates (including pursuant to any claim, demand, proceeding, cause of action or order), in each case, other than (i) any obligation of the Company or any of its Subsidiaries arising under any Ancillary Agreement after the Closing or in connection with employment of such Stockholder after the Closing, (ii) any claim arising under this Agreement or (iii) any claim for indemnification arising under the charter, bylaws or other organizational documents of the Company or its Subsidiaries 39 or Applicable Law. Notwithstanding the foregoing, the Lehman Stockholders make no representations about any such contract, agreement, arrangement, obligation or liability of the Company or any of its Subsidiaries with or to Lehman Brothers Inc. or any of the Affiliates of Lehman Brothers Inc. other than the Lehman Stockholders. SECTION 4.7. OWNERSHIP OF NOTES. Each Significant Stockholder represents that the Notes held by each such Significant Stockholder are set forth next to such Significant Stockholder's name on Schedule 4.7 hereto. ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrants to each Stockholder as follows: SECTION 5.1. ORGANIZATION, STANDING AND AUTHORITY. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite power and authority to carry on its operations as they are now being conducted. SECTION 5.2. AUTHORIZATION. The Purchaser has full right, power and authority and has taken all corporate action necessary to execute and deliver this Agreement and the Ancillary Agreements, to perform its obligations hereunder and thereunder and to consummate the Subject Transactions. This Agreement has been, and by the Closing Date each Ancillary Agreement to which the Purchaser is to be a party will have been, duly executed and delivered by the Purchaser, and, subject to due authorization, execution and delivery by the other parties, this Agreement is, and each such Ancillary Agreement will be, the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally, and to general principles of equity (whether considered in a proceeding at law or in equity). SECTION 5.3. ACTIONS AND PROCEEDINGS. As of the date hereof, there are no outstanding orders, decrees or judgments by or with any Government Entity to which the Purchaser is a party that would, individually or in the aggregate, have a Purchaser Material Adverse Effect. As of the date hereof, there are no actions, suits, arbitrations or legal, administrative or other proceedings pending or, to the Knowledge of the Purchaser, threatened against the Purchaser, at law or in equity, by or before any Government Entity, which would, if adversely determined, individually or in the aggregate, have a Purchaser Material Adverse Effect. 40 SECTION 5.4. NO CONFLICT OR VIOLATION. Except as set forth in Section 5.5 or on Schedule 5.4, the execution, delivery and performance by the Purchaser of this Agreement and the Ancillary Agreements and the consummation of the Subject Transactions in accordance with their terms will not (a) violate any provision of the charter, bylaws or other organizational documents of the Purchaser, (b) violate, conflict with or result in a breach of any of the terms of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any agreement, license or contract to which the Purchaser is a party or by or to which it or any of its assets or properties may be bound or subject, (c) violate any order, judgment, injunction, award or decree of any court, arbitrator or Government Entity against, or binding upon, the Purchaser, (d) violate any statute, law or regulation of any jurisdiction applicable to the Purchaser, or (e) result in a breach or violation of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment or revocation of, any Permit related to the Purchaser's business or necessary to conduct such business, except in the case of each of the foregoing clauses (b), (c), (d) and (e) for such violations, conflicts, breaches, defaults, impairments or revocations that would not, individually or in the aggregate, have a Purchaser Material Adverse Effect. SECTION 5.5. GOVERNMENTAL CONSENTS AND APPROVALS. Except as required under the HSR Act or any competition law or similar statute or regulation of any foreign jurisdiction, the execution, delivery and performance by the Purchaser of this Agreement and the Ancillary Agreements, and the consummation of the Subject Transactions in accordance with their terms, do not require the Purchaser or any of its Affiliates to obtain any consent or approval of, make any filing with, or give any notice to, any Government Entity, except for such consents, approvals, filings or notices the failure to obtain, make or give which, as the case may be, would not, individually or in the aggregate, have a Purchaser Material Adverse Effect. SECTION 5.6. COMPLIANCE WITH LAWS. Except for those violations, if any, which would not, individually or in the aggregate, have a Purchaser Material Adverse Effect, the Purchaser is not in violation of any Applicable Law or any other requirement of any Government Entity. The Purchaser has not received any written notice from any Government Entity alleging any violation of any such Applicable Law or directing the Purchaser to take any remedial action with respect to such law, ordinance or regulation, in either case which would have a Purchaser Material Adverse Effect. SECTION 5.7. FINANCING. The Purchaser has delivered to the Company complete and correct executed copies of the documents listed in Part I of Exhibit D and all other letters, agreements and other documents (collectively, the "Debt Financing Documents") issued to the Purchaser or to which the Purchaser is a party in connection with the debt financing of the Subject Transactions (the "Financing"). The Purchaser has also delivered to the Company complete and correct executed 41 copies of the documents listed in Part II of Exhibit D and all other letters, agreements and other documents (collectively, the "Equity Financing Documents" and collectively with the Debt Financing Documents, the "Financing Documents") issued to the Purchaser or to which the Purchaser is a party in connection with the equity financing for the Subject Transactions (the "Equity Investment"). The Financing Documents are in full force and effect, are not subject to any conditions other than those contained therein, and have not been amended or modified in any respect, all commitment fees required to be paid thereunder have been paid in full or will be duly paid in full when due, and no event has occurred which (with or without notice, lapse of time or both) would constitute a default thereunder on the part of the Purchaser or the Finance Parties, as the case may be. There are no facts and circumstances known to the Purchaser or its Affiliates that any of them believes or has reason to believe is reasonably likely to (i) prevent the conditions described in the Financing Documents from being satisfied, (ii) prevent the Purchaser from receiving financing pursuant to the terms of the Financing Documents or (iii) make any of the conditions or assumptions set forth in the Financing Documents unreasonable. The Finance Parties have not advised the Purchaser or any of its Affiliates of any facts which cause them to believe the financing contemplated by the Financing Documents will not be consummated substantially in accordance with the terms thereof. Assuming satisfaction of all applicable conditions set forth in the Debt Financing Documents, at the Closing Date, the Purchaser will be capitalized with the Equity Investment, which, together with the proceeds from the Financing and available cash of the Purchaser, will provide sufficient funds to consummate the Subject Transactions. SECTION 5.8. SOPHISTICATED INVESTOR. The Purchaser is a sophisticated investor, represented by independent legal and investment counsel with experience in the acquisition and valuation of ongoing businesses and acknowledges that it has received, or has had access to, all information which it considers necessary or advisable to enable it to make an informed investment decision concerning its purchase of the Common Stock. The Purchaser is acquiring the Common Stock for investment purposes only, and not with a view to, or for, any public resale or other distribution thereof. The Purchaser is an "accredited investor" as such term is defined in the regulations promulgated under the Securities Act. SECTION 5.9. OTHER INVESTMENT REPRESENTATIONS. The Purchaser acknowledges that (i) the Purchaser and its employees, agents and accounting and legal representatives have been afforded access to the books, records, key personnel, facilities and other information related to the Common Stock and the business and affairs of the Company and its Subsidiaries; (ii) the Purchaser and its employees, agents and accounting and legal representatives have been given an opportunity to ask questions relating to the Common Stock and the business and affairs of the Company and its Subsidiaries and to receive answers thereto; (iii) the Purchaser has performed such due diligence as the Purchaser deemed necessary in order to review and assess the properties, business and affairs of the Company and its Subsidiaries in connection with its acquisition of the Common Stock (including the matters set forth in the Schedules attached hereto); and (iv) each of the Finance Parties has similarly been afforded access to information and conducted such due diligence as such Finance Parties required. In completing the Subject Transactions, the Purchaser has not and is not relying 42 on any representation or warranty, whether by any Stockholder, the Company or any other Person, which is not expressly set forth in this Agreement. The Purchaser understands that no party hereto nor any Affiliates, representatives or agents of any party is making any representation or warranty whatsoever, oral or written, express or implied, other than as set forth in this Agreement, and the Purchaser is not relying on any statement, representation or warranty, oral or written, express or implied, made by another party hereto, such other party's Affiliates, representatives or agents, or any other Person, except as set forth in this Agreement. SECTION 5.10. BROKERS. No broker, investment bank, finder, financial adviser or other person has acted as such for, or is entitled to any compensation from, the Purchaser or its Affiliates in connection with this Agreement or the Subject Transactions, except as set forth on Schedule 5.10. SECTION 5.11. INFORMATION SUPPLIED. None of the written information supplied or to be supplied by the Purchaser specifically for inclusion or incorporation by reference in the Tender Offer Documents will, at the time the Offer to Purchase first is mailed to holders of the Notes, at any time it is amended or supplemented or at any time prior to the expiration of the Tender Offers, 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 are made, not misleading. ARTICLE VI. COVENANTS SECTION 6.1. CONDUCT OF THE BUSINESS PENDING THE CLOSING. The Company will not, and the Company will not permit any of its Subsidiaries to, take any action with the purpose of causing any of the conditions to the Purchaser's obligations set forth in Article VII hereof to not be satisfied. Except as contemplated by this Agreement, as set forth on Schedule 6.1 or with the prior written consent of the Purchaser, during the period from the date of this Agreement to the Closing, the Company will, and will cause each of its Subsidiaries to, conduct their respective businesses according to their ordinary and usual course of business and to use all commercially reasonable efforts consistent therewith (x) to preserve intact their respective material properties, assets and business organizations and (y) to maintain satisfactory relationships with material customers, suppliers, distributors, regulators, creditors and others having business relationships with the Company and its Subsidiaries, in each case in the ordinary course of business; provided, however, that none of the Company or its Subsidiaries shall be required to incur any costs or expenses or otherwise expend any monies out of the ordinary course of business in connection with such efforts. Without limiting the generality of the foregoing, and except as otherwise provided in this Agreement, the Company will not, and will not permit any of its Subsidiaries to, without the prior written consent of the Purchaser (such consent not to be unreasonably withheld or delayed): 43 (i) except for the issuance of Common Stock upon the exercise of currently outstanding Options, issue, sell or pledge, or authorize or propose the issuance, sale or pledge, of additional shares of capital stock of any class, or securities convertible into or exchangeable for shares of capital stock, or any rights, warrants or options to acquire any such shares, or other convertible securities of the Company or its Subsidiaries; (ii) split, combine or reclassify any shares of the Capital Stock of the Company or its Subsidiaries or declare, set aside for payment or pay any dividend or distribution, payable in cash, stock, property or otherwise, with respect to any of the Capital Stock of the Company or its Subsidiaries, other than, with respect to dividends or distributions, cash dividends and distributions by a direct or indirect wholly-owned Subsidiary to the Company or another direct or indirect wholly-owned Subsidiary; (iii) enter into an agreement with respect to any merger, consolidation, liquidation or business combination involving the Company or any of its Subsidiaries, or any acquisition or disposition of all or substantially all of the assets or securities of the Company or any of its Subsidiaries; (iv) propose or adopt any amendment to the certificate of incorporation or by-laws or other organizational documents of the Company or any of its Subsidiaries; (v) (A) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division or line of business thereof or (B) make any investment, either by purchase of stock or securities, contributions to capital (other than to a Subsidiary), property transfer or purchase of any property or assets of any Person, except pursuant to Contracts in effect on the date of this Agreement and disclosed on Schedule 6.1(v) hereto; (vi) except for borrowings under existing lines of credit in the ordinary course of business, incur any long-term Indebtedness or issue any debt securities or assume, guarantee or endorse the obligations of any other Person in excess of Fifty Thousand Dollars ($50,000) in the aggregate; (vii) cancel any material third party Indebtedness owed to the Company or any of its Subsidiaries (other than Indebtedness owed to the Company or any of its wholly-owned Subsidiaries by another wholly-owned Subsidiary); (viii) (A) increase in any manner the rate or terms of compensation or benefits of any of its directors, officers or other employees, except as may be required under existing employment agreements or such increases as are granted in the ordinary course of business consistent with past practice, (B) hire any new employees except in the ordinary course of business consistent with past practice, (C) pay or agree to pay any pension, retirement allowance or other employee benefit not required or permitted by any existing Benefit Plan or other agreement or arrangement to any such director, officer or employee, whether past or present, or (C) enter into or amend any employment, bonus, 44 severance or retirement contract or adopt or amend any Benefit Plan, except in the ordinary course of business consistent with past practice; (ix) (A) except for the sale of inventory in the ordinary course of business consistent with past practice, sell, lease, transfer or otherwise dispose of any of its material property or assets, or (B) create Encumbrances on any of its material property or assets, in each case described in this clause (B) in excess of Fifty Thousand Dollars ($50,000) per transaction or One Hundred Thousand Dollars ($100,000) in the aggregate; (x) sell, assign, lease, license, transfer or otherwise dispose of, mortgage, pledge or encumber, any Owned Real Property, or amend, terminate, modify or renew any Real Property Lease except as disclosed on Schedule 6.1; (xi) make any loans, advances or capital contributions (other than advances for travel and other normal business expenses to officers and employees), except in the ordinary course of business and in an aggregate amount outstanding at any one time not to exceed One Hundred Thousand Dollars ($100,000); (xii) commit to make any capital expenditure not set forth on Schedule 6.1(xii) (unless consistent with subsection (xiii) following) or fail to make capital expenditures consistent with past practices (even in excess of amounts set forth on Schedule 6.1(xii)) or fail to expend aggregate cash amounts in any month in respect of commitments made between the date hereof and the Closing Date less than the amount set forth on Schedule 6.1(xii) hereto with respect to such month (unless such amounts may be avoided or deferred consistent with past practices); (xiii) fail to maintain all its assets in good repair and condition, except to the extent of wear or use in the ordinary course of business or damage by fire or other unavoidable casualty; (xiv) make or change any Tax election, release, assign, settle or compromise any material Tax liability, or waive or consent to the extension of any statute of limitations for the assessment and collection of any Tax, except in the ordinary course of business consistent with past practice, or fail to make timely any estimated payment for Taxes in accordance with Applicable Law; (xv) except as may be required as a result of a change in Applicable Law or GAAP, change any accounting principles or practices used by the Company or any of its Subsidiaries; (xvi) institute, settle or dismiss any action, claim, demand, lawsuit, proceeding, arbitration or grievance by or before any court, arbitrator or governmental or regulatory body threatened against, relating to or involving the Company or any of its Subsidiaries in connection with any business, asset or property of the Company or any of its Subsidiaries, other than in the ordinary course of business but not, in any individual case, in excess of One Hundred Thousand Dollars ($100,000) ; 45 (xvii) enter into any Contract with a term of more than thirty six (36) months or involving the payment, or provision of goods or services, in excess of One Million Dollars ($1,000,000) or enter into any Contract outside of the ordinary course of business consistent with past practices; (xviii) fail to pay the accounts payable or other liabilities of the Company or any of its Subsidiaries in a manner consistent with the practices of the Company and its Subsidiaries prior to the date hereof or take any action not consistent with the past practices of the Company and its Subsidiaries that is designed to accelerate or has the effect of accelerating the receipt by the Company or any of its Subsidiaries of any amounts of cash earlier than such cash would have been realized consistent with the past practices of the Company and its Subsidiaries; or (xix) agree in writing to take any of the foregoing actions. SECTION 6.2. CERTAIN TRANSACTIONS. The Stockholders and the Company agree that between the date of this Agreement and the earlier of (a) the Closing and (b) the termination of this Agreement, none of the Stockholders, the Company, any of its Subsidiaries nor any of their respective Affiliates, officers, directors, representatives or agents will (i) solicit, initiate, consider, encourage or accept any other proposals or offers from any Person (A) relating to any acquisition or purchase of all or any portion of the capital stock of the Company or any of its Subsidiaries or assets of the Company or any of its Subsidiaries (other than any sale of assets to be sold in the ordinary course of business consistent with past practice and otherwise not in violation of the terms of this Agreement), (B) to enter into any merger, consolidation or other business combination relating to the Company or any of its Subsidiaries, (C) to enter into a recapitalization, reorganization or any other extraordinary business transaction involving or otherwise relating to the Company or any of its Subsidiaries or (D) to enter into any other extraordinary business transaction involving or otherwise relating to the Company or any of its Subsidiaries, or (ii) participate in any discussions, conversations, negotiations and other communications regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any other Person to seek to do any of the foregoing. The Company immediately shall cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Person conducted heretofore with respect to any of the foregoing. The Company shall notify the Purchaser promptly if any such proposal or offer, or any inquiry or other contact with any Person with respect thereto, is made and shall, in any such notice to the Purchaser, indicate in reasonable detail the identity of the Person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or other contact. The Stockholders and the Company agree not to, and to cause each of the Subsidiaries not to, without the prior written consent of the Purchaser, release any Person from, or waive any provision of, any confidentiality or standstill agreement to which the Company or any Subsidiary is a party. 46 SECTION 6.3. INVESTIGATIONS; PRE-CLOSING ACCESS. (a) Prior to the Closing Date, the Company shall, and shall cause its Subsidiaries to, allow the Purchaser, through its employees and representatives, to make such continuing investigation of the assets, liabilities, business, operations, books and records of the Company and its Subsidiaries as the Purchaser may reasonably request. Any investigation or examination by the Purchaser of the Company and its Subsidiaries or access pursuant to this Section 6.3 shall be conducted or occur at reasonable times during regular business hours, as approved in advance by the Chief Executive Officer of the Company; the Company shall, and shall cause its Subsidiaries and their respective employees and representatives, including, without limitation, counsel, investment bankers and independent public accountants, to, cooperate with the Purchaser's employees and its representatives in connection with such review and examination; and any such investigation, examination or interview shall be subject to the terms and conditions of the Confidentiality Agreement or, at the request of the Company, a separate confidentiality agreement between the Company and each of such employees and representatives that is substantially identical to the Confidentiality Agreement. Without limiting the foregoing, the Company shall also deliver to Purchaser and its advisors such tax returns, supporting materials and related documents as Purchaser reasonably deems necessary to diligence the principal amount of the Defeasance Cost Tax Note. (b) Between the date hereof and the Closing, the Company shall furnish to the Purchaser as soon as available and in any event not later than the end of each fiscal month, an unaudited consolidated balance sheet of the Company as of the end of the preceding fiscal month and the related consolidated statements of earnings and stockholders' equity (deficit) for such period, and, as soon as available and in any event within twenty-five (25) Business Days after the end of each fiscal quarter, a statement of cash flows for the quarter then ended, each prepared in accordance with GAAP in conformity with the practices consistently applied by the Company with respect to its monthly and quarterly financial statements. All the foregoing shall be in accordance with the books and records of the Company and shall fairly present its consolidated financial position (taking into account the differences between the monthly and quarterly statements prepared by the Company in conformity with its past practices) as of the last day of the period then ended. (c) The foregoing shall not require the Company or any of its Subsidiaries to (i) permit any inspection, or to disclose any information, that in their reasonable judgment could reasonably be expected to result in (A) the disclosure of any trade secrets of third parties or the violation of any obligations of the Company or any of its Subsidiaries with respect to confidentiality provided that they shall have used commercially reasonable efforts to obtain the consent of such third party to such inspection or disclosure, (B) the waiver of any applicable attorney-client privilege, or (C) the violation of any Applicable Law or (ii) provide access to any property for purposes of testing or invasive sampling of soil groundwater, structural or mechanical components, tanks or other conditions. (d) Notwithstanding any other provisions of this Section 6.3, the Purchaser and each other party to this Agreement shall cooperate in implementing the provisions of this Section 6.3 so as not to prevent or interfere with the compliance with Section 6.1 hereof. 47 SECTION 6.4. HSR ACT FILINGS; CONSENTS. (a) The Company, the Significant Stockholders and the Purchaser shall, to the extent required by the HSR Act, as promptly as practicable and in any event within ten (10) Business Days after the date of this Agreement, file, or cause to be filed, (i) Notification and Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice (the "Antitrust Division") in connection with the Subject Transactions and (ii) any similar notices or filings required to be made under any competition law or similar statute or regulation of any foreign jurisdiction in connection with the Subject Transactions, and will use their respective reasonable best efforts to respond as promptly as practicable to all inquiries received from the FTC, the Antitrust Division or any applicable foreign Government Entity for additional information or documentation and to cause the waiting periods under the HSR Act (and any competition law or similar statute or regulation of any foreign jurisdiction) to terminate or expire at the earliest possible date or to obtain any necessary consents or approvals from any such Government Entity. Each of the Company and the Purchaser shall inform the other promptly of any communication made by or on behalf of such party to, or received from, the FTC, the Antitrust Division or any applicable foreign Government Entity and shall furnish to the other such information and assistance as the other may reasonably request in connection with its preparation of any filing, submission or other act that is necessary or advisable under the HSR Act or similar foreign statute or regulation. The parties hereto agree not to take any action or omit to take any action that will have the effect of unreasonably delaying, impairing or impeding the receipt of any required authorizations, consents, orders or approvals. (b) The Company, the Significant Stockholders and the Purchaser shall cooperate and use reasonable best efforts to obtain all consents, approvals and agreements of, and to give and make all notices and filings with, any Government Entities necessary to authorize, approve or permit the consummation of the Subject Transactions. The Company, the Significant Stockholders and the Purchaser shall cooperate and use reasonable best efforts to obtain all other consents and approvals to the Subject Transactions, including (i) the matters set forth on Schedule 3.6, Schedule 4.4 and Schedule 6.4, (ii) of any Person from whom consents and approvals are required under any Contract to which the Company or any of its Subsidiaries is a party, and (iii) the consents of any other third parties. (c) Each party shall provide all necessary information, documentation and communications to any Government Entities and other Persons required to consummate the Subject Transactions. Each party shall cooperate with the other in obtaining, as promptly as practicable, all approvals, authorizations and clearances of Government Entities and other Persons required to consummate the Subject Transactions. Each party hereto shall have the right to review in advance, and to the extent practicable each will consult the other on, in each case subject to Applicable Laws relating to the exchange of information or other applicable confidentiality requirements, all the information relating to the Significant Stockholders, the Company or its Subsidiaries, the Purchaser or any of their respective Affiliates, as the case may be, that appears in any filings or other submissions with, or other written materials submitted to, any third party or Government Entity in connection with Subject Transactions. The Company, the Significant Stockholders and the Purchaser agree, subject to Applicable Laws relating to the exchange of information or applicable confidentiality agreements, that they will keep the other 48 apprised of the status of matters relating to completion of the Subject Transactions, including promptly furnishing the other with copies of any notice or other communications received by any of the Significant Stockholders, the Company or any of its Subsidiaries, or the Purchaser, as the case may be, from any third party or Government Entity with respect to the Subject Transactions, including, without limitation, all notices of claims, suits and actions for which any such party receives service of process. (d) Notwithstanding anything contained in this Section 6.4, neither the Company, its Subsidiaries, the Securityholders nor the Purchaser and its direct or indirect equity owners shall be obligated to: sell or otherwise dispose of, or hold separate (through the establishment of a trust or otherwise), particular assets or categories of assets, or operations, of the Company, its Subsidiaries, the Securityholders or the Purchaser or any of its direct or indirect equity owners (as the case may be). The Purchaser covenants that it will not, and will not permit any of its Affiliates to, acquire at any time prior to the Closing Date any interest in any Person (or any assets of any Person) that competes in any material respect in any relevant market with any of the businesses conducted by the Company or any of its Subsidiaries on the date hereof. SECTION 6.5. FURTHER ASSURANCES. (a) Upon the terms and subject to the conditions herein provided, on and prior to the Closing Date, each of the Company, the Significant Stockholders and the Purchaser shall use reasonable best efforts to take, or cause to be taken, all actions or do, or cause to be done, all things or execute any documents necessary, proper or advisable under Applicable Laws to consummate and make effective the Subject Transactions, including without limitation in the case of the Significant Stockholders terminating without further liability on the part of the Company the agreements set forth on Exhibit I hereto. (b) The Purchaser shall use reasonable best efforts to obtain the Financing and the Equity Investment described in the Financing Documents in order to consummate the Subject Transactions (including, without limitation, borrowing the Interim Loans (as defined in, and subject to the terms of, the Debt Financing Documents (as defined in Section 5.7 hereof)). The Company agrees to provide, and will cause its Subsidiaries and its and their respective officers, directors, agents, employees, financial advisors, counsel, accountants and other representatives and Affiliates to provide, such cooperation as may be reasonably requested by the Purchaser and approved by counsel for the Company and the Stockholders (which approval shall not be unreasonably withheld or delayed) in connection with the arrangement of the Financing, including without limitation, participation in meetings, due diligence sessions, road shows, the preparation of offering memoranda, private placement memoranda, prospectuses and similar documents, the execution and delivery of any further commitment letters, underwriting or placement agreements, pledge and security documents, other definitive financing documents, or other requested certificates or documents, including comfort letters of accountants and such other certificates or documents as the Purchaser may reasonably request from time to time. (c) In the event that at any time funds are not or have not been made available pursuant to the Financing Documents so as to enable the Purchaser to proceed with the Subject Transactions in a timely manner, the Purchaser shall (i) use its reasonable best efforts to obtain alternative funding in an amount at least equal to the amount to be provided pursuant to the 49 Financing Documents on terms and conditions substantially comparable to those provided in the Financing Documents, or otherwise on terms reasonably acceptable to the Purchaser, and (ii) shall continue to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under Applicable Laws and regulations to consummate the Subject Transactions. (d) Following the date hereof, the Purchaser shall promptly disclose to the Company any amendment or modification, or any termination or cancellation of, the Financing, or any information that becomes known to the Purchaser or its Affiliates and that makes it unlikely that the condition set forth in Section 7.6 will be satisfied at the Closing. None of the Purchaser or any of its Affiliates will knowingly attempt, directly or indirectly, to induce or encourage the Finance Parties or other Persons not to fund any of the financing provided for in the Financing Documents. (e) Between the date hereof and the Closing Date each party hereto will promptly notify the others in writing of any breach of any representation, warranty, covenant or agreement of such party or the occurrence of any event or condition that is reasonably likely to result in the failure of the conditions of any party to consummate the Closing; provided, however, that the Lehman Stockholders shall have no such obligation with respect to any information it might learn from or about Lehman Brothers Inc. or any of the Affiliates of Lehman Brothers Inc. other than the Lehman Stockholders. SECTION 6.6. TRANSACTION EXPENSES; DEFEASANCE COSTS. (a) Except as otherwise specifically provided in this Agreement, (i) the Company shall bear all Company Transaction Expenses, (ii) the Purchaser shall bear all Purchaser Transaction Expenses and (iii) each Stockholder shall bear its respective fees, costs and expenses incurred by such Stockholder relating to the Subject Transactions (whether incurred prior to or after the date hereof), including fees and disbursements of counsel, financial advisors, consultants, accountants, actuaries and other advisors, but in the case of each Significant Stockholder only to the extent that such do not constitute Company Transaction Expenses. (b) Each Significant Stockholder shall submit to the Company and the Purchaser, not later than the close of business, New York, New York time, three (3) Business Days prior to the Closing Date, a schedule setting forth all fees, costs and expenses that such Significant Stockholder shall have incurred in connection with the Subject Transactions, and only such fees, costs and expenses as are on such schedule shall constitute Company Transaction Expenses. Each Stockholder shall indemnify and hold harmless the Purchaser, the Company and its Subsidiaries for any and all such fees, costs and expenses incurred by such Stockholder relating to the Subject Transactions (whether incurred prior to or after the date hereof) to the extent that such do not constitute Company Transaction Expenses. (c) From the date hereof until the Closing Date, the Company shall provide written notice to the Purchaser of the payment prior to the Closing Date of any Company Transaction Expenses or Defeasance Costs, including the amount thereof, promptly after the payment thereof; provided, however, that the Company shall not be required to provide such 50 notice until the aggregate amount of all Company Transaction Expenses and Defeasance Costs previously paid by the Company or any of its Subsidiaries without notice to the Purchaser pursuant to this Section 6.6(c) equals or exceeds (or after giving effect to any such payment would exceed) Twenty Five Thousand Dollars ($25,000). The Significant Stockholders and the Company hereby covenant and agree that the Company shall cause all of the Company Transaction Expenses and Defeasance Costs (other than any Tender Offer Consideration and any Consent Payments that may become payable after the Closing) to be paid on or prior to the Closing Date, and the Significant Stockholders shall, severally in proportion to their respective Pro Rata Portions, indemnify the Purchaser and the Company for any Company Transaction Expenses or Defeasance Costs (other than any Tender Offer Consideration and any Consent Payments that may become payable after the Closing) that remain unpaid after the Closing. SECTION 6.7. EMPLOYEE MATTERS. (a) The Purchaser acknowledges that the employees of the Company and its Subsidiaries immediately prior to the Closing will continue to be employed by the Company or one of its Subsidiaries immediately after the time of the Closing and that the terms of employment for such employees will be the same terms and conditions as are applicable prior to the Closing, except to the extent any such employee becomes a party to an Employment Agreement on the Closing Date. The Purchaser shall cause the Company and its Subsidiaries to provide, for a period of twelve (12) months after the Closing Date, welfare, retirement and fringe benefits to all Persons employed by the Company or any Subsidiary (and any of their eligible dependents as of the Closing Date) (collectively, the "Company Employees") substantially similar, in each case, to the benefits provided to the Company Employees under the Benefit Plans immediately before the Closing Date, except to the extent otherwise provided in any Employment Agreement to which any Company Employee becomes a party on the Closing Date. Without limiting the generality of the foregoing, in the event that the employment of any Company Employee is terminated by the Company or any Subsidiary prior to the first anniversary of the Closing Date, such Company Employee shall have the same rights to receive such benefits, including a severance benefit (if one is payable under the circumstances), that are not less than the rights to receive benefits that the Company Employee would have had in connection with such Company Employee's termination of employment under the terms of the Benefit Plans in which such Company Employee participated immediately prior to the Closing. This Section 6.7(a) is intended to be for the benefit of and to grant third party rights to the Company Employees whether or not parties to this Agreement, and each of the Company Employees shall be entitled to enforce the covenants contained herein. (b) Effective as of the Closing Date, the Purchaser shall cause the Company and its Subsidiaries to offer employment agreements to the employees whose names are set forth on Schedule 6.7(b) hereof (the "Key Employees"). The forms of such employment agreements are attached as part of Exhibit E. (c) Effective as of the Closing Date, the Purchaser shall cause the Company and its Subsidiaries to offer employment agreements to Bernard L. Schwartz and Kenneth M. Schwartz. The forms of such employment agreements are attached hereto as part of Exhibit E. 51 (d) Subject to Section 6.7(a) and the terms of any Employment Agreement (with respect to any Company Employee who becomes a party thereto on the Closing Date), the Company may amend or terminate any of the Benefit Plans at any time following the Closing Date in accordance with their respective terms and Applicable Law. In connection with any employee benefit plan (other than the Benefit Plans) provided to the Company Employees after the Closing Date (i) participants therein shall receive full credit for all service with the Company and its Subsidiaries, including, but not limited to, recognition of service for eligibility and vesting (but not for purposes of benefit accruals under any pension or retirement plan), (ii) the Purchaser shall cause the Company to waive, or cause its insurance carriers to waive, all limitations as to pre-existing and at-work conditions, if any, with respect to participation and coverage requirements applicable to the employees under the Company's welfare plans (except for limitations or waiting periods that are already in effect and that have not been satisfied with respect to such employees under the Benefit Plans), and (iii) participants therein shall receive credit for any co-payments and deductibles paid by such employees under the Benefit Plans for the year in which such participation commences. (e) The Company shall promptly notify the Purchaser of any pre-Closing communications it or any of its Affiliates, directors, officers, employees, attorneys or other representatives receive from the Department of Labor or the PBGC relating to the matters that are the subject of this Agreement or any Ancillary Agreement and permit the Purchaser to review in advance any proposed filing or written communication by the Company to the Department of Labor or the PBGC. The Purchaser will provide the Company and the PBGC with all documents and information required to respond to any inquiry from the Department of Labor or the PBGC. SECTION 6.8. INDEMNIFICATION OF DIRECTORS AND OFFICERS; RELEASES. (a) It is understood and agreed that the Company shall, to the fullest extent permitted under the Delaware General Corporation Law and regardless of whether the Closing occurs, indemnify, defend and hold harmless the present and former officers, directors, employees and agents of the Company and of the Company's Subsidiaries (each a "Company Indemnified Party" and collectively the "Company Indemnified Parties") against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, including without limitation, liabilities arising out of or pertaining to acts or omissions (other than illegal acts or fraud), by them in their capacities as such, whether commenced, asserted or claimed before or after the Closing Date; provided, however, that no indemnification shall be made to (i) any Company Indemnified Person to the extent it is finally determined by a court of competent jurisdiction (after all rights to appeal shall have expired) that such Company Indemnified Party did not, with the respect to the matter subject to indemnification hereunder, act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company (or any Subsidiary thereof) or (ii) any Securityholder or any of the officers, directors, employees, agents or Affiliates of any Securityholder that, in any such case, is finally determined by a court of competent jurisdiction (after all rights to appeal shall have expired) to be in respect of any liabilities resulting from, relating to or arising out of any Purchaser Indemnifiable Matter. If any indemnity is paid to or for the benefit of any Company Indemnified Party pursuant to this Section 6.8(a) or otherwise, and it is later determined that such Company Indemnified Party was not entitled to any part of 52 such indemnification, such Company Indemnified Party shall pay to the Company on demand such part of such indemnification together with interest thereon at a rate per annum equal to the Prime Rate from the date such indemnification was paid to or for the benefit of such Company Indemnified Party until such indemnification is repaid to the Company. (b) In the event of any such claim, action, suit, proceeding or investigation, (i) the Company shall pay the reasonable fees and expenses of counsel selected by the Company Indemnified Parties, which counsel shall be reasonably satisfactory to the Company, promptly as statements therefor are received, and (ii) the Company will cooperate in the defense of any such matter; provided, however, that the Company shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld or delayed); and provided, further, that the Company shall not be obligated pursuant to this Section 6.8(b) to pay the fees and disbursements of more than one counsel for all Company Indemnified Parties in any single action except to the extent that, in the opinion of counsel for the Company Indemnified Parties, two or more of such Company Indemnified Parties have conflicting interests in the outcome of such action. For six years after the Closing Date, the Company shall (x) maintain or obtain officers' and directors' liability insurance, or purchase extension(s) of the discovery period under the Company's existing policies for a total of six (6) years, covering the Company Indemnified Parties who are currently covered by the Company's officers and directors liability insurance policy with respect to matters existing or occurring at or prior to the Closing Date on terms not less favorable than those in effect on the date of this Agreement in terms of scope of coverage and amounts (provided that in either such case the Company and the Representatives will work together to obtain such insurance at the lowest possible cost); and (y) not amend the Certificate of Incorporation or By-Laws of the Company if the effect of doing so would be to reduce or narrow the scope of the Company's obligations to indemnify the Company Indemnified Parties or to reduce or narrow the scope of any exculpatory provision in favor of the Company Indemnified Parties. This Section 6.8 shall survive the Closing Date. The Purchaser shall cause the Company to comply with this Section 6.8 and to reimburse all expenses, including reasonable attorney's fees and expenses, incurred by any Person to enforce the obligations of the Purchaser and the Company under this Section 6.8. This Section 6.8 is intended to be for the benefit of and to grant third party rights to Company Indemnified Parties whether or not parties to this Agreement, and each of the Company Indemnified Parties shall be entitled to enforce the covenants contained herein. (c) If the Company or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then and in each such case, proper provision shall be made so that the successors and assigns of the Company assume the obligations set forth in this Section 6.8. Notwithstanding the foregoing, no transfer or assignment shall release any Person from that Person's obligations as set forth in this Section 6.8. SECTION 6.9. STOCK OPTIONS. Prior to the Closing Date, the Company shall comply with the terms of each Option, subject to the terms of this Agreement. To the extent any Options are exercised in whole or in part prior to the Closing, the Company shall cause the exercising holder to execute a joinder 53 to this Agreement, in the form of Exhibit F, to become a Stockholder hereunder with respect to all of the shares of Common Stock issuable with respect to such Option. Prior to the Closing Date, the Company shall cause each Optionholder who has not exercised such Optionholder's Options to enter into an Option Termination Agreement. At the Closing, each Option then outstanding and unexercised shall be cancelled and terminated in exchange for the cash payment to the applicable holder as provided in Sections 2.1 and 2.2, and the Option Plans shall be terminated. SECTION 6.10. CUSTODY OF SHARE CERTIFICATES. Concurrently with the execution of this Agreement, each of the Stockholders and the Company shall enter into a custody agreement, in the form attached hereto as Exhibit L (the "Custody Agreement"), with Ronald H. Kisner (the "Custodian") and each of the Stockholders shall deliver to the Custodian certificate(s) with appropriate transfer stamps, if any, affixed thereto, representing the shares of Common Stock owned by such Stockholder with appropriate stock powers duly endorsed in blank or accompanied by other duly executed instruments of transfer. As soon as practicable after the date hereof, but in any event no less than three (3) Business Days prior to the Closing Date, the Company shall, or shall cause each Optionholder to, deliver to the Custodian all Option Termination Agreements and any other agreements pertaining to the Options held by the Optionholders accompanied by other duly executed instruments of transfer as the Custodian may reasonably require. The Custodian will hold such certificates evidencing the shares of Common Stock and Option Termination Agreements in accordance with the terms of the Custody Agreement until the Closing or the termination of this Agreement. SECTION 6.11. NOTES TENDER OFFER. (a) Promptly after the date of this Agreement and in any event not later than five (5) Business Days after the date hereof, the Company will commence (i) a cash tender offer (the "9 5/8% Notes Tender Offer") in respect of all of the outstanding 9 5/8% Notes and (ii) a cash tender offer (the "9 1/4% Notes Tender Offer" and, together with the 9 5/8 Notes Tender Offer, the "Tender Offers") in respect of all of the outstanding 9 1/4% Notes. The aggregate consideration payable to each holder of 9 5/8% Notes pursuant to the 9 5/8% Notes Tender Offer and each holder of 9 1/4% Notes pursuant to the 9 1/4% Notes Tender Offer, in respect of Notes validly tendered and not validly withdrawn prior to the relevant expiration date of the relevant Tender Offer, shall be an amount in cash (the "Tender Offer Consideration") to be mutually agreed upon by the Purchaser and the Representatives within four (4) Business Days after the date of this Agreement. Such Tender Offer Consideration may be increased from time to time by the Company at any time from that set forth in the respective drafts of the Offer to Purchase delivered to the Purchaser concurrent with the execution of this Agreement. Each Tender Offer shall be made pursuant to the relevant Offer to Purchase. (b) As part of each of the Tender Offers, the Company shall solicit the consent of the holders of the respective series of Notes to certain amendments, including the elimination of the covenants set forth on Schedule 6.11 (the "Proposed Amendments"), to the respective indentures governing such series of Notes as described in the respective Offers to Purchase (the "Notes Consents"), and shall offer to pay an amount in cash (the "Consent Payment") to be mutually agreed upon by the Purchaser and the Representatives within four (4) Business Days 54 after the date of this Agreement (which amount shall not be less than the amounts set forth in the respective drafts of the Offer to Purchase delivered to the Purchaser concurrent with the execution of this Agreement), as such amount may be increased by the Company from time to time, to each holder of a Note who is entitled to vote on the Proposed Amendments and who validly consents to the Proposed Amendments prior to the tenth (10th) day after the commencement of the relevant Tender Offer (as such date may be extended, provided that the consent of the Purchaser (which shall not be unreasonably delayed or withheld) is required to extend more than five business days), the "Consent Date"). The Company represents that the Proposed Amendments do not require the consent of the holders of more than a majority of the outstanding principal amount of the 9 5/8% Notes or the 9 1/4% Notes, respectively, entitled to vote thereon and that, to the Knowledge of the Company, the aggregate principal amount of the 9 5/8% Notes and the 9 1/4% Notes not entitled to vote thereon does not exceed $800,000 and $3,184,000, respectively. (c) The Company's obligation pursuant to each Tender Offer to accept for payment and pay for any of the Notes tendered pursuant to such Tender Offer shall be subject to the following conditions: (i) the consummation of the Closing and (ii) such other conditions as are customary or appropriate for transactions similar to the Tender Offers. Subject to the terms and conditions of the Tender Offers, the Company agrees to accept for payment and to pay for (at the times specified in the relevant Offer to Purchase) all Notes validly tendered and not validly withdrawn. The Company will not waive any of the conditions to either Tender Offer without the consent of the Purchaser, which consent shall not be unreasonably delayed or withheld. (d) The Company shall, as promptly as practicable after the date of this Agreement, (i) complete the preparation of the Offers to Purchase, together with related letters of transmittal and similar ancillary agreements (such documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Tender Offer Documents"), relating to each Tender Offer and (ii) disseminate to the record holders of the 9 5/8% Notes and 9 1/4% Notes and, to the extent known by the Company, the beneficial owners thereof (collectively, the "Noteholders"), the Tender Offer Documents relating to the applicable Tender Offer; provided, however, that prior to the dissemination thereof, the Company shall consult with the Purchaser with respect to all of the Tender Offer Documents and shall afford the Purchaser reasonable opportunity to comment thereon. The Tender Offer Documents will comply with all Applicable Laws and the Company shall make all filings or obtain all consents required under Applicable Law with respect thereto. The Purchaser shall provide the Company with any information for inclusion in the Tender Offer Documents which may be required under Applicable Laws and which is reasonably requested by the Company. If at any time prior to the acceptance of the 9 5/8% Notes or 9 1/4% Notes pursuant to the Tender Offers, any event should occur that is required by Applicable Law to be set forth in an amendment of, or a supplement to, any of the Tender Offer Documents, the Company will prepare and disseminate such amendment or supplement; provided, however, that prior to such dissemination, the Company shall consult with the Purchaser with respect to such amendment or supplement and shall afford the Purchaser reasonable opportunity to comment thereon. The Company will notify the Purchaser at least three (3) Business Days prior to the mailing of any amendment or supplement to the Tender Offer Documents to the Noteholders. 55 (e) With respect to each of the 9 5/8% Notes and 9 1/4% Notes, at such time as the Company receives Note Consents from Noteholders holding at least a majority of the aggregate principal amount of each such series entitled to vote thereon, the Company agrees to execute, and to cause all of the guarantors that are a party to the indenture governing such notes (the "Applicable Indenture") to execute, and will use reasonable best efforts to cause the trustee under the Applicable Indenture to execute, a supplemental indenture (a "Supplemental Indenture") in order to give effect to the applicable Proposed Amendments; provided, however, that notwithstanding the fact that any Supplemental Indenture will become effective upon such execution, the Proposed Amendments set forth therein will not become operative unless and until all conditions to such Tender Offer have been satisfied or waived by the Company and the Company accepts on the Closing Date the 9 5/8% Notes or 9 1/4% Notes, as applicable, (and related Notes Consents) validly tendered and not theretofore validly withdrawn for purchase and payment pursuant to such Tender Offer. In such event, the parties hereto agree, and the Tender Offer Documents will provide, that the Proposed Amendments will be deemed operative as of immediately prior to such acceptance for payment on the Closing Date, and the Company will thereafter be obligated to pay all Tender Offer Consideration and Consent Payments in accordance with the terms of the relevant Offer to Purchase. (f) If at any time prior to the Closing Date any information should be discovered by any party hereto, which should be set forth in an amendment or supplement to any Tender Offer Documents mailed to any Noteholder so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and, to the extent required by Applicable Law, the Company shall promptly prepare an appropriate amendment or supplement describing such information, and, if required, file such amendment or supplement with the SEC or disseminate such amendment or supplement to the applicable Noteholders. (g) If the Notes Consent Condition shall not have been satisfied by the Closing Date with respect to either or both of the 9 5/8% Notes or the 9 1/4% Notes, then, at the Purchaser's election and provided the Purchaser complies with subsection (h) of this Section 6.11, on the Closing Date the Company (i) shall irrevocably deposit with the applicable trustee the amount required to satisfy the applicable "covenant defeasance" condition of the 9 5/8% Notes or the 9 1/4% Notes, as applicable, and (ii) shall comply with all other conditions to a "covenant defeasance" that are capable of being satisfied by the Closing Date (a "Note Defeasance"). (h) The Purchaser shall take any and all necessary action to provide, or cause to be provided, to the Company at the Closing funds in an amount equal to the Closing Date Indebtedness attributable to the 9 5/8% Notes or 9 1/4% Notes, as applicable, validly tendered and not theretofore validly withdrawn pursuant to the relevant Tender Offer, which funds shall be used by the Company, together with other funds available to the Company, to consummate the Tender Offers and/or any required Note Defeasance on the Closing Date, provided that the conditions to the consummation of the Closing have been satisfied or waived. 56 (i) Each of the Significant Stockholders hereby agree to tender all of the Notes held by them in the Tender Offers and to cause each of their respective Affiliates (provided that the Lehman Stockholders will not be so obligated with respect to Lehman Brothers Inc. or any Affiliates of Lehman Brothers Inc. other than the Lehman Stockholders) to tender all of the Notes held by them in the Tender Offers. SECTION 6.12. ESTOPPEL CERTIFICATES. The Company shall exercise commercially reasonable efforts to deliver to the Purchaser at the Closing an estoppel certificate, executed by each landlord under the Real Property Leases and substantially in the form attached hereto as Exhibit N or in the form required under the applicable Real Property Lease. To the extent an estoppel certificate is delivered to the Purchaser with respect to a Real Property Lease, any representations and warranties of the Company or its Subsidiaries hereunder relating to such Real Property Lease that are specifically set forth in the applicable estoppel certificate shall no longer be required to be made by the Company or its Subsidiaries hereunder with respect to the matters covered by such estoppel certificate and such representations and warranties shall, to such extent (but only to such extent), be deemed to be null and void and of no force or effect. If obtained, such estoppel certificates shall not disclose any information relating to the applicable Real Property Lease which would, individually or in the aggregate, have a Material Adverse Effect. SECTION 6.13. CERTAIN TAX MATTERS. (a) To the extent permitted by Applicable Law, the parties hereto agree to cause state and local Tax periods of the Company and its Subsidiaries to be closed at the close of business on the Closing Date. The Purchaser agrees that, as of the day following the Closing Date, the Company shall become a member of the "affiliated group" of corporations of which the Purchaser is a member, as defined in Code Section 1504(a) (the "Purchaser Tax Group"), and shall be included in a federal consolidated income Tax Return that will be filed by such affiliated group for a taxable period that will include the day following the Closing Date. The Purchaser shall timely file or cause to be timely filed when due all Tax Returns of the Company and its Subsidiaries that are required to be filed after the Closing Date (including, without limitation, a federal income Tax Return for the Company and its Subsidiaries for the taxable period ending on the Closing Date) and the Purchaser shall pay or cause to be paid all Taxes shown as due on such Tax Returns (subject in all cases to Section 9.3). All Straddle Period Tax Returns and all Tax Returns relating to periods ending on or before the Closing Date that are prepared by the Purchaser pursuant to this Section 6.13 shall be prepared in a manner consistent with past practice. The Purchaser will not permit the Company and its Subsidiaries to treat the Subject Transactions as being properly allocable to the portion of the Closing Date occurring after the Closing or as occurring after the Closing Date pursuant to the "Next Day Rule" under Treasury Regulations Section 1.1502-76(b)(1)(ii)(B). The Tax Returns described in the second preceding sentence shall be submitted to the Representatives no later than fifteen (15) Business Days prior to the due date and filing thereof for review and approval of the Representatives. The Representatives shall respond in writing to the Purchaser with any comments within five (5) Business Days of receiving the draft Tax Return(s). The Representatives and the Purchaser shall consult with each other and attempt in good faith to resolve any issues arising as a result of such Tax Returns and, if they are unable to do so, the disputed items shall be resolved (within a 57 reasonable time, taking into account the deadline for filing such Tax Return) by an internationally recognized independent accounting firm chosen by and mutually agreeable to the Purchaser and the Representatives. Upon resolution of all such items, the relevant Tax Return shall be timely filed on that basis. All Straddle Period Tax Returns and all Tax Returns relating to periods ending on or before the Closing Date that are prepared by the Purchaser pursuant to this Section 6.13 shall be prepared and filed as soon as practicable (but in no event after the due date of such Tax Return, including any extension thereof). The Purchaser shall, upon the Representatives' written request, prepare and prosecute a claim or suit for a refund of or reduction in Taxes for any taxable period, provided that the Significant Stockholders shall pay all reasonable expenses in connection with the preparation and prosecution of such claim or suit. The Purchaser shall not file any amended Tax Return for any period of the Company and its Subsidiaries ending on or prior to the Closing Date or for the Straddle Period without the prior written consent of the Representatives (which consent shall not be unreasonably delayed or withheld). (b) The Purchaser, the Stockholders, the Company and each of their respective Subsidiaries shall reasonably cooperate, and shall cause their respective Affiliates and such parties' respective directors, officers, employees, agents, auditors and representatives reasonably to cooperate, in preparing and filing all Tax Returns and in resolving all disputes and audits with respect to all taxable periods relating to Taxes, including maintaining and making available to each other all records necessary in connection with Taxes. (c) For purposes of this Section 6.13, whenever it is necessary to determine the liability for Taxes of the Company and its Subsidiaries for a Straddle Period, the determination of the Taxes for the portion of the Straddle Period ending on and including, and the portion of the Straddle Period beginning after, the Closing Date shall be determined by assuming that the Straddle Period consisted of two taxable years or periods, one which ended at the close of the Closing Date and the other which began at the beginning of the day following the Closing Date, and items of income, gain, deduction, loss or credit, and state and local apportionment factors of the Company and its Subsidiaries for the Straddle Period shall be allocated between such two taxable years or periods on a "closing of the books basis" by assuming that the books of the Company and its Subsidiaries were closed at the end of the Closing Date. However, (A) exemptions, allowances or deductions that are calculated on an annual basis, such as the deduction for depreciation and (B) periodic taxes such real and personal property taxes shall be apportioned ratably between such periods on a daily basis. ARTICLE VII. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO CLOSE The obligations of the Purchaser under this Agreement to consummate the Closing are subject to the satisfaction on or prior to the Closing of the following conditions, any one or more of which may be waived by it to the extent permitted by law: 58 SECTION 7.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in Article III and Article IV of this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered on the Closing Date by the Company or any of the Stockholders pursuant hereto shall be true and correct on the date hereof and as of the Closing Date, except that any such representations and warranties that expressly relate to a specified date shall be true and correct only as of such date, in each case, except where the failure to be so true and correct (without giving effect to any limitation or qualification as to "materiality" (including the word "material") or "Material Adverse Effect" or words of similar import set forth herein or therein) would not, individually or in the aggregate, have a Material Adverse Effect. The Company and each of the Stockholders shall have delivered to the Purchaser a certificate to the foregoing effect (in respect of the Company's or such Stockholder's representations and warranties), dated the Closing Date and signed by the Company or such Stockholder. SECTION 7.2. COMPLIANCE WITH COVENANTS. The Company and the Stockholders shall have complied in all material respects with, or performed in all material respects in accordance with the terms of, their respective covenants contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered on the Closing Date by the Company or any of the Stockholders pursuant hereto to be complied with or performed prior to the Closing Date. The Company and each of the Stockholders shall have delivered to the Purchaser a certificate to the foregoing effect (in respect of the Company's or such Stockholder's covenants), dated the Closing Date and signed by the Company or such Stockholder. SECTION 7.3. GOVERNMENTAL AND REGULATORY CONSENTS AND APPROVALS. (a) All Permits required by the Purchaser, the Company or any of its Subsidiaries, or any of the Stockholders, from the Government Entities listed on Exhibit G hereto shall have been obtained and shall be in full force and effect. (b) The waiting period prescribed by the HSR Act or any competition law or similar statute or regulation of any foreign jurisdiction shall have terminated or expired, and any other governmental or regulatory notices required in order to consummate the Subject Transactions shall have been made (and any applicable waiting periods shall have expired or been terminated in accordance with Applicable Law) and all governmental approvals required shall have been received (and no such approvals shall contain any materially burdensome requirement on the Company or the Purchaser or its Affiliates). Notwithstanding the foregoing, the condition set forth in this Section 7.3(b) shall be deemed satisfied with respect to Brazil upon the making by the Company of any required filings with Brazilian Government Entities. SECTION 7.4. INJUNCTION. There shall not be in effect any judgment, order, injunction or decree of any court of competent jurisdiction enjoining the consummation of the Subject Transactions. 59 SECTION 7.5. MATERIALITY OF CONDITIONS. Notwithstanding anything contained herein, no condition involving performance of agreements by the Company or any of the Stockholders (other than those in Article II) as of the Closing shall be deemed not fulfilled, and the Purchaser shall not be entitled to fail to consummate the Subject Transactions or terminate this Agreement on such basis, if the respects in which such agreements have not been performed, in the aggregate, would not have a Material Adverse Effect. SECTION 7.6. FINANCING. All of the conditions to the Finance Parties' obligations to provide the financing described in the Financing Documents shall be satisfied or waived by the party entitled to waive the same, other than those conditions described in the following paragraphs of Exhibit D to the Commitment Letter included in the Debt Financing Documents, in each case to the extent such paragraph is applicable to the Purchaser and the other entities that are, as of immediately prior to the Closing, Affiliates of the Purchaser: paragraph (a); paragraph (b); paragraph (c), but only in the event that the failure to satisfy such paragraph (c) is the result of a breach by Purchaser or any of its foregoing Affiliates of its obligations hereunder, under the Financing Documents or under any Ancillary Agreement; paragraph (f); paragraph (g)(ii), but only in the event that the failure to satisfy such paragraph (g)(ii) is the result of a breach by Purchaser or any of its foregoing Affiliates of its obligations hereunder, under the Financing Documents or under any Ancillary Agreement; paragraph (i), but only in the event that the failure to satisfy such paragraph (i) is the result of a breach by Purchaser or any of its foregoing Affiliates of its obligations hereunder, under the Financing Documents or under any Ancillary Agreement; paragraph (j); paragraph (k); paragraph (l); and paragraph (n). SECTION 7.7. NOTES SATISFACTION CONDITION; INDEBTEDNESS AND ENCUMBRANCES. (a) The Note Satisfaction Condition shall have been satisfied. (b) The Company shall have delivered to the Purchaser evidence reasonably satisfactory to the Purchaser and the Finance Parties demonstrating that except for (i) such of the 9 5/8% Notes and/or 9 1/4% Notes as shall remain outstanding after completion of the Tender Offers, (ii) the Financing or (iii) as otherwise set forth in Schedule 7.7, neither the Company nor any of its Subsidiaries will have any Indebtedness outstanding upon consummation of the Subject Transactions and all Encumbrances on the Assets of the Company or any of its Subsidiaries securing payment for any Indebtedness will be terminated prior to or upon the consummation of the Subject Transactions. SECTION 7.8. DOCUMENTS. (a) The Purchaser shall have received (i) certificates, with appropriate transfer stamps, if any, affixed thereto, evidencing all of the shares of Common Stock duly endorsed for transfer to the Purchaser with appropriate stock powers duly endorsed in blank or accompanied by other duly executed instruments of transfer, in each case transferring title to such shares of Common Stock to the Purchaser free and clear of all Encumbrances, (ii) Option Termination 60 Agreements duly executed by each Optionholder outstanding on the Closing Date and (iii) counterparts of each of the Ancillary Agreements (other than the Employment Agreements) executed by each of the Stockholders and such other Persons party thereto (other than the Purchaser). (b) All documents and instruments of transfer delivered to the Purchaser at the Closing shall be in form and substance reasonably satisfactory to the Purchaser and its counsel, and shall be legally sufficient to consummate the Subject Transactions. (c) The Purchaser shall have received a copy of (i) the certificates of incorporation, as amended (or similar organizational documents), of the Company and each Subsidiary, certified by the secretary of state (or other relevant authority) of the relevant jurisdiction, as of a date not unreasonably prior to the Closing Date and accompanied by a certificate of the Secretary or Assistant Secretary of each such entity, dated as of the Closing Date, stating that no amendments have been made to such certificate of incorporation (or similar document) since such date, and (ii) the by-laws (or similar organizational documents) of the Company and of each Subsidiary, certified by the Secretary or Assistant Secretary of each such entity. (d) The Purchaser shall have received good standing certificates for the Company and for each Subsidiary from the secretary of state (or other relevant authority) of the jurisdiction in which each such entity is incorporated or organized and from the secretary of state in each other jurisdiction in which any of the Company or any Subsidiary is qualified to do business as a foreign corporation, in each case dated as of a date not unreasonably prior to the Closing Date. SECTION 7.9. OPINIONS OF COUNSEL TO THE COMPANY. The Purchaser shall have been furnished with an opinion of Willkie Farr & Gallagher LLP, external counsel to the Company, Ronald H. Kisner, Esq., General Counsel of the Company, Emma Bailey, Esq., Vice President and Associate General Counsel of Lehman Brothers Inc., and Willkie Farr & Gallagher LLP, counsel to The Bernard L. Schwartz 2004 Grantor Retained Annuity Trust, each dated as of the Closing Date, covering the matters set forth on Exhibit H-I, Exhibit H-II, Exhibit H-III, and Exhibit H-IV respectively, and which provide that the Finance Parties (and their respective successors and assigns) are entitled to rely upon such opinions. SECTION 7.10. TERMINATION OF CERTAIN AFFILIATE AGREEMENTS. Each of the agreements listed on Exhibit I hereto shall have been terminated and all costs, fees and expenses of the Company and its Subsidiaries incurred in connection therewith and not paid prior to the determination of the Closing Date Cash Balance shall be included in the determination of Company Transaction Expenses to be deducted from the Cash Purchase Price on the Closing Date. 61 SECTION 7.11. NO PLAN TERMINATION. No Pension Plan that is sponsored by, or with respect to which a contribution is required of, the Company, any Subsidiary or any ERISA Affiliate shall, at the initiation of the PBGC or otherwise, have been terminated pursuant to Title IV of ERISA, no actions or proceedings for the termination of any such Pension Plan shall have been initiated or be pending and neither the Company, any subsidiary nor any ERISA Affiliate shall have authorized or agreed to any such termination. SECTION 7.12. CONFIRMATION LETTERS. The Company shall have delivered to the Purchaser evidence reasonably satisfactory to the Purchaser demonstrating that all Company Transaction Expenses and Defeasance Costs will be paid in full concurrent with the Closing (or arrangements for the payment thereof reasonably satisfactory to the Purchaser shall have been made) and that each of the Persons to whom Company Transaction Expenses or Defeasance Costs are to be paid shall have delivered to the Company written confirmation (in form and substance reasonably satisfactory to the Purchaser) that all amounts owed to such Persons for Company Transaction Expenses and Defeasance Costs have been paid in full or can be paid concurrent with the Closing and confirming that none of the Company, any of its Subsidiaries and the Purchaser will have any further liability to such Person for any Company Transaction Expenses or Defeasance Costs (including any such Company Transactions Expenses or Defeasance Costs that may be incurred after the Closing) other than for services rendered after the Closing at the request of the Purchaser, the Company or any of its Subsidiaries made at any time after the Closing. ARTICLE VIII. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE STOCKHOLDERS TO CLOSE The obligations of each Stockholder under this Agreement to consummate the Closing are subject to the satisfaction on or prior to the Closing of the following conditions, any one or more of which may be waived by the Significant Stockholders, acting on behalf of all of the Stockholders, to the extent permitted by law: SECTION 8.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in Article V of this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered on the Closing Date by the Purchaser pursuant hereto shall be true and correct on the date hereof and as of the Closing Date, except that any such representations and warranties that expressly relate to a specified date shall be true and correct only as of such date, in each case, except where the failure to be so true and correct (without giving effect to any limitation or qualification as to "materiality" (including the word "material") or "Purchaser Material Adverse Effect" or words of similar import set forth herein or therein) would not, individually or in the aggregate, have a Purchaser Material Adverse Effect. 62 SECTION 8.2. COMPLIANCE WITH COVENANTS. The Purchaser shall have complied in all material respects with, or performed in all material respects in accordance with the terms of, its covenants contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered on the Closing Date by the Purchaser pursuant hereto to be complied with or performed prior to the Closing Date. The Purchaser shall have delivered to the Representatives a certificate to the foregoing effect, dated the Closing Date and signed by a senior executive officer of the Purchaser. SECTION 8.3. GOVERNMENTAL AND REGULATORY CONSENTS AND APPROVALS. (a) All Permits required by the Purchaser, the Company or any of its Subsidiaries, or any of the Stockholders, from the Government Entities listed on Exhibit G hereto shall have been obtained and shall be in full force and effect. (b) The waiting period prescribed by the HSR Act or any competition law or similar statute or regulation of any foreign jurisdiction shall have terminated or expired, and any other governmental or regulatory notices required in order to consummate the Subject Transactions shall have been made (and any applicable waiting periods shall have expired or been terminated in accordance with Applicable Law) and all governmental approvals required shall have been received (and no such approvals shall contain any materially burdensome requirement on any Securityholder). Notwithstanding the foregoing, the condition set forth in this Section 8.3(b) shall be deemed satisfied with respect to Brazil upon the making by the Purchaser of any required filings with Brazilian Government Entities. SECTION 8.4. CASH PURCHASE PRICE. Subject to the satisfaction of the conditions specified in Sections 2.1 and 2.3 and in Article VIII, the Purchaser shall have paid to each Stockholder and each Optionholder an amount in cash equal to such Person's portion of the Cash Purchase Price as provided in Sections 2.1 and 2.2 of this Agreement and shall have paid the Indemnity Escrow Fund to the Indemnity Escrow Agent. SECTION 8.5. INJUNCTION. There shall not be in effect any judgment, order, injunction, or decree of any court of competent jurisdiction, enjoining the consummation of the Subject Transactions. SECTION 8.6. MATERIALITY OF CONDITIONS. Notwithstanding anything contained herein, no condition involving performance of agreements by the Purchaser (other than those in Article II) as of the Closing shall be deemed not fulfilled, and none of the Stockholders shall be entitled to fail to consummate the Subject Transactions or terminate this Agreement on such basis, if the respects in which such agreements have not been performed, in the aggregate, would not have a Purchaser Material Adverse Effect. 63 SECTION 8.7. DOCUMENTS. (a) The Representatives shall have received counterparts of each of the Ancillary Agreements (other than the Employment Agreements) executed by the Purchaser and the Purchaser shall have executed and delivered the Defeasance Cost Tax Note. (b) All documents and instruments of transfer delivered to the Stockholders at the Closing shall be in form and substance reasonably satisfactory to the Representatives and their counsel, and shall be legally sufficient to consummate the Subject Transactions. (c) The Representatives shall have received a copy of (i) the certificate of incorporation, as amended (or similar organizational document), of the Purchaser, certified by the secretary of state (or other relevant authority) of the relevant jurisdiction, as of a date not unreasonably prior to the Closing Date and accompanied by a certificate of the Secretary or Assistant Secretary of such entity, dated as of the Closing Date, stating that no amendments have been made to such certificate of incorporation (or similar document) since such date, and (ii) the by-laws (or similar organizational document) of such entity, certified by the Secretary or Assistant Secretary of such entity. (d) The Representatives shall have received good standing certificates for the Purchaser from the secretary of state (or other relevant authority) of the jurisdiction in which such entity is incorporated or organized and from the secretary of state in each other jurisdiction in which such entity is qualified to do business as a foreign corporation, in each case dated as of a date not unreasonably prior to the Closing Date. SECTION 8.8. OPINION OF COUNSEL TO THE PURCHASER. The Representatives shall have been furnished with an opinion of Gibson, Dunn & Crutcher LLP, dated as of the Closing Date, covering the matters set forth on Exhibit K hereto. ARTICLE IX. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION SECTION 9.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations, warranties, covenants and agreements set forth in this Agreement, the Ancillary Agreements or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the Subject Transactions shall survive the Closing and the consummation of the Subject Transactions. Notwithstanding the foregoing, no Person shall be entitled to recover for any Losses pursuant to this Agreement unless written notice of a claim therefor (describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim) is delivered to the applicable party on or before the Applicable Limitation Date with respect to such claim, irrespective of whether the subject matter of such claim shall have occurred before or after the Closing Date. For purposes of this Agreement, the term "Applicable Limitation Date" shall mean the date that is eighteen (18) months after the Closing Date; provided, however, that (i) with respect to any Loss arising from 64 (A) a breach of the representations and warranties of the Company, the Stockholders or the Purchaser (as applicable) set forth in Sections 3.1(a), 3.1(c), 3.2, 3.3, 3.21, 4.1, 4.2, 4.3, 4.4. 4.5, 4.6, 5.1, 5.2, 5.3, 5.4, 5.5, 5.6, 5.8, 5.9 and 5.10 (collectively, the "Fundamental Representations and Warranties") or (B) fraud or an intentional misrepresentation or an intentional breach or (C) a breach after the Closing Date of any covenant or agreement that by its terms requires compliance or performance at or after the Closing Date, the Applicable Limitation Date shall be the date of expiration of the applicable statute of limitations with respect thereto; (ii) with respect to any Loss arising from a breach of the representations and warranties set forth in Section 3.14, the Applicable Limitation Date shall be thirty (30) days after the date of expiration of the statute of limitations for the assessment and collection of the applicable Tax; and (iii) with respect to the indemnification obligations of the Significant Stockholders under Section 9.2(a)(iii), the Applicable Limitation Date shall be the date that is six years and six months after the Closing Date. Neither the Stockholders nor the Purchaser shall have any liability whatsoever with respect to any such representations and warranties unless a claim is made hereunder prior to the Applicable Limitation Date, in which case such representation and warranty shall survive as to such claim until such claim has been finally resolved. SECTION 9.2. INDEMNIFICATION BY THE SIGNIFICANT STOCKHOLDERS AND THE STOCKHOLDERS. (a) If the Closing occurs, then subject to Section 9.1 the Significant Stockholders shall save, defend, indemnify and hold harmless the Purchaser and its Affiliates (including the Company and its Subsidiaries) and their respective officers, directors, employees, attorneys and agents and the successors and assigns of each of the foregoing (collectively, the "Purchaser Indemnified Parties") from and against any and all losses, damages, liabilities, claims, interest, awards, judgments, penalties, costs and expenses (including attorneys' fees, costs and other out-of-pocket expenses incurred in investigating, prosecuting, preparing for the prosecution or defense of or defending the foregoing) (hereinafter collectively, "Losses"), asserted against, incurred, sustained or suffered by any of the foregoing as a result of or arising out of: (i) any pre-Closing breach of any representation or warranty made by the Company contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered by the Company on the Closing Date pursuant hereto or thereto; (ii) any pre-Closing breach of any covenant or agreement by the Company contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered by the Company on the Closing Date pursuant hereto or thereto (including as a result of the action or failure to act of the Company or any of its Subsidiaries); and (iii) any matter set forth on Schedule 9.2(a)(iii) to this Agreement. 65 (b) If the Closing occurs, then subject to Section 9.1, each of the Stockholders shall, severally and not jointly, save, defend, indemnify and hold harmless the Purchaser Indemnified Parties from and against any and all Losses asserted against, incurred, sustained or suffered by any of the foregoing as a result of or arising out of: (i) any representation or warranty made by such Stockholder contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered by such Stockholder on the Closing Date pursuant hereto or thereto; and (ii) any breach of any covenant or agreement by such Stockholder contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered by such Stockholder on the Closing Date pursuant hereto or thereto. (c) In the case of any claim for indemnity pursuant to Section 9.2(a), the obligations of the Significant Stockholders shall be several and not joint, which shall mean that a Significant Stockholder shall be liable only to the extent of such Significant Stockholder's Pro Rata Portion of such Loss. The Purchaser Indemnified Parties' remedy for any indemnification of Losses under Section 9.2(b) above may be satisfied by proceeding only against the Stockholder committing such breach and, in the case of any Significant Stockholder, the Sub-Account (as defined in the Indemnity Escrow Agreement) of such Significant Stockholder in accordance with the terms of the Indemnity Escrow Agreement. SECTION 9.3. LIMITATIONS ON INDEMNIFICATION BY THE SIGNIFICANT STOCKHOLDERS AND THE STOCKHOLDERS. The indemnification provided for in Section 9.2 above is subject to the following covenants and limitations: (a) The aggregate amount of all payments made by any Significant Stockholder in satisfaction of claims for indemnification pursuant to Section 9.2(a) shall not exceed such Significant Stockholder's Pro Rata Portion of the Significant Stockholders' Cap; provided, however, that the Significant Stockholders' Cap shall not apply with respect to any Losses resulting from or arising out of breaches of any Fundamental Representations and Warranties and such Losses shall not be limited by or count towards satisfaction of the Significant Stockholders' Cap; and provided, further, that the aggregate amount of all payments made by any Significant Stockholder or Stockholder in satisfaction of claims for indemnification pursuant to Sections 9.2(a) and 9.2(b) (including with respect to any Losses resulting from breaches of any Fundamental Representations and Warranties) shall not exceed such Significant Stockholder's or Stockholder's Pro Rata Portion of the sum of the Cash Purchase Price and the Defeasance Costs Tax Note paid to it pursuant to Section 2.2 or 2.3. (b) The Significant Stockholders shall not be liable to indemnify any Purchaser Indemnified Parties pursuant to Section 9.2(a) unless and until the Purchaser Indemnified Parties have collectively suffered aggregate Losses otherwise indemnifiable pursuant to such Section 9.2(a) in excess of a Five Million Dollar ($5,000,000) aggregate 66 deductible (the "Deductible") (at which point, subject to the other limitations herein, the Significant Stockholders will be liable to the Purchaser Indemnified Parties for their respective Pro Rata Portions of all Losses in excess of the Deductible); provided, however, that the Deductible shall not apply with respect to (i) any Losses resulting from or arising out of breaches of any Fundamental Representations and Warranties; (ii) the representations and warranties set forth in Section 3.14; and (iii) the indemnification obligation of the Significant Stockholders under Section 9.2(a)(iii); and provided, further, that where the aggregate amount of Losses (other than Losses related to Section 9.2(a)(iii)) arising out of a claim or series of related claims of a breach of a representation, warranty, covenant or agreement does not exceed Ten Thousand Dollars ($10,000), such claim or series of related claims shall not count as Losses for purposes of Section 9.2(a) hereof. (c) Any payment made by a Significant Stockholder or a Stockholder to a Purchaser Indemnified Party pursuant to Section 9.2 in respect of any indemnifiable event shall be net of any insurance or other proceeds recovered by such Purchaser Indemnified Party in respect of such claim. In the event that an insurance or other recovery is received by a Purchaser Indemnified Party with respect to any Loss for which a Purchaser Indemnified Party has previously been indemnified hereunder, then the Purchaser Indemnified Parties shall promptly make a refund to the relevant Significant Stockholder (or the Indemnity Escrow Agent) or the relevant Stockholder, as applicable, in an amount equal to the lesser of (i) the total amount of such insurance recovery (net of collection expenses), and (ii) the amount previously paid by the Significant Stockholder or Stockholder as indemnification for such Loss. (d) If the indemnification obligation under Section 9.2 arises in respect of any indemnifiable event (i) for which a Purchaser Indemnified Party receives indemnification from the Significant Stockholders or the Stockholders, as applicable, and (ii) which results in any Tax benefit to such Purchaser Indemnified Party for any taxable period (or portion thereof) beginning and ending after the Closing Date which would not, but for such indemnifiable event, be available, such Purchaser Indemnified Party shall pay, or shall cause to be paid, to the relevant Significant Stockholders or Stockholders (or the Indemnity Escrow Agent) an amount equal to the actual Tax savings produced by such Tax benefit reduced by the amount of any Tax detriment to such Purchaser Indemnified Party as a result of the receipt of such indemnification. Tax benefits and detriments shall be taken into account as and when actually realized. The amount of any such Tax saving for any taxable period shall be the amount of the reduction in Taxes payable to a Tax authority by such Purchaser Indemnified Party with respect to such Tax period (net of any Tax detriment resulting from the receipt of the indemnity payment) as compared to the Taxes that would have been payable to a Tax authority by such Purchaser Indemnified Party with respect to such Tax period in the absence of such Tax benefit. (e) The Significant Stockholders shall not be obligated to indemnify any Purchaser Indemnified Party with respect to any Loss to the extent that a specific accrual or reserve for the amount of such Loss was reflected or reserved against in the Financial Statements included in the Company Report most recently filed by the Company with SEC before the date hereof. 67 SECTION 9.4. INDEMNIFICATION BY THE PURCHASER INDEMNITORS. If the Closing occurs, the Purchaser and the Company (including its Subsidiaries) (collectively, the "Purchaser Indemnitors") shall save, defend, indemnify and hold harmless the Securityholders and their respective Affiliates and their respective, officers, directors, employees, attorneys and agents and the successors and assigns of each of the foregoing (collectively, the "Securityholder Parties") from and against any and all Losses asserted against, incurred, sustained or suffered by any of the foregoing as a result of or arising out of: (a) any breach of any representation or warranty made by the Purchaser contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered by the Purchaser on the Closing Date pursuant hereto; (b) any breach (including as a result of the action or failure to act of the Purchaser) of any covenant or agreement by the Purchaser contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered by the Purchaser on the Closing Date pursuant hereto; and (c) the conduct of business by the Purchaser, the Company and its Subsidiaries after the Closing Date, including without limitation, any claim for death, injury or property damage arising from the sale of products manufactured by the Company or any of its Subsidiaries after the Closing Date or attributable to any warranties, representations or commitments with respect to products manufactured by the Company or any of its Subsidiaries after the Closing Date and claims under Environmental Laws and for Taxes, in each case arising out of the conduct of business by the Purchaser, the Company and its Subsidiaries after the Closing Date. SECTION 9.5. LIMITATIONS ON INDEMNIFICATION BY THE PURCHASER INDEMNITORS. The indemnification provided for in Section 9.4 above is subject to the following limitations: (a) The aggregate amount of all payments made by the Purchaser Indemnitors in satisfaction of claims for indemnification pursuant to Section 9.4 shall not exceed Thirty Million Dollars ($30,000,000) (the "Purchaser's Cap"); provided, however, that the Purchaser's Cap shall not apply with respect to any Losses (i) related to any indemnification claim brought under Section 9.4(c), (ii) payments due under this Agreement including payments due under Section 2.3 and Section 6.13 or (iii) resulting from or arising out of breaches of any Fundamental Representations and Warranties and such Losses shall not be limited by or count towards satisfaction of the Purchaser's Cap; and provided, further, that the aggregate amount of all payments made by the Purchaser Indemnitors in satisfaction of claims for indemnification pursuant to Sections 9.4 (including with respect to Section 9.4(c) and/or any Losses resulting from breaches of any Fundamental Representations and Warranties) shall not exceed the sum of the Cash Purchase Price and the amount of the Defeasance Costs Tax Note. (b) Except for any indemnification claim brought under Section 9.4(c), the Purchaser Indemnitors shall not be liable to indemnify any Securityholder Party pursuant to Section 9.4 where the aggregate amount of Losses arising out of a claim or series of related 68 claims of a breach of a representation or warranty does not exceed Ten Thousand Dollars ($10,000), and no such claim or series of related claims shall not count as Losses for purposes of Section 9.4 hereof. (c) Any payment made by the Purchaser Indemnitors to a Securityholder Party pursuant to Section 9.4 in respect of any indemnifiable event shall be net of any insurance proceeds recovered by such Securityholder Party in respect of such claim. In the event that an insurance recovery is received by a Securityholder Party with respect to any Loss for which such Securityholder Party has previously been indemnified hereunder, then such Securityholder Party shall promptly make a refund to the Purchaser Indemnitors in an amount equal to the lesser of (i) the total amount of such insurance recovery (net of collection expenses), and (ii) the amount previously paid by the Purchaser Indemnitors to such Securityholder Party as indemnification for such Loss. (d) If the Purchaser Indemnitors' indemnification obligation under Section 9.4 arises in respect of any indemnifiable event (i) for which a Securityholder Party receives indemnification from the Purchaser Indemnitors and (ii) which results in any Tax benefit to such Securityholder Party for any taxable period which would not, but for such indemnifiable event, be available, such Securityholder Party shall pay, or shall cause to be paid, to the Purchaser Indemnitors an amount equal to the actual Tax savings produced by such Tax benefit reduced by the amount of any Tax detriment to such Securityholder Party as a result of the receipt of such indemnification. Tax benefits and detriments shall be taken into account as and when actually realized. The amount of any such Tax saving for any taxable period shall be the amount of the reduction in Taxes payable to a Tax authority by such Securityholder Party with respect to such Tax period (net of any Tax detriment resulting from the receipt of the indemnity payment) as compared to the Taxes that would have been payable to a Tax authority by such Securityholder Party with respect to such Tax period in the absence of such Tax benefit. SECTION 9.6. PROCEDURES. (a) In order for a Securityholder Party or Purchaser Indemnified Party (an "Indemnified Party") to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a Loss or a claim or demand made by any Person against the Indemnified Party (a "Third Party Claim"), such Indemnified Party shall deliver notice thereof to the party against whom indemnity is sought (the "Indemnifying Party") with reasonable promptness after receipt by such Indemnified Party of written notice of the Third Party Claim and shall provide the Indemnifying party with such information with respect thereto as the Indemnifying Party may reasonably request. The failure to provide such notice, however, shall not release the Indemnifying Party from any of its obligations under this Article IX except to the extent that the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or liability that it may have to the Indemnified Party pursuant to this Article IX. (b) If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party against the entirety of any Losses (subject to any rights to recovery or offset pursuant to Sections 9.3, 9.5 or 9.10) that may result from a Third Party Claim pursuant to the terms of this Agreement, the Indemnifying Party shall have the right, upon 69 written notice to the Indemnified Party within fifteen (15) Business Days of receipt of notice from the Indemnified Party of the commencement of such Third Party Claim, to assume the defense thereof at the expense of the Indemnifying Party (which expenses shall not be applied against any indemnity limitation herein) with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party. If the Indemnifying Party does not expressly elect to assume the defense of such Third Party Claim within the time period and otherwise in accordance with the first sentence of this Section 9.6(b), the Indemnified Party shall have the sole right to assume the defense of and to settle such Third Party Claim; provided, however, that the Indemnified Party (i) shall keep the Indemnifying Party reasonably apprised of material developments in any matter for which indemnification may be sought, (ii) shall give notice to the Indemnifying Party of pending settlement discussions and afford the Indemnifying Party a commercially reasonable opportunity to comment on any such pending settlement (provided that the Indemnified Party will not be required to obtain the consent of the Indemnifying Party to any such settlement) and (iii) shall allow the Indemnifying Party to monitor such action at its discretion and at its sole expense. The Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party all witnesses, pertinent records, materials and information in the Indemnifying Party's possession or under the Indemnifying Party's control relating thereto as is reasonably required by the Indemnified Party. If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party unless (i) the employment of such counsel shall have been specifically authorized in writing by the Indemnifying Party or (ii) the named parties to the Third Party Claim (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party reasonably determines that representation by counsel to the Indemnifying Party of both the Indemnifying Party and such Indemnified Party may present such counsel with a conflict of interest. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party shall, at the Indemnifying Party's expense, cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party all witnesses, pertinent records, materials and information in the Indemnified Party's possession or under the Indemnified Party's control relating thereto as is reasonably required by the Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party shall not admit any liability with respect to, or settle, compromise or discharge, or offer to settle, compromise or discharge, such Third Party Claim without the Indemnified Party's prior written consent (which shall not be unreasonably delayed or withheld); provided, however, that the Indemnified Party's consent shall not be required for any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms requires that the Indemnifying Party pay the full amount of the liability in connection therewith, that otherwise releases the Indemnified Party completely and with prejudice in connection with such Third Party Claim and that would not subject the Indemnified Party to any injunctive or other equitable relief (it being understood that the Indemnified Party shall have the sole discretion to determine whether to consent to any settlement, compromise or discharge that would subject the Indemnified Party to any injunctive or other equitable relief). (c) The Indemnifying Party shall not be entitled to require that any action be asserted or brought against any other Person before action is brought or claim is made against it hereunder by the Indemnified Party, and the Significant Stockholders shall have no right to, and 70 shall not, object to or protest the handling by a Purchaser Indemnified Party of any such claim or deny or dispute any claim for indemnification brought by the Purchaser Indemnified Parties under this Article IX on the basis of the assertion, prosecution or handling by a Purchaser Indemnified Party of any claim by Purchaser Indemnified Party against any such other Person. The Purchaser will, and will use its commercially reasonable efforts to cause the Purchaser Indemnified Parties to, and the Significant Stockholders will, reasonably cooperate, communicate and consult with each other with respect to any actions or claims brought against any other such third Person. (d) In any action where the Purchaser Indemnified Parties or the Securityholder Parties reasonably determine that there are claims or defenses available to such parties that are different from or in addition to those available to the party defending such action, such parties shall have the right to select separate legal counsel, at their sole cost and expense, to assert such claims or defenses or to otherwise participate in such action. (e) Notwithstanding the provisions of Section 11.4, each Indemnifying Party hereby consents to the nonexclusive jurisdiction of any court in which an action in respect of a Third Party Claim is brought against any Indemnified Party for purposes of any claim that an Indemnified Party may have under this Agreement with respect to such action or the matters alleged therein and agrees that process may be served on each Indemnifying Party with respect to such claim in accordance with the notice provisions set forth in Section 11.3 hereof. SECTION 9.7. REMEDIES NOT AFFECTED BY INVESTIGATION, DISCLOSURE OR KNOWLEDGE. No investigation conducted by or on behalf of any party at any time and no disclosure provided to or knowledge of any party with respect to any event, condition or circumstance that renders inaccurate any representation or warranty or reveals the occurrence of a breach of any covenant or agreement of any other party contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the Subject Transactions shall be deemed to be a waiver of any rights to indemnification or other remedy arising in connection therewith. SECTION 9.8. INDEMNITY ESCROW FUND. (a) Any indemnification to be provided by the Significant Stockholders to a Purchaser Indemnified Party under Section 9.2(a) shall be by recourse first to, and payable from the Indemnity Escrow Fund pursuant to the terms of the Indemnity Escrow Agreement, and then, subject to the limitations on aggregate liability for such claim, by cash payment from the Significant Stockholders; provided, however, that if the Purchaser Indemnified Parties are seeking indemnification based upon a breach of the Fundamental Representations and Warranties set forth in Sections 3.1(a), 3.1(c), 3.2, 3.3 or 3.21, the Purchaser Indemnified Parties shall have the right to elect to proceed simultaneously against the Indemnity Escrow Fund and any one or more Significant Stockholders directly, subject to the limitations set forth in this Agreement. 71 (b) Any indemnification to be provided by a Stockholder to a Purchaser Indemnified Party under Section 9.2(b) shall be by recourse directly against such Stockholder; provided, however, that (i) in the case of any claim against a Significant Stockholder under Section 9.2(b), the Purchaser Indemnified Party shall be entitled to assert a claim against such Significant Stockholder's Pro Rata Portion of the Indemnity Escrow Fund pursuant to the terms of the Indemnity Escrow Agreement, but no monies shall be paid in respect of such claim by the Indemnity Escrow Agent other than out of funds that would otherwise be released to such Significant Stockholder in accordance with the terms of the Indemnity Escrow Agreement. SECTION 9.9. EXCLUSIVE REMEDY; ADDITIONAL LIMITATIONS. (a) Except as otherwise expressly provided in this Agreement or any Ancillary Agreement, no party hereto nor any of its Affiliates nor any of their respective directors, officers, stockholders, partners (limited or general), employees, attorneys or agents, shall have any liability whatsoever, whether in tort or otherwise, in respect of this Agreement, any Ancillary Agreement or any schedule, certificate or other document delivered by any of them pursuant hereto or the Subject Transactions. (b) No party hereto shall have any liability under any provision of this Agreement, any Ancillary Agreement or otherwise for any punitive, incidental, consequential, special or indirect damages, including business interruption, loss of future revenue, profits or income, or loss of business reputation or opportunity, including, without limitation, any such damages relating to the breach or alleged breach of this Agreement, any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or in connection with the Subject Transactions. SECTION 9.10. SUBROGATION. (a) If a Purchaser Indemnified Party collects an indemnification payment from the Indemnity Escrow Fund with respect to a Loss for which a commercially reasonable claim against a Person other than the parties hereto is available, then the Significant Stockholders shall be subrogated to the claims and rights of action of such Purchaser Indemnified Party against such other Person to the extent of such indemnification payments hereunder. (b) In connection with the rights of the Significant Stockholders pursuant to this Section 9.10, the Purchaser shall, and shall cause the Company and its Subsidiaries to, reasonably cooperate with the Significant Stockholders in securing the subrogation rights of the Significant Stockholders set forth in this Section 9.10 and in pursuing claims for recovery. (c) None of the Purchaser nor any Purchaser Indemnified Party makes any representation or warranty hereunder to the Significant Stockholders regarding the availability or enforceability of the subrogation rights set forth in this Section 9.10. The Significant Stockholders acknowledge that third parties may have valid defenses to any such attempted subrogation. 72 SECTION 9.11. APPOINTMENT OF THE REPRESENTATIVES. (a) In order to efficiently administer the terms of Section 2.3 and the defense and/or settlement of any claims for indemnity by a Purchaser Indemnified Party pursuant to Section 9.2(a) ("Common Indemnification Claims"), Bernard L. Schwartz and Alan H. Washkowitz (the "Representatives"), are hereby appointed to serve as the representatives of the Securityholders. The Representatives shall have full power and authority to make, on behalf of all of the Securityholders, any and all decisions relating to the terms of Section 2.3 hereof and the defense and/or settlement of any Common Indemnification Claims for which any Purchaser Indemnified Party may claim to be entitled to indemnity pursuant to Section 9.2(a) hereof. All such decisions and actions by the Representatives shall be binding upon all of the Securityholders, and no Securityholder shall have the right to object to, dissent from, protest or otherwise contest the same. All fees, costs and expenses of the Representatives incurred by them in connection with its responsibilities as herein defined shall be reimbursed by the Securityholders in accordance with their respective portions of the Cash Purchase Price payable to them in accordance with Sections 2.2 and 2.3. (b) Each Securityholder agrees that (i) the provision of this Section 9.11 are independent and severable, are irrevocable and coupled with an interest and shall be enforceable notwithstanding any rights or remedies any Securityholder or the Purchaser may have in connection with the Subject Transactions, (ii) the remedy at law for any breach of the provisions of this Section 9.11 would be inadequate, (iii) any Securityholder or the Purchaser shall be entitled to temporary and permanent injunctive relief without the necessity of proving damages if such Securityholder or the Purchaser brings an action to enforce the provisions of this Section 9.11, and (iv) the provisions of this Section 9.11 shall be binding upon the successors, assigns, heirs and estates of each Securityholder. (c) Each Securityholder hereby (i) waives any claims such Securityholder may have or assert, including those that may arise in the future, against the Representatives, and any of their respective Affiliates, for any action or inaction taken or not taken by the Representatives in connection therewith, provided that such action or inaction is not taken in a manner that results in any Significant Stockholder paying a greater proportion of any claim for indemnity pursuant to Section 9.2(a) hereof than such Significant Stockholder's Pro Rata Portion thereof, and (ii) acknowledges and agrees that neither it nor any of its successors, assigns, heirs or estates nor any of their respective officers, directors, employees or Affiliates will have any claims or rights to contribution or indemnity from the Purchaser, the Company or any of its Subsidiaries with respect to any amounts paid by any of them pursuant to this Article IX. (d) Any notice or communication delivered by the Purchaser or the Company to the Representatives with respect to the administration of the terms of Section 2.3 or the defense and/or settlement of any claims for indemnity by a Purchaser Indemnified Party pursuant to Section 9.2(a) shall, as between the Purchaser and the Company, on the one hand, and the Securityholders, on the other, be deemed to have been delivered to all Securityholders. The Purchaser and the Company shall be entitled to rely exclusively upon any communication or writings given or executed by the Representatives in connection with any claims for indemnity (other than those claims arising under Section 9.2(b)) and shall not be liable in any manner whatsoever for any action taken or not taken in reliance upon the actions taken or not taken or 73 communications or writings given or executed by the Representatives. The Purchaser and the Company shall be entitled to disregard any notices or communications given or made by any Securityholder Party in connection with any claims for indemnity arising under Section 9.2(a) unless given or made through the Representatives. ARTICLE X. TERMINATION PRIOR TO CLOSING SECTION 10.1. TERMINATION OF AGREEMENT. This Agreement may be terminated: (a) at any time prior to the Closing, by the Purchaser or any of the Significant Stockholders in writing, if there shall be any order, writ, injunction or decree of any court or Government Entity binding on the Purchaser, the Company or any Stockholder, which prohibits or restrains the Purchaser, the Company or any of the Stockholders from consummating the Subject Transactions; provided, however, that the Purchaser, the Company and the Significant Stockholders, as the case may be, shall have used their reasonable best efforts to have any such order, writ, injunction or decree lifted; (b) at any time prior to the Closing, by the Purchaser or any of the Significant Stockholders in writing, if the Closing has not occurred on or prior to December 27, 2004; provided, however, that no such party hereto may terminate this Agreement pursuant to this Section 10.1(b) if such party (or, in the case of the Significant Stockholders, the Company) is in material violation or breach of its agreements, representations or warranties contained in this Agreement; (c) at any time prior to the Closing, by any of the Significant Stockholders in writing, if there has been a material violation or breach by the Purchaser of its agreements, covenants, representations or warranties contained in this Agreement, which violation or breach would result in the failure to satisfy one or more of the conditions set forth in Section 8.1 or Section 8.2 (subject to Section 8.6) and such violation or breach shall be incapable of being cured or, if capable of being cured, shall not have been cured within 30 days after written notice thereof shall have been given to the Purchaser in accordance with Section 11.3, and if the Company and the Stockholders are not then in material violation or breach of their agreements, covenants, representations or warranties contained in this Agreement; (d) at any time prior to the Closing, by the Purchaser in writing, if there has been a material violation or breach by the Company or any of the Stockholders of their respective agreements, covenants, representations or warranties contained in this Agreement, which violation or breach would result in the failure to satisfy one or more of the conditions set forth in Section 7.1 or Section 7.2 (subject to Section 7.5) and such violation or breach shall be incapable of being cured or, if capable of being cured, shall not have been cured within 30 days after written notice thereof shall have been given to the Company and the Significant Stockholders in accordance with Section 11.3, and if the Purchaser is not then in material 74 violation or breach of its agreements, covenants, representations or warranties contained in this Agreement; (e) at any time on or prior to the Closing Date, by mutual written consent of the Significant Stockholders and the Purchaser; or (f) on the Closing Date, (i) by the Purchaser in writing, if any of the conditions set forth in Article VII shall not have been satisfied on or before such date or (ii) by any of the Significant Stockholders in writing, if any of the conditions set forth in Article VIII shall not have been satisfied on or before such date; provided, however, that no such party hereto may terminate this Agreement pursuant to this Section 10.1(f) if such party (or, in the case of the Significant Stockholders, the Company) is in material violation or breach of its agreements, representations or warranties contained in this Agreement. SECTION 10.2. SURVIVAL. If this Agreement is terminated and the Subject Transactions are not consummated as described above, this Agreement shall become null and void and of no further force and effect, and there shall be no liability or obligation hereunder on the part of the Stockholders, the Company or the Purchaser, or any of their respective directors, officers, employees, Affiliates, agents, representatives, successors or assigns except (i) for the provisions of this Agreement and the Confidentiality Agreement relating to the obligations of the parties hereto to keep confidential and not to use certain information and data obtained from the other parties hereto, (ii) for the provisions of Sections 6.6, 9.9, 11.1, 11.2, 11.3, 11.4, 11.8 and 11.9 and this Section 10.2, which shall survive any such termination, (iii) for liability of the Stockholders and the Company, on the one hand, for all Losses, in an aggregate amount not to exceed Thirty Million Dollars ($30,000,000), resulting from or arising out of a breach by such parties of any representation, warranty or covenant contained in this Agreement, and (iv) for liability of the Purchaser, on the other hand, for all Losses, in an aggregate amount not to exceed Thirty Million Dollars ($30,000,000), resulting from or arising out of a breach by such party of any representation, warranty or covenant contained in this Agreement. ARTICLE XI. MISCELLANEOUS SECTION 11.1. PUBLICITY. The press release announcing the execution of this Agreement shall be issued only in such form as shall be mutually agreed upon by the Company, the Significant Stockholders and the Purchaser. Thereafter, the Purchaser, the Company and the Significant Stockholders shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Subject Transactions, and shall not issue any such press release or make any such public statement before such consultation, except as may be required by law. 75 SECTION 11.2. CONFIDENTIALITY. The parties agree that, other than as agreed or as required to implement the Subject Transactions, the parties will keep confidential the terms and conditions of this Agreement, including, without limitation, the Ancillary Agreements, the Exhibits and Schedules hereto, except as otherwise required by law (including, without limitation, pursuant to any federal or state securities laws or the rules of any stock exchange or self-regulatory organization or pursuant to any legal, regulatory or legislative proceedings). SECTION 11.3. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), telegraphed, telexed, sent by facsimile transmission or sent by certified or registered mail, postage prepaid and return receipt requested, or by express mail. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission or, if mailed, three days after the date of deposit in the United States mails, as follows: (i) if to the Company prior to the Closing Date (and with a copy to the Purchaser after the Closing Date): K&F Industries, Inc. 600 Third Avenue New York, New York 10016 Attn: General Counsel Facsimile: (212) 867-1182, with a copy, which shall not constitute notice, to: Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, New York 10019-6099 Attn: Neil Novikoff, Esq. Facsimile: (212) 728-8111 (ii) if to any Stockholder, to the address set forth below such Stockholder's name on Exhibit A hereto; and (iii) if to Purchaser: c/o Aurora Capital Group 10877 Wilshire Boulevard Suite 2100 Los Angeles, California 90024 Attn: Richard K. Roeder Facsimile: (310) 277-5591 with a copy, which shall not constitute notice, to: 76 Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071-3197 Attn: Bruce D. Meyer, Esq. Facsimile: (213) 229-7520 Any party may, by notice given in accordance with this Section 11.3 to the other parties, designate another address or Person for receipt of notices hereunder provided that notice of such a change shall be effective upon receipt. SECTION 11.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Each of the parties hereto, including, without limitation, each of the Stockholders, agrees that any legal action or proceeding with respect to this Agreement may be brought in the Courts of the State of New York, County of New York or the United States District Court for the Southern District of New York and, by execution and delivery of this Agreement, each party hereto irrevocably submits itself in respect of its property, generally and unconditionally, to the non-exclusive jurisdiction of the aforesaid courts in any legal action or proceeding arising out of this Agreement. Each of the parties hereto hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to in the preceding sentence. Each party hereby consents to process being served in any such action or proceeding by the mailing of a copy thereof to the address set forth in Section 11.3 hereof and agrees that such service upon receipt shall constitute good and sufficient service of process or notice thereof. Nothing in this Section 11.4 shall affect or eliminate any right to serve process in any other matter permitted by law. SECTION 11.5. ENTIRE AGREEMENT. (a) This Agreement (including the Ancillary Agreements and any other additional agreements contemplated hereby or thereby and the Exhibits and the Schedules hereto) contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto other than the Confidentiality Agreement, which shall survive and remain in full force and effect according to its terms. (b) Any information provided in any Schedule hereto is considered set forth on each and every other Schedule hereto as to which such information is applicable. Any disclosure in any Schedule of any contract, document, liability, default, breach, violation, limitation, impediment or other matter, although the provision for such disclosure may require such disclosure only if such contract, document, liability, default, breach, violation, limitation, impediment or other matter be "material," shall not be construed against any Stockholder as an assertion by such Stockholder that any such contract, document, liability, default, breach, violation, limitation, impediment or other matter is, in fact, material. 77 SECTION 11.6. WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES; PRESERVATION OF REMEDIES. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Purchaser and the Representative or, in the case of a waiver, by the party waiving compliance. Except as provided in Article IX hereof, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, or shall any waiver on the part of any party of any right, power or privilege, or any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. Except as otherwise provided herein, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. SECTION 11.7. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, permitted assigns and legal representatives. Neither this Agreement, nor any right hereunder, may be assigned by any party (in whole or in part) without the prior written consent of the other parties hereto; provided, however, that the rights and obligations of the Purchaser hereunder shall be assignable without any other party's consent to (i) any lender of the Purchaser or the Company or any of its Subsidiaries, (ii) any wholly-owned subsidiary of the Purchaser, or (iii) any third party that acquires substantially all of the capital stock or assets of the Purchaser or the Company, whether through a merger, consolidation, purchase of stock, asset purchase or otherwise. SECTION 11.8. INTERPRETATION. (a) The parties acknowledge and agree that, except as specifically provided herein, they may pursue judicial remedies at law or equity in the event of a dispute with respect to the interpretation or construction of this Agreement. (b) For purposes of this Agreement, the words "hereof," "herein," "hereby" and other words of similar import refer to this Agreement as a whole unless otherwise indicated. Whenever the singular is used herein, the same shall include the plural, and whenever the plural is used herein, the same shall include the singular, where appropriate. All terms defined herein in the singular shall have the same meaning when used in the plural; all terms defined herein in the plural shall have the same meaning when used in the singular. SECTION 11.9. NO THIRD PARTY BENEFICIARIES. Except as set forth in Section 6.7, Section 6.8 and except for those parties included in the definitions of "Purchaser Indemnified Parties" and "Securityholder Parties" in Article IX hereof, nothing in this Agreement is intended or shall be construed to give any Person, other than the parties hereto, their successors and permitted assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 78 SECTION 11.10. COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the parties hereto. SECTION 11.11. OTHER AGREEMENTS, EXHIBITS AND SCHEDULES. The Exhibits and the Schedules are a part of this Agreement as if fully set forth herein. All references herein to Articles, Sections, subsections, paragraphs, subparagraphs, clauses, Exhibits and Schedules shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. SECTION 11.12. HEADINGS. The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement. SECTION 11.13. INVESTIGATION BY PURCHASER. In entering into this Agreement, Purchaser has relied solely upon its own investigation and analysis, and the Purchaser (a) acknowledges that none of the Stockholders or the Company or any of their respective directors, officers, members, managers, stockholders, employees, Affiliates, controlling persons, agents or representatives makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to the Purchaser or its directors, officers, employees, Affiliates, controlling persons, agents or representatives, except as and only to the extent expressly set forth herein or in any Ancillary Agreement or any Exhibit, Schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the Subject Transactions with respect to such representations and warranties and subject to the limitations and restrictions contained in this Agreement or any Ancillary Agreement or any Exhibit, Schedule or certificate delivered pursuant hereto or thereto or in connection with the Subject Transactions, and (b) agrees, to the fullest extent permitted by law, that, except to the extent expressly set forth herein, none of the Stockholders or the Company or any of their respective directors, officers, members, managers, stockholders, employees, Affiliates, controlling persons, agents or representatives shall have any liability or responsibility whatsoever to the Purchaser or its directors, officers, employees, affiliates, controlling persons, agents or representatives on any basis (including, without limitation, in contract or tort, under federal or state securities laws or otherwise) based upon any information provided or made available, or statements made, to the Purchaser or its directors, officers, employees, Affiliates, controlling persons, agents or representatives (or any omissions therefrom), including, without limitation, in respect of the specific representations and warranties of the Stockholders or the Company set forth in this Agreement or in any Ancillary Agreement or any Exhibit, Schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the Subject Transactions and subject to the limitations and restrictions contained in this Agreement. In particular, without limiting the foregoing disclaimer, none of the following shall be deemed to 79 constitute a representation or warranty of the Stockholders or the Company or any of their respective directors, officers, members, managers, stockholders, employees, Affiliates, controlling persons, agents or representatives: (i) any financial projection or forecast relating to the business of the Company and its Subsidiaries, (ii) any information set forth in actuarial reports relating to Company and its Subsidiaries, (iii) any oral or written information presented to the Purchaser during any management presentation, including any question and answer session pursuant thereto or (iv) any information provided to assist the Purchaser with the arrangements for the Financing as contemplated by Section 6.5. With respect to any projection or forecast delivered by or on behalf of the Stockholders or the Company to the Purchaser, the Purchaser acknowledges that (A) there are uncertainties inherent in attempting to make such projections and forecasts, (B) it is familiar with such uncertainties, (C) it is taking full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts so furnished to it, and (D) it shall have no claim against any Person with respect thereto. [Remainder of page intentionally left blank.] 80 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. AAKF ACQUISITION, INC. By: /s/ Gerald L. Parsky --------------------------------------------------- Name: Gerald L. Parsky Title: President and Chief Executive Officer K&F INDUSTRIES, INC. By: /s/ Kenneth Schwartz --------------------------------------------------- Name: Kenneth Schwartz Title: President & Chief Operating Officer LEHMAN BROTHERS MERCHANT BANKING PORTFOLIO PARTNERSHIP L.P. By: LB I Group, its General Partner By: /s/ Alan H. Washkowitz -------------------------------------------------- Name: Alan H. Washkowitz Title: Senior Vice President LEHMAN BROTHERS OFFSHORE INVESTMENT PARTNERSHIP L.P. By: Lehman Brothers Offshore Partners, Ltd., its General Partner By: /s/ Alan H. Washkowitz -------------------------------------------------- Name: Alan H. Washkowitz Title: Director S-1 LEHMAN BROTHERS OFFSHORE INVESTMENT PARTNERSHIP -- JAPAN L.P. By: Lehman Brothers Offshore Partners Ltd., its General Counsel By: /s/ Alan H. Washkowitz -------------------------------------------------- Name: Alan H. Washkowitz Title: Director LEHMAN BROTHERS CAPITAL PARTNERS II, L.P. By: Lehman Brothers Holdings Inc., its General Partner By: /s/ Alan H. Washkowitz -------------------------------------------------- Name: Alan H. Washkowitz Title: Vice President /s/ Bernard L. Schwartz ----------------------------------------- Bernard L. Schwartz THE BERNARD L. SCHWARTZ 2004 GRANTOR RETAINED ANNUITY TRUST NO. 2 /s/ Bernard L. Schwartz ----------------------------------------- Bernard L. Schwartz, as Trustee of The Bernard L. Schwartz 2004 Grantor Retained Annuity Trust No. 2 /s/ Francesca Schwartz ----------------------------------------- Francesca Schwartz /s/ Karen Schwartz Paddock ----------------------------------------- Karen Schwartz Paddock /s/ Robert B. Hodes ----------------------------------------- Robert B. Hodes S-2 EX-4.1 3 y69010exv4w1.txt INDENTURE EXECUTION COPY EXHIBIT 4 ================================================================================ K&F ACQUISITION, INC. (to be known as K&F Industries, Inc. following the consummation of the Merger) and U.S. BANK NATIONAL ASSOCIATION as Trustee -------------- INDENTURE Dated as of November 18, 2004 7-3/4% SENIOR SUBORDINATED NOTES DUE 2014 ================================================================================ CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section - --------------- ----------------- 310(a)(1).......................................................................... 7.10 (a)(2)......................................................................... 7.10 (a)(3)......................................................................... N.A. (a)(4)......................................................................... N.A. (a)(5)......................................................................... 7.10 (b)............................................................................ 7.10 (c)............................................................................ N.A. 311(a)............................................................................. 7.11 (b)............................................................................ 7.11 (c)............................................................................ N.A. 312(a)............................................................................. 2.05 (b)............................................................................ 11.03 (c)............................................................................ 11.03 313(a)............................................................................. 7.06 (b)(1)......................................................................... 10.03 (b)(2)......................................................................... 7.06, 7.07 (c)............................................................................ 7.06, 11.02 (d)............................................................................ 7.06 314(a)............................................................................. 11.05 (b)............................................................................ N.A. (c)(1)......................................................................... N.A. (c)(2)......................................................................... N.A. (c)(3)......................................................................... N.A. (d)............................................................................ N.A. (e)............................................................................ 10.05 (f)............................................................................ NA 315(a)............................................................................. 7.01 (b)............................................................................ N.A. (c)............................................................................ 7.01 (d)............................................................................ 7.01 (e)............................................................................ 6.11 316(a)(last sentence).............................................................. 2.09 (a)(1)(A)...................................................................... 6.05 (a)(1)(B)...................................................................... 6.04 (a)(2)......................................................................... N.A. (b)............................................................................ 6.07 (c)............................................................................ 2.12 317(a)(1).......................................................................... 6.08 (a)(2)......................................................................... 6.09 (b)............................................................................ 2.04 318(a)............................................................................. N.A. (b)............................................................................ N.A. (c)............................................................................ 11.01
- ----------------- N.A. means Not Applicable *This Cross-Reference Table is not part of the Indenture TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE............................................................. 1 SECTION 1.01. Definitions........................................................................ 1 SECTION 1.02. Other Definitions.................................................................. 24 SECTION 1.03. Incorporation by Reference of TIA.................................................. 24 SECTION 1.04. Rules of Construction.............................................................. 25 ARTICLE 2 THE NOTES.............................................................................................. 25 SECTION 2.01. Form and Dating.................................................................... 25 SECTION 2.02. Denominations...................................................................... 28 SECTION 2.03. Execution and Authentication....................................................... 28 SECTION 2.04. Registrar and Paying Agent......................................................... 29 SECTION 2.05. Paying Agent to Hold Money in Trust................................................ 29 SECTION 2.06. Holder Lists....................................................................... 30 SECTION 2.07. Transfer and Exchange.............................................................. 30 SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Notes......................................... 41 SECTION 2.09. Outstanding Notes.................................................................. 42 SECTION 2.10. Treasury Notes..................................................................... 42 SECTION 2.11. Temporary Notes.................................................................... 42 SECTION 2.12. Cancellation....................................................................... 42 SECTION 2.13. Defaulted Interest................................................................. 43 SECTION 2.14. Computation of Interest............................................................ 43 SECTION 2.15. Issuance of Additional Notes....................................................... 43 SECTION 2.16. One Class of Notes................................................................. 43 SECTION 2.17. CUSIP, ISIN or Other Similar Numbers............................................... 43 ARTICLE 3 REDEMPTION AND PREPAYMENT.............................................................................. 44 SECTION 3.01. Notices to Trustee................................................................. 44 SECTION 3.02. Selection of Notes to Be Redeemed.................................................. 44 SECTION 3.03. Notice of Redemption............................................................... 44 SECTION 3.04. Effect of Notice of Redemption..................................................... 45 SECTION 3.05. Deposit of Redemption Price........................................................ 45 SECTION 3.06. Notes Redeemed in Part............................................................. 46 SECTION 3.07. Optional Redemption................................................................ 46 SECTION 3.08. Mandatory Special Redemption....................................................... 46 SECTION 3.09. Mandatory Redemption............................................................... 47 ARTICLE 4 COVENANTS.............................................................................................. 47 SECTION 4.01. Payment of Notes................................................................... 47 SECTION 4.02. Maintenance of Office or Agency.................................................... 47 SECTION 4.03. Reports............................................................................ 48 SECTION 4.04. Compliance Certificate............................................................. 49 SECTION 4.05. Taxes.............................................................................. 49 SECTION 4.06. Stay, Extension and Usury Laws..................................................... 49 SECTION 4.07. Restricted Payments................................................................ 49 SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries..................... 52 SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock......................... 54
-i- SECTION 4.10. Asset Sales........................................................................ 57 SECTION 4.11. Transactions with Affiliates....................................................... 60 SECTION 4.12. Liens.............................................................................. 62 SECTION 4.13. Business Activities................................................................ 62 SECTION 4.14. Corporate Existence................................................................ 62 SECTION 4.15. Offer to Repurchase upon Change of Control......................................... 62 SECTION 4.16. Future Subsidiary Guarantees....................................................... 64 SECTION 4.17. Designation of Restricted and Unrestricted Subsidiaries............................ 64 SECTION 4.18. Payments for Consent............................................................... 64 SECTION 4.19. Limitation on Layering Debt........................................................ 64 ARTICLE 5 SUCCESSORS............................................................................................. 65 SECTION 5.01. Merger, Consolidation or Sale of Assets............................................ 65 SECTION 5.02. Successor Corporation Substituted.................................................. 66 ARTICLE 6 DEFAULTS AND REMEDIES.................................................................................. 66 SECTION 6.01. Events of Default.................................................................. 66 SECTION 6.02. Acceleration....................................................................... 68 SECTION 6.03. Other Remedies..................................................................... 68 SECTION 6.04. Waiver of Past Defaults............................................................ 69 SECTION 6.05. Control by Majority................................................................ 69 SECTION 6.06. Limitation on Suits................................................................ 69 SECTION 6.07. Rights of Holders of Notes to Receive Payment...................................... 69 SECTION 6.08. Collection Suit by Trustee......................................................... 70 SECTION 6.09. Trustee May File Proofs of Claim................................................... 70 SECTION 6.10. Priorities......................................................................... 70 SECTION 6.11. Undertaking for Costs.............................................................. 71 ARTICLE 7 TRUSTEE................................................................................................ 71 SECTION 7.01. Duties of Trustee.................................................................. 71 SECTION 7.02. Rights of Trustee.................................................................. 72 SECTION 7.03. Individual Rights of Trustee....................................................... 73 SECTION 7.04. Trustee's Disclaimer............................................................... 73 SECTION 7.05. Notice of Defaults................................................................. 73 SECTION 7.06. Reports by Trustee to Holders of the Notes......................................... 74 SECTION 7.07. Compensation and Indemnity......................................................... 74 SECTION 7.08. Replacement of Trustee............................................................. 75 SECTION 7.09. Successor Trustee by Merger, etc................................................... 75 SECTION 7.10. Eligibility; Disqualification...................................................... 76 SECTION 7.11. Preferential Collection of Claims Against the Company.............................. 76 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE............................................................... 76 SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance........................... 76 SECTION 8.02. Legal Defeasance and Discharge..................................................... 76 SECTION 8.03. Covenant Defeasance................................................................ 77 SECTION 8.04. Conditions to Legal or Covenant Defeasance......................................... 77 SECTION 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions................................................ 78 SECTION 8.06. Repayment to the Company........................................................... 79 SECTION 8.07. Reinstatement...................................................................... 79
-ii- ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER....................................................................... 79 SECTION 9.01. Without Consent of Holders of Notes................................................ 79 SECTION 9.02. With Consent of Holders of Notes................................................... 80 SECTION 9.03. Compliance with Trust Indenture Act................................................ 81 SECTION 9.04. Revocation and Effect of Consents.................................................. 81 SECTION 9.05. Notice of Amendment; Notation on or Exchange of Notes.............................. 82 SECTION 9.06. Trustee to Sign Amendments, etc.................................................... 82 ARTICLE 10 SUBSIDIARY GUARANTEES................................................................................. 82 SECTION 10.01. Guarantee.......................................................................... 82 SECTION 10.02. Limitation on Guarantor Liability.................................................. 83 SECTION 10.03. Guarantors May Consolidate, etc., on Certain Terms................................. 84 SECTION 10.04. Releases of Subsidiary Guarantees.................................................. 84 ARTICLE 11 SATISFACTION AND DISCHARGE............................................................................ 84 SECTION 11.01. Satisfaction and Discharge......................................................... 84 SECTION 11.02. Application of Trust Funds......................................................... 85 SECTION 11.03. Repayment to Company............................................................... 85 SECTION 11.04. Reinstatement...................................................................... 86 ARTICLE 12 SUBORDINATION......................................................................................... 86 SECTION 12.01. Agreement to Subordinate........................................................... 86 SECTION 12.02. Liquidation; Dissolution; Bankruptcy............................................... 86 SECTION 12.03. Default on Designated Senior Debt.................................................. 87 SECTION 12.04. Acceleration of Notes.............................................................. 87 SECTION 12.05. When Distribution Must Be Paid Over................................................ 88 SECTION 12.06. Notice by the Company.............................................................. 88 SECTION 12.07. Subrogation........................................................................ 88 SECTION 12.08. Relative Rights.................................................................... 88 SECTION 12.09. Subordination May Not Be Impaired by the Company................................... 89 SECTION 12.10. Distribution or Notice to Representative........................................... 89 SECTION 12.11. Rights of Trustee and Paying Agent................................................. 89 SECTION 12.12. Authorization to Effect Subordination.............................................. 90 ARTICLE 13 MISCELLANEOUS......................................................................................... 90 SECTION 13.01. Trust Indenture Act Controls....................................................... 90 SECTION 13.02. Notices............................................................................ 90 SECTION 13.03. Communication by Holders of Notes with Other Holders of Notes...................... 91 SECTION 13.04. Certificate and Opinion as to Conditions Precedent................................. 91 SECTION 13.05. Statements Required in Certificate or Opinion...................................... 92 SECTION 13.06. Rules by Trustee and Agents........................................................ 92 SECTION 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders.................................................................. 92 SECTION 13.08. Governing Law...................................................................... 93 SECTION 13.09. No Adverse Interpretation of Other Agreements...................................... 93 SECTION 13.10. Successors......................................................................... 93 SECTION 13.11. Severability....................................................................... 93 SECTION 13.12. Counterpart Originals.............................................................. 93 SECTION 13.13. Table of Contents, Headings, etc................................................... 93
-iii- SECTION 13.14. Benefits of Indenture.............................................................. 93 SECTION 13.15. Legal Holidays..................................................................... 93
EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING ACCREDITED INVESTORS/INSTITUTIONAL ACCREDITED INVESTORS Exhibit E-1 FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS Exhibit E-2 FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY A PERMITTED SUCCESSOR TO THE COMPANY -iv- INDENTURE dated as of November 18, 2004 between K&F Acquisition, Inc., a Delaware corporation (to be known as K&F Industries, Inc. following the consummation of the Merger) (the "Company") and U.S. Bank National Association, a national banking association organized under the laws of the United States, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Initial Notes, any Additional Notes and the Exchange Notes (in each case as defined herein): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS "144A Global Note" means one or more Restricted Global Notes that shall represent the aggregate principal amount of the Notes sold in reliance on Rule 144A. "Accredited Investor" means an "accredited investor" as defined in Rule 501(a)(1), (2), (3), (4), (5), (6) or (7) under the Securities Act. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquisition" shall have the meaning specified in the Offering Memorandum. "Additional Interest" means all additional interest then owing pursuant to the Registration Rights Agreement. "Additional Notes" means 7-3/4% Senior Subordinated Notes due 2014 of the Company issued in compliance with and under this Indenture after the Issue Date and having identical terms to the Initial Notes or the Exchange Notes. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent. "AI Definitive Note" means one or more Restricted Definitive Note issued to Accredited Investors. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear or Clearstream, as the case may be, that apply to such transfer or exchange. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by the provisions of Section 4.15 and/or the provisions of Section 5.01 and not by the provisions of Section 4.10; and (2) the issuance of Equity Interests in any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $5.0 million; (2) a transfer of assets between or among the Company and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; and (6) a Restricted Payment or Permitted Investment that is permitted by Section 4.07 hereof. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "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" shall 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. "Board of Directors" means: -2- (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the board of directors of the general partner of the partnership; and (3) with respect to any other Person, the board of directors or committee of such Person serving a similar function. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of a company to have been duly adopted by the Board of Directors of such company and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Broker-Dealer" means any broker or dealer registered under the Exchange Act. "Business Day" means each day that is not a Legal Holiday. "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than twelve months from the date of acquisition; (3) (i) demand deposits, (ii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, (iii) bankers' acceptances with maturities not exceeding one year and (iv) overnight bank deposits and other similar types of investments routinely offered by commercial banks, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $250.0 million and a Thomson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; -3- (5) commercial paper having a rating of at least A-3 from Moody's Investors Service, Inc. or P-3 from Standard & Poor's Rating Services and in each case maturing within 270 days after the date of acquisition; (6) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory, the securities of which state, commonwealth, territory, political subdivision or taxing authority (as the case may be) are rated at least A by Moody's Investors Service, Inc. or A by Standard & Poor's Rating Services; and (7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) of this definition. "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder; (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Clearstream" means Clearstream Banking, societe anonyme. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the United States Securities and Exchange Commission. "Company" means K&F Acquisition, Inc., until a successor shall have become such pursuant to the applicable provisions of this Indenture and thereafter "Company" shall mean such successor. "Company Order" means a written order of the Company signed by two Officers of the Company. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus -4- (2) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received (if any) pursuant to Hedging Obligations), in each such case to the extent that any of the foregoing was deducted in computing such Consolidated Net Income; plus (3) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash charges (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period, in each such case to the extent that such depreciation, amortization and other non-cash charges were deducted in computing such Consolidated Net Income; plus (4) management fees and related expenses to Aurora Management Partners LLC and its Affiliates not to exceed $2.0 million for such fees in any twelve month period, in each case, to the extent deducted in computing such Consolidated Net Income; plus (5) without duplication for periods prior to the date of this Indenture, all items added back to "EBITDA" for purposes of calculating "Adjusted EBITDA" in footnote (d) under "Summary Historical and Pro Forma Consolidated Financial Information" in the Offering Memorandum; minus (6) non-cash items increasing such Consolidated Net Income for such period, other than (i) the accrual of revenue in the ordinary course of business and (ii) any non-cash items reversing an accrual or reserve that was excluded from the determination of Consolidated Cash Flow pursuant to the preceding clause (3)); minus (7) but solely for the purposes of determining Cumulative Operating Cash Flow, upon and following the election of the Company to capitalize Program Investments on its balance sheet, the amount of Program Investments capitalized for such period. in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding sentence, clauses (1) through (6) relating to amounts of a Restricted Subsidiary of a Person will be added to (or subtracted from) Consolidated Net Income to compute Consolidated Cash Flow of such Person only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "Consolidated Interest Expense" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts -5- and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received (if any) pursuant to Hedging Obligations); plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the cumulative effect of a change in accounting principles shall be excluded; (4) any non-cash compensation expense realized for grants of performance shares, stock options or other rights to officers, directors and employees of the Company or any Restricted Subsidiary shall be excluded, provided that such shares, options or other rights can be redeemed at the option of the holder only for Equity Interests of the Company (other than Disqualified Stock); (5) any step-up in cost of sales for inventory arising out of the application of purchase accounting treatment in connection with the Transactions shall be excluded; and (6) to the extent deducted in determining Net Income, (a) the fees, expenses and other costs incurred in connection with the consummation of the Transactions and (b) any increase in amortization or write-off of goodwill or other intangible assets or increased depreciation or amortization expense arising solely from such Transactions shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of this Indenture; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" means the office of the Trustee located at 225 Asylum Street, Hartford, Connecticut or such other office as it shall notify the Company in writing. -6- "Credit Agreement" means that certain Credit Agreement, to be entered into in connection with the Acquisition, among K&F Acquisition, Inc., the lenders parties thereto and Lehman Brothers Inc. and J.P.Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners, J.P. Morgan Securities Inc., as Syndication Agent, Goldman, Sachs & Co. and Citigroup Global Markets Inc., as Co-Documentation Agents and Lehman Commercial Paper Inc., as Administrative Agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time (whether with the original agents or lenders or other agents and lenders or otherwise, and whether provided under the original credit agreement or other credit agreements). "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities or indentures, in each case with banks or other institutional lenders or investors providing for revolving credit loans, term loans, debt securities, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit and any agreement or agreements governing Indebtedness incurred to refinance, replace, restructure or refund such agreements in whole or in part from time to time (whether with the original agent and lenders or other agents and lenders or otherwise). "Cumulative Operating Cash Flow" means, for the period beginning October 1, 2004 through and including the end of the last fiscal quarter (taken as one accounting period) preceding the date of any proposed Restricted Payment, Consolidated Cash Flow for the Company and its consolidated Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Cumulative Total Interest Expense" means, for the period beginning October 1, 2004 through and including the end of the last fiscal quarter (taken as one accounting period) preceding the date of any proposed Restricted Payment, Consolidated Interest Expense for the Company and its consolidated Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.01 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.01 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Debt" means: (1) any Indebtedness outstanding under the Credit Agreement; and (2) any other Senior Debt permitted under this Indenture the principal amount of which is $25.0 million or more and that has been designated in the agreement or instrument governing such Senior Debt as "Designated Senior Debt." -7- "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant contained in Section 4.07. "Distribution Compliance Period" means the 40-day distribution compliance period as defined in Regulation S. "Domestic Subsidiary" means any Restricted Subsidiary of the Company that (x) was formed under the laws of the United States or any state of the United States or the District of Columbia or (y) guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "Escrow Agreement" means that certain Escrow and Security Agreement, to be entered into in the event that the Acquisition does not close prior to or substantially concurrent with the closing of the issuance of the Notes, among K&F Acquisition, Inc., U.S. Bank National Association, and Lehman Brothers Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any public or private sale of Capital Stock (other than Disqualified Stock) made for cash on a primary basis by the Company after the date of this Indenture (but excluding in any event any issuance pursuant to employee benefit plans or otherwise in compensation to officers, directors or employees). "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system, or any successor securities electing agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the 7-3/4% Senior Subordinated Notes due 2014 to be issued by the Company upon the expiration of an Exchange Offer pursuant to the terms of a Registration Rights Agreement containing terms substantially identical to the Initial Notes (except that (i) the transfer restrictions thereon shall be eliminated (other than as may be imposed by state securities laws) and (ii) there will be no provision for the payment of Additional Interest). "Exchange Offer" means, subject to the terms of a Registration Rights Agreement, the offer by the Company to the Holders of the opportunity to exchange their Initial Notes for Exchange Notes pursuant to a registration statement filed with the Commission. "Exchange Offer Registration Statement" has the meaning set forth for such term in a Registration Rights Agreement. -8- "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of this Indenture, until such amounts are repaid. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including acquisitions of assets used in a Permitted Business) and including any related financing transactions (including any repayments of Indebtedness), during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period, including any Consolidated Cash Flow (including interest income reasonably anticipated by such Person to be received from cash or Cash Equivalents held by such Person or any of its Restricted Subsidiaries) and any pro forma expense and cost reductions that have occurred or are reasonably expected to occur within the twelve month period following the transaction, in the reasonable judgment of the chief financial officer or chief accounting officer of the Company (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the Commission related thereto) or any other regulation or policy of the Commission related thereto); provided that such adjustments are set forth in an Officer's Certificate signed by the Company's chief financial officer which states (i) the amount of such adjustment or adjustments, (ii) that such adjustment or adjustments are based on the reasonable good faith belief of the Company at the time of such execution and (iii) that any related incurrence of Indebtedness is permitted pursuant to this Indenture; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges shall not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: -9- (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received (if any) pursuant to Hedging Obligations); plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon); plus (4) the product of (a) all dividends paid (whether or not in cash) on any series of preferred stock, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Foreign Subsidiary" means any Restricted Subsidiary that is not a Domestic Subsidiary. "GAAP" means generally accepted accounting principles 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 in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Note Legend" means the legend set forth in Section 2.01(d)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means one or more global notes deposited with or on behalf of, and registered in the name of, the Depositary or its nominee and issued in accordance with Sections 2.01 and 2.07 hereof. "Government Securities" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a) (2) of the Securities Act), as custodian, with respect to any such Governmental Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. -10- "Guarantor" means any Person that guarantees the Notes; provided that upon the release or discharge of such Person from its Subsidiary Guarantee in accordance with the provisions of this Indenture, such Person shall cease to be a Guarantor. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person incurred in the normal course of business and not for speculative purposes under: (1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; (2) foreign exchange contracts and currency protection agreements entered into with one or more financial institutions and designed to protect the person or entity entering into the agreement against fluctuations in currency exchange rates with respect to Indebtedness incurred; (3) any commodity futures contract, commodity option or other similar agreement or arrangement designed to protect against fluctuations in the price of commodities used by that entity at the time; and (4) other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency exchange rates. "Holder" means any Person (which may include the Depositary or its nominee) in whose name the Notes are registered. "IAI Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount at maturity of the Notes sold to Institutional Accredited Investors. "Indebtedness" means (without duplication), with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; (6) all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary, any preferred stock (but excluding, in each case, any accrued dividends); or (7) representing any Hedging Obligations, -11- if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the guarantee by the specified Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; (2) in the case of any Disqualified Stock or preferred stock, the repurchase price calculated in accordance with the terms of such Disqualified Stock or preferred stock as if such Disqualified Stock or preferred stock were repurchased on the date on which Indebtedness is required to be determined pursuant to this Indenture; provided that if such Disqualified Stock or preferred stock is not then permitted to be repurchased, the book value of Disqualified Stock or preferred stock; (3) in the case Indebtedness of others secured by a Lien on any asset of the specified Person, the lesser of (A) the fair market value of such asset on the date on which Indebtedness is required to be determined pursuant to this Indenture and (B) the amount of the Indebtedness so secured; (4) in the case of the guarantee by the specified Person of any Indebtedness of any other Person, the maximum liability to which the specified Person may be subject upon the occurrence of the contingency giving rise to the obligation; (5) in the case of any Hedging Obligations, the net amount payable if such Hedging Obligations were terminated at that time due to default by such Person (after giving effect to any contractually permitted set-off); and (6) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time, and provisions of the TIA that are deemed by the TIA to be a part hereof. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means the $315,000,000 aggregate principal amount of 7-3/4% Senior Subordinated Notes due 2014 issued by the Company on the Issue Date. "Initial Purchasers" means (i) with respect to the Initial Notes issued on the Issue Date, Lehman Brothers Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related purchase agreement. -12- "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition in an amount equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07. The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment made by the Company or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person on the date of any such acquisition in an amount determined as provided in the final paragraph of Section 4.07. "Issue Date" means the date on which the Notes are originally issued under this Indenture. "Legal Holiday" means a Saturday, Sunday or other day on which banking institutions in New York, New York are authorized or required by law to close. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give a security interest under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Merger" shall have the meaning specified in the Offering Memorandum. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary or nonrecurring gain or loss, together with any related provision for taxes on such extraordinary or nonrecurring gain or loss. -13- "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale (as reasonably estimated by the Company), in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, amounts required to be applied to the repayment of Indebtedness, secured by a Lien on the asset or assets that were the subject of such Asset Sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) is the lender; (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and (3) as to which the lenders have been notified in writing that they shall not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a Person who is not a U.S. Person. "Note Custodian" means U.S. Bank National Association, as custodian for the Depositary with respect to the Notes in global form, or any successor entity thereto. "Notes" means the Initial Notes, the Exchange Notes and any Additional Notes issued under this Indenture. "Obligations" means any principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto. "Offering Memorandum" means the offering memorandum of the Company, dated November 5, 2004, in connection with the offering of the Initial Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the Controller, the Secretary or any Vice President of such Person. "Officers' Certificate" means a certificate signed by two Officers or by one Officer and any Assistant Treasurer or Assistant Secretary of the Company, which complies with the provisions of Section 13.05 hereof. -14- "144A Global Note" means one or more global notes in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall represent the aggregate principal amount of the Notes sold in reliance on Rule 144A. "Opinion of Counsel" means an opinion from legal counsel, who is reasonably acceptable to the Trustee, which meets the requirements of Section 13.04 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream). "Participating Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Permitted Business" means the lines of business conducted by the Company and its Restricted Subsidiaries on the date of this Indenture and any business incidental or reasonably related thereto or which is a reasonable extension thereof as determined in good faith by the Board of Directors. "Permitted Holder" means: (1) each of Aurora Industrial Holdings LLC, Aurora Equity Partners II L.P., Aurora Overseas Equity Partners II, L.P., Aurora Equity Partners III L.P. and Aurora Overseas Equity Partners III, L.P. (the "Limited Partnerships"); (2) Aurora Capital Partners II L.P., Aurora Overseas Capital Partners II, L.P., Aurora Capital Partners III L.P. and Aurora Overseas Capital Partners III, L.P. (the "General Partners"); (3) Aurora Advisors II LLC, Aurora Advisors III LLC, Aurora Overseas Advisors II, LDC and Aurora Overseas Advisors III, LDC (the "Ultimate General Partners"); (4) any limited partners of the Limited Partnerships or any limited partners of the General Partners, provided that such limited partner gives a proxy to, or otherwise agrees that it will vote in a manner consistent with, any of the Limited Partnerships or the General Partners; (5) any managing director, consultant or employee of Aurora Management Partners LLC, provided that such managing director, consultant or employee gives a proxy to, or otherwise agrees that he or she will vote in a manner consistent with, the Limited Partnerships or the General Partners; (6) any member of the Advisory Board of Aurora Management Partners LLC, provided that such member gives a proxy to, or otherwise agrees that he or she will vote in a manner consistent with, the Limited Partnerships or the General Partners; (7) any Affiliate of Aurora Management Partners LLC, provided that such Affiliate gives a proxy to, or otherwise agrees that it will vote in a manner consistent with, the Limited Partnerships or the General Partners; or (8) any investment fund or other entity controlled by or under common control with, any one or more of the Ultimate General Partners or Aurora Management Partners LLC or the -15- principals that control any one or more of the Ultimate General Partners or Aurora Management Partners LLC. "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Company; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant contained in the Section 4.10 or any non-cash consideration received in connection with a disposition of assets excluded from the definition of "Asset Sales;" (5) workers' compensation, utility, lease and similar deposits and prepaid expenses in the ordinary course of business and endorsements of negotiable instruments and documents in the ordinary course of business; (6) loans or advances to employees (or guarantees of third party loans to employees) made in the ordinary course of business of the Company or such Restricted Subsidiary in aggregate amount not to exceed $2.0 million at any one time outstanding; (7) any Investments in any Person solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (8) any Investments received in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; (9) Hedging Obligations; (10) advances or extensions of credit on terms customary in the industry in the form of accounts or other receivables incurred, and loans and advances made in settlement of such accounts receivable, all in the ordinary course of business; (11) Investments existing on the date of this Indenture; (12) guarantees in accordance with the covenant set forth under Section 4.09; (13) advances, loans or extensions of credit to suppliers and vendors in the ordinary course of business; -16- (14) Investments by the Company or any Restricted Subsidiary in joint ventures operating primarily in a Permitted Business in an aggregate amount at any one time outstanding not to exceed $20.0 million; (15) reclassification of any Investment initially made in the form of equity as a loan or advance, and reclassification of any Investment initially made in the form of a loan or advance as equity; provided in each case that the amount of such Investment is not increased thereby; and (16) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (16) that are at the time outstanding not to exceed $10.0 million. "Permitted Junior Securities" means: (1) Equity Interests in the Company; or (2) debt securities that are subordinated in right of payment to all Senior Debt that may at the time be outstanding, to substantially the same extent as, or to a greater extent than, the Notes and the Subsidiary Guarantees are subordinated to Senior Debt pursuant to this Indenture, and such securities shall not be entitled to the benefits of covenants or defaults materially more beneficial to the holders of such securities than those in effect with respect to the Notes on the date of this Indenture. "Permitted Liens" means: (1) Liens of the Company and any Guarantor securing Senior Debt that was permitted by the terms of this Indenture to be incurred; (2) Liens in favor of the Company or any Guarantor; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company or becomes a Restricted Subsidiary of the Company or renewals or replacement of such Liens in connection with the incurrence of Permitted Refinancing Indebtedness in respect of Indebtedness secured by such Liens; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (4) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company or renewals or replacement of such Liens in connection with the incurrence of Permitted Refinancing Indebtedness in respect of Indebtedness secured by such Liens; provided that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens existing on the date of this Indenture and any extensions or renewals thereof, provided that such Liens do not extend to or cover any other property or assets of the Company or any Restricted Subsidiary; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of Section 4.09 covering only the assets acquired with such -17- Indebtedness or permitted by clause (5) of such paragraph, to the extent such Liens secure Permitted Refinancing Indebtedness initially incurred under clause (4); (7) statutory Liens or landlords and carriers', warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in the ordinary course of business; (8) Liens for taxes, assessments, government charges or claims which are not yet delinquent or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (9) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (10) Liens created or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (11) easements, rights-of-way, restrictions and other similar charges or encumbrances not interfering in any material respect with the business of the Company incurred in the ordinary course of business; (12) judgment liens in respect of judgments that do not constitute an Event of Default so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been fully terminated or the period within which such proceedings may be initiated has not expired; (13) any other Liens imposed by operation of law which do not materially affect the Company's ability to perform its obligations under the Notes and this Indenture; (14) rights of banks to set off deposits against debts owed to said bank; (15) Liens upon specific items of inventory or other goods and proceeds of the Company or its Subsidiaries securing the Company's or any Restricted Subsidiary's obligations in respect of bankers' acceptances issued or created for the account of any such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (16) Liens securing reimbursement obligations with respect to letters of credit which encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (17) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (18) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or one of its Subsidiaries relating to such property or assets; (19) Liens pursuant to master netting agreements entered into in the ordinary course of business in connection with Hedging Obligations; -18- (20) Liens on assets that are the subject of a sale and leaseback transaction permitted hereby; (21) Liens on the property or assets of the Company or its Restricted Subsidiaries in favor of the PBGC in respect of unfunded pension obligations, which liens are junior to the liens permitted under any Credit Facility; (22) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding; (23) Liens securing the obligations under the Escrow Agreement. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection with the extension, refinancing, renewal, replacement, defeasance or refunding); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to the Notes on terms at least as favorable to the Holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Program Investments" means, for any period, the amount of investments made by the Company and its Restricted Subsidiaries during such period consisting of the sale of original wheel and brake assemblies to customers below cost in accordance with industry practice in the commercial, general aviation and military industries. "Predecessor Note" of any particular Note means every previous Note evidencing all or a portion of the same Indebtedness as that evidenced by such particular Note; and any Note authenticated -19- and delivered under Section 2.08 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same Indebtedness as the mutilated, lost, destroyed or stolen Note. "Private Placement Legend" means the legend set forth in Section 2.01(d)(i)(A) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Proceeds" any of the following or any combination of the following: (i) cash, (ii) Cash Equivalents, (iii) assets that are used or useful in a Permitted Business (excluding Permitted Investments made in Persons other than Restricted Subsidiaries pursuant to clause (7) of the definition of "Permitted Investments") by the Company or any Restricted Subsidiary of the Company and (iv) the Capital Stock of any Person engaged in a Permitted Business that becomes a Restricted Subsidiary of the Company as a result of the acquisition of such Capital Stock by the Company or any Restricted Subsidiary of the Company. "Registration Rights Agreement" means (a) with respect to the Initial Notes issued on the Issue Date, the Registration Rights Agreement dated as of the date hereof among the Company and the Initial Purchasers, as supplemented by any joinder agreement and (b) 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 Persons purchasing such Additional Notes under the related purchase agreement. "Registration Statement" means any registration statement filed under the Securities Act by the Company pursuant to the provisions of the Registration Rights Agreement relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Notes issued in a transaction exempt from the registration requirements of the Securities Act pursuant to the Shelf Registration Statement. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means the Regulation S Temporary Global Note or the Regulation S Permanent Global Note, as the case may be. "Regulation S Permanent Global Note" means a permanent global note bearing the Global Note Legend and the Private Placement Legend and deposited with, or on behalf of, and registered in the name of, the Depositary or its nominee, that shall equal the outstanding principal amount at maturity of the Regulation S Temporary Global Note upon expiration of the Distribution Compliance Period. "Regulation S Temporary Global Note" means one or more global notes bearing the Global Note Legend, the Temporary Global Note Legend and the Private Placement Legend and deposited with, or on behalf of, and registered in the name of, the Depositary or its nominee that shall represent the aggregate principal amount at maturity of the Notes sold in reliance on Regulation S. "Representative" means, for any Senior Debt, the trustee, agent or representative with respect to such Senior Debt. "Responsible Officer" means when used with respect to the Trustee, an officer within the Corporate Trust Division of the Trustee (or any successor unit, department or division of the Trustee) located at the Corporate Trust Office of the Trustee, who has direct responsibility for the administration -20- of this Indenture and, for the purposes of Section 7.01(c)(ii) and the second sentence of Section 7.05 shall also include any officer of the Trustee to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Note" means a Restricted Definitive Note or a Restricted Global Note, as the case may be. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 144A Global Note" means one or more Restricted Global Notes that shall represent the aggregate principal amount of Notes sold in reliance on Rule 144A. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means: (1) all Indebtedness and other monetary obligations (whether now existing or hereafter incurred) of the Company and any Guarantor on, under or in respect of, the Credit Agreement and including all fees, expenses (including reasonable fees and expenses of counsel), claims, charges, indemnity obligations and interest accruing on or subsequent to the filing of a petition initiating any proceeding in bankruptcy, insolvency or like proceeding whether or not such interest is an allowed claim in such proceeding; (2) all other Indebtedness of the Company or any Guarantor (other than the Notes and the Subsidiary Guarantees), whether presently outstanding or hereafter created, incurred or assumed, unless such Indebtedness, by the terms of the agreement or instrument creating or evidencing such Indebtedness expressly provides that it is subordinate in right of payment to or pari passu in right of payment with the Notes or the Subsidiary Guarantees, as applicable; and (3) any Hedging Obligations. Notwithstanding the foregoing, the term "Senior Debt" shall not include: (1) any Indebtedness of the Company or any Guarantor which when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Code, was without recourse to the Company or any Guarantor; -21- (2) any Indebtedness of the Company to any of its Subsidiaries or Affiliates; (3) any Indebtedness of the Company or any Guarantor not otherwise permitted by the covenants contained in Section 4.09 and Section 4.19; (4) Indebtedness to any employee of the Company; (5) any liability for taxes; and (6) trade payables. "Shelf Registration Statement" has the meaning set forth for such term in the Registration Rights Agreement. "Significant Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "Subsidiary Guarantee" means any Guarantee by a Guarantor of the Company's payment Obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture. "Tax Benefit Note" means the tax benefit note to be issued by K&F Parent, Inc. to the existing stockholders and optionholders of the Company prior to the Acquisition for estimated tax benefits to be received by the Company due to the payment of fees and premiums in connection with the Tender Offers. "Tender Offers" means the tender offers and consent solicitations initiated by K&F Industries, Inc. on October 20, 2004 for all of K&F Industries, Inc.'s outstanding 91/4% Senior Subordinated Notes due 2007 and 95/8% Senior Subordinated Notes due 2010. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the date on which this Indenture is qualified under the TIA, provided that in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. -22- "Transactions" shall have the meaning specified in the Offering Memorandum. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means a Definitive Note that does not and is not required to bear the Private Placement Legend. "Unrestricted Global Note" means a Global Note that does not and is not required to bear the Private Placement Legend. "Unrestricted Note" means an Unrestricted Definitive Note or an Unrestricted Global Note, as the case may be. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company shall be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (1) such Indebtedness is permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(k) under the Securities Act. -23- "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors 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 sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that shall elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. SECTION 1.02. OTHER DEFINITIONS
Term Defined in Section "Affiliate Transaction"............................................................................. 4.11 "Asset Sale Offer".................................................................................. 4.10 "Authenticating Agent".............................................................................. 2.03 "Authentication Order".............................................................................. 2.03 "Change of Control Offer"........................................................................... 4.15 "Change of Control Payment"......................................................................... 4.15 "Change of Control Payment Date".................................................................... 4.15 "Covenant Defeasance"............................................................................... 8.03 "Custodian"......................................................................................... 6.01 "DTC"............................................................................................... 2.01 "Event of Default".................................................................................. 6.01 "Excess Proceeds"................................................................................... 4.10 "incur"............................................................................................. 4.09 "Legal Defeasance".................................................................................. 8.02 "Maximum Amount".................................................................................... 4.09 "New York Corporate Trust Office"................................................................... 4.02 "Offer Amount"...................................................................................... 4.10 "Paying Agent"...................................................................................... 2.04 "Payment Blockage Notice"........................................................................... 12.03 "Payment Default"................................................................................... 6.01 "Purchase Date"..................................................................................... 4.10 "Registrar"......................................................................................... 2.04 "Relevant Fixed Charge Coverage Ratio".............................................................. 4.09 "Restricted Payments"............................................................................... 4.07 "Special Redemption................................................................................. 3.08 "Special Redemption Date"........................................................................... 3.08 "Special Redemption Price".......................................................................... 3.08
SECTION 1.03 INCORPORATION BY REFERENCE OF TIA Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. All terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. -24- SECTION 1.04 RULES OF CONSTRUCTION Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "herein," "hereof," "hereunder" and other words of similar import refer to this Indenture (as amended or supplemented from time to time) and not to any particular Article, Section or other subdivision; and (vii) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time. ARTICLE 2 THE NOTES SECTION 2.01 FORM AND DATING (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto; provided that only Global Notes shall have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company, the Guarantors and the Trustee shall approve the forms 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 Notes shall constitute, and are hereby expressly made, a part of this Indenture and 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. To the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Each Global Note shall be deposited with the Note Custodian and registered in the name of the Depositary or the nominee of the Depositary and shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee, the Depositary or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.07 hereof. The Company initially appoints The Depository Trust Company ("DTC") to act as -25- Depositary with respect to the Global Notes. The Trustee shall act as Note Custodian with respect to the Global Notes in accordance with its agreement with DTC. Notes initially offered and sold to QIBs in reliance on Rule 144A shall be issued in the form of one or more Rule 144A Global Notes. Notes initially offered and sold outside the United States in reliance on Regulation S shall be issued in the form of one or more Regulation S Temporary Global Notes, which shall be deposited with the Note Custodian 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. The Distribution Compliance Period shall be terminated upon the receipt by the Trustee of a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Distribution Compliance Period pursuant to another exemption from registration under the Securities Act and who took delivery of a beneficial ownership interest in a 144A Global Note, all as contemplated by Section 2.07(b)(iii) hereof). Following the termination of the Distribution Compliance Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for an equal amount of beneficial interests in the Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of the Regulation S Permanent Global Note, the Trustee shall cancel the Regulation S Temporary Global Note. (c) Definitive Notes. Notes initially offered and sold to Accredited Investors shall be issued in the form of one or more AI Definitive Notes. (d) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture: (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR OTHER 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 OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. 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 NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2), (3), (4), (5), (6) OR (7) UNDER -26- THE SECURITIES ACT PURCHASING ITS NOTE FOR INVESTMENT PURPOSES ONLY AND WITH NO PRESENT INTENTION TO RESELL THE NOTE, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED STATES, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE ISSUER, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THE NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued in compliance with subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of Section 2.07 (and all Notes issued in exchange therefor or substitution thereof), and any Additional Notes issued pursuant to a registration statement that has been declared effective under the Securities Act, shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE -27- DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A SUCCESSOR DEPOSITARY, OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THE GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THE GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE." "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON 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." (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "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." SECTION 2.02 DENOMINATIONS The Notes shall be in minimum denominations of $2,000 aggregate principal amount and integral multiples of $1,000 in excess thereof. SECTION 2.03 EXECUTION AND AUTHENTICATION The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited. The Trustee shall, upon a written order of the Company signed by two Officers of the Company or by an Officer and an Assistant Treasurer or an Assistant Secretary of the Company (an "Authentication Order"), authenticate (i) on the Issue Date, the Initial Notes in aggregate principal amount of $315.0 million, (ii) subject to the provisions of Section 2.15, at any time and from time to time thereafter, Additional Notes in an aggregate principal amount specified in such authentication order and (iii) subject to the provisions of Section 2.07(f), Exchange Notes issued in exchange for a like principal amount of Initial Notes or Additional Notes tendered pursuant to an Exchange Offer. Such authentication order shall specify (i) the amount of the Notes to be authenticated, (ii) the date on which the Notes are to be authenticated, (iii) whether the Notes are to be Initial Notes, Exchange Notes or Additional Notes and (iv) whether such Notes shall bear the Global Note Legend, the Regulation S Temporary Global Note Legend and/or the Private Placement Legend. Furthermore, Notes -28- may be authenticated and delivered upon registration or transfer, or in lieu of, other Notes pursuant to Section 2.07, 2.08, 2.11 or 9.05 or in connection with a Change of Control Offer pursuant to Section 4.15. An Officer of the Company shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until an authorized signatory of the Trustee manually authenticates the Note. The signature of the Trustee on a Note shall be conclusive evidence that the Note has been duly and validly authenticated and issued under this Indenture. The Trustee may appoint an authenticating agent (the "Authenticating Agent") acceptable to the Company to authenticate Notes. 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 Holders or an Affiliate of the Company SECTION 2.04 REGISTRAR AND PAYING AGENT The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints the Trustee to act as the Registrar and Paying Agent. SECTION 2.05 PAYING AGENT TO HOLD MONEY IN TRUST By no later than 11:00 a.m. (New York City time) on the date on which any principal of, premium or Additional Interest, if any, or interest on any Notes is due and payable, the Company shall deposit with the Paying Agent a sum sufficient in immediately available funds to pay such amount when due. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium or Additional Interest, if any, or interest on the Notes, and shall notify the Trustee in writing of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. -29- SECTION 2.06 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 all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.07 TRANSFER AND EXCHANGE (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary, (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or (iii) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.08, 2.11 and 9.05 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.07 or Section 2.08 or 2.11 or 9.05 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.07(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.07(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend and any Applicable Procedures; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Temporary Regulation S 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 or a "distributor" (as defined in Rule 902(d) of Regulation S)). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an -30- Unrestricted Global Note. Except as may be required by Applicable Procedures, no written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.07(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.07(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) if permitted under Section 2.07(a) hereof, (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.07(f) hereof, the requirements of this Section 2.07(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon notification from the Registrar that all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act have been satisfied, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.07(h) hereof. (iii) Transfer of Beneficial Interests in a Restricted Global Note to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.07(b)(ii) above and the Registrar and the Company receive the following: (A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee shall take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee shall take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. -31- (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the exchange or transfer complies with the requirements of Section 2.07(b)(ii) above and: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with a Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal or is deemed to have made such certifications if delivery is made through the Applicable Procedures as may be required by the Registration Rights Agreement; (B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar and the Company receive the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests or the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.03 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. (v) Transfer or Exchange of Beneficial Interests in Unrestricted Global Notes for Beneficial Interests in Restricted Global Notes Prohibited. Beneficial -32- interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests in Global Notes for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. Subject to Section 2.07(a) hereof, if any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar and the Company of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Accredited Investor or an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(h) hereof, and the Company shall execute and upon receipt of an Authentication Order in accordance with Section 2.03 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive -33- Note in the appropriate principal amount. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Restricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding Sections 2.07(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Distribution Compliance Period and (y) 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. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. Subject to Section 2.07(a) hereof, a holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal; (B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar and the Company receive the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; -34- and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the clauses of this Section 2.07(c)(iii), the Company shall execute, and, upon receipt of an Authentication Order in accordance with Section 2.03 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount, and the Trustee shall cause the aggregate principal amount at maturity of the applicable Restricted Global Note to be reduced in a corresponding amount pursuant to Section 2.07(h) hereof. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. Subject to Section 2.07(a) hereof, if any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon satisfaction of the applicable conditions set forth in Section 2.07(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Unrestricted Global Note to be reduced accordingly pursuant to Section 2.07(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order in accordance with Section 2.03 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar and the Company of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; -35- (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to either of the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal; (B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar and the Company receives the following: -36- (1) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Restricted Definitive Note proposes to transfer such Note to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar and the Company request or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.07(d)(ii), the Trustee shall cancel such Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iv) Transfer or Exchange of Unrestricted Definitive Notes to Beneficial Interests in Restricted Global Notes Prohibited. An Unrestricted Definitive Note may not be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note. (v) Issuance of Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest in an Unrestricted Global Note is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.03 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.07(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by such Holder's attorney, duly authorized in writing. In addition, the -37- requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.07(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer shall be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer shall be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof; and (D) if the transfer shall be to an Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (A) and (B) above, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal; (B) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar and the Company receive the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or -38- (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the clauses of Section 2.07(e)(ii), the Trustee shall cancel the prior Restricted Definitive Note and the Company shall execute, and, upon receipt of an Authentication Order in accordance with Section 2.03 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of an Exchange Offer in accordance with a Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.03, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount at maturity equal to the principal amount at maturity of the beneficial interests in the applicable Restricted Global Notes tendered for acceptance by Persons that make any and all certifications in the applicable Letter of Transmittal or are deemed to have made such certifications if delivery is made through the Applicable Procedures as may be required by such Registration Rights Agreement and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Notes in an aggregate principal amount at maturity equal to the principal amount at maturity of the Restricted Definitive Notes tendered for acceptance by Persons who made the foregoing certifications and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount at maturity of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Restricted Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.12 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount at maturity of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall -39- be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (h) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company 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 exchange or transfer pursuant to Sections 2.11, 3.06, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Registrar shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (vi) The Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.03 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.07 to effect a registration of transfer or exchange may be submitted by facsimile. (ix) The Trustee is hereby authorized and directed to enter into a letter of representations with the Depositary in the form provided by the Company and to act in accordance with such letter. (x) Subject to compliance with any applicable additional requirements contained in this Article, when a Note is presented to the Registrar with a request to register a transfer thereof or to exchange such Note for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that every Note presented or surrendered for registration of transfer or -40- exchange shall be duly endorsed or accompanied by an assignment form and, if applicable, a transfer certificate, each in the form included in Exhibit A attached hereto and in form satisfactory to the Registrar and each duly executed by the Holder thereof or its attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Note for registration of transfer or exchange at an office or agency maintained for such purpose pursuant to Section 2.04, the Company shall execute, and the Trustee shall authenticate, Notes of a like aggregate principal amount at maturity at the Registrar's request. (xi) Any Registrar appointed pursuant to Section 2.04 shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Notes upon transfer or exchange of Notes. (xii) 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 Participants or other 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. (xiii) None of the Company, the Trustee or any Paying Agent shall have any responsibility or liability for any aspect of the records relating to, or payments made on account of or transfers of, beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. (xiv) None of the Company, the Trustee or the Registrar shall have any liability for any acts or omissions of the Depositary, for any Depositary records of beneficial interests, for any transaction between the Depositary or any Participant and/or beneficial owners, for any transfers of beneficial interests in the Notes, or in respect of any transfers effected by the Depositary or by any Participant or any beneficial owner of any interest in any Notes held through any such Participant. SECTION 2.08 MUTILATED, DESTROYED, LOST OR STOLEN NOTES If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order or in accordance with a previously delivered Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any Authenticating Agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge for their expenses in replacing a Note. Every replacement Note issued in accordance with this Section 2.07 is an additional obligation of the Company and any other obligor upon the Notes and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. The Company and the Trustee may charge the Holder for their expenses in replacing a Note. In the event any such 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. -41- The provisions of this Section 2.08 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes. SECTION 2.09 OUTSTANDING NOTES The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.10 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.08 hereof, it ceases to be outstanding unless the Company and the Trustee receive proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, by 11:00 a.m. New York City time, on a redemption date or other maturity date money sufficient to pay all principal, premium and Additional Interest, if any, and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.10 TREASURY NOTES In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or by any Affiliate of the Company shall be deemed not to be 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 that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. SECTION 2.11 TEMPORARY NOTES In the event that Definitive Notes are to be issued under the terms of this Indenture, until such Definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form, and shall carry all rights, 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 Definitive Notes. After the preparation of Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Notes representing an equal principal amount of Notes. Until so exchanged, the Holder of temporary Notes shall in all respects be entitled to the same benefits under this Indenture as a Holder of Definitive Notes. SECTION 2.12 CANCELLATION The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation in accordance with customary practices (subject to the record retention requirement of the Exchange Act) and, upon request, deliver a -42- certificate of such destruction to the Company unless the Company directs the Trustee to deliver canceled Notes to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.13 DEFAULTED INTEREST If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.14 COMPUTATION OF INTEREST Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.15 ISSUANCE OF ADDITIONAL NOTES The Company shall be entitled, subject to its compliance with Section 4.09, to issue Additional Notes under this Indenture which shall have identical terms as the Initial Notes issued on the Issue Date or the Exchange Notes, other than with respect to the date of issuance and issue price, first payment of interest and rights under a related Registration Rights Agreement, if any. With respect to any Additional Notes, the Company shall set forth in a resolution of the Board of Directors and an Officers' Certificate, a copy of each which shall be delivered to the Trustee, the following information: (a) the aggregate principal amount at maturity of such Additional Notes to be authenticated and delivered pursuant to this Indenture; (b) the issue price, the issue date and the CUSIP number and corresponding ISIN of such Additional Notes; and (c) whether such Additional Notes shall be Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit A to this Indenture or shall be issued in the form of Exchange Notes as set forth in Exhibit A to this Indenture. SECTION 2.16 ONE CLASS OF NOTES The Initial Notes issued on the Issue Date, any Additional Notes and all Exchange Notes issued in exchange therefor shall be treated as a single class for all purposes under this Indenture. SECTION 2.17 CUSIP, ISIN OR OTHER SIMILAR NUMBERS -43- The Company in issuing the Notes may use "CUSIP," "ISIN" or other similar numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP," "ISIN" or other similar numbers in notices of redemption or offers to purchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption or offer to purchase and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption or offer to purchase shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP," "ISIN" or other similar numbers. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01 NOTICES TO TRUSTEE If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, the Company shall furnish to the Trustee, at least 35 days but not more than 60 days (unless a shorter period is acceptable to the Trustee) (or, in the case of a redemption pursuant to Section 3.08, by 11:00 a.m. New York time (or such other time of day acceptable to the Trustee which will permit it to give the notice referred to in the last paragraph of Section 3.03) at least one Business Day prior to the Special Redemption Date) before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price (expressed as a percentage or principal amount). SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes 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 in accordance with any other method the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee 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 thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, 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 Except as provided in Section 3.08, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture. -44- The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) 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 upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 35 days prior to the redemption date (unless a shorter period is acceptable to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Notwithstanding the foregoing, in the event that the Notes will be redeemed pursuant to the Special Redemption as set forth in Section 3.08, the Trustee shall, at the Company's request and in the Company's name and expense, give notice of such redemption to each Holder in accordance with this Section at least one Business Day prior to the Special Redemption Date. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION Once notice of redemption is mailed in accordance with Section 3.03 hereof or delivered in accordance with Section 3.08 hereof, Notes called for redemption shall become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE Prior to 11:00 a.m. New York City time on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed on that date. Subject to applicable abandoned property laws, the Trustee or the Paying Agent shall promptly, upon request, return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. -45- If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION (a) Except as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to November 15, 2009. Thereafter, the Company shall have the option to the Notes, in whole or in part at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on November 15 of the years indicated below:
Year Percentage - ---- ---------- 2009.............................................................. 103.875% 2010.............................................................. 102.583% 2011.............................................................. 101.292% 2012 and thereafter............................................... 100.000%
If the redemption date is on or after an interest payment record date and on or before the related interest payment date, the accrued and unpaid interest and Additional Interest, if any, will be paid to the Holder in whose name the Note is registered at the close of business on such record date, and no additional interest or Additional Interest, if any, will be payable to Holders whose Notes will be subject to redemption by the Company. (b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to November 15, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price equal to 107.750% of the principal amount thereof on the redemption date, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings by the Company; provided that (1) at least 65% of the aggregate principal amount of Notes issued under this Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) that such redemption shall occur within 90 days of the date of the closing of such offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. SECTION 3.08. MANDATORY SPECIAL REDEMPTION. -46- Notwithstanding the foregoing, in the event that the Acquisition is not consummated on or prior to December 27, 2004 or if the Acquisition Agreement is terminated prior to such time, the Company shall redeem (the "Special Redemption") the Notes, in whole but not in part, on or prior to December 28, 2004, at a redemption price (the "Special Redemption Price") in cash equal to 100.0% of the principal amount of the Notes plus accrued and unpaid interest to the Special Redemption Date. The "Special Redemption Date" means the earlier of the date specified by the Company in an Officers' Certificate delivered in accordance with the Escrow Agreement and December 28, 2004. The Trustee shall deliver to each Holder a written notice (specifying the information specified in Section 3.03) of the Special Redemption one Business Day prior to the Special Redemption Date. SECTION 3.09. MANDATORY REDEMPTION Except as set forth in Sections 3.08, 4.10 and 4.15, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF NOTES The Company shall pay or cause to be paid the principal of or premium, if any, Additional Interest, if any, or interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, interest and Additional Interest, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal of or premium, if any, Additional Interest, if any, or interest on the Notes then due. The Company shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful. The Company shall make all interest, premium, if any, Additional Interest, if any, and principal payments by wire transfer of immediately available funds to any Holder who shall have given written directions to the Company or the Paying Agent to make such payments by wire transfer pursuant to the wire transfer instructions supplied to the Company or the Paying Agent by such Holder on or prior to the applicable record date. All other payments on Notes shall be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their address set forth in the register of Holders. Payments in respect of Notes represented by a Global Note (including interest, premium, if any, Additional Interest, if any, and principal payments) shall be made by wire transfer of immediately available funds to the accounts specified by DTC. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co- -47- registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt 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 office of the Trustee, 100 Wall Street, 16th Floor, New York, New York (the "New York Corporate Trust Office"). The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the New York Corporate Trust Office as one such office or agency of the Company in accordance with Section 2.04. SECTION 4.03. REPORTS Whether or not required by the Commission, so long as any Notes are outstanding, the Company shall furnish to the Trustee and the Holders of Notes, within the time periods specified in the Commission's rules and regulations: (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company was required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in a "Management's Discussion and Analysis of Financial Condition and Results of Operations," of 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. In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, the Company shall file a copy of all of the information and reports referred to in clauses (i) and (ii) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Company also shall comply with the other provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and -48- the Trustee's receipt of such 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 conclusively on Officers' Certificates). The Trustee shall have no duty or responsibility to review such reports, information or documents. SECTION 4.04. COMPLIANCE CERTIFICATE (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto). (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, as soon as possible and in any event within 10 days after any Officer becoming aware of any Event of Default, an Officers' Certificate specifying such Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. TAXES The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent all material taxes, assessments, and governmental charges levied or imposed upon the Company or any Restricted Subsidiary, except such as are contested in good faith and by appropriate proceedings or where the failure to pay or discharge the same would not have a material adverse effect on the ability of the Company to perform its obligations under the Notes or this Indenture. SECTION 4.06. STAY, EXTENSION AND USURY LAWS The Company and each of the Guarantors 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, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors covenants (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants 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 has been enacted. SECTION 4.07. RESTRICTED PAYMENTS The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the -49- Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable to the Company or a Restricted Subsidiary of the Company or payable in Equity Interests (other than Disqualified Stock) of the Company); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, any payment in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees, except payments of interest (or the equivalent of Additional Interest, if any) or payments of principal at the Stated Maturity thereof; or (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default has occurred and is continuing or would occur immediately after giving effect to such Restricted Payment; (2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6) and (7) of the next succeeding paragraph), is less than the sum, without duplication, of: (a) an amount equal to the difference (but not less than zero) between (A) Cumulative Operating Cash Flow and (B) the product of 1.3 times Cumulative Total Interest Expense, plus (b) 100% of the fair market value of the Qualified Proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital (other than any capital contribution pursuant to clause (7)(e) of the next paragraph or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company or an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination), plus (c) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the return of capital with respect to such Restricted Investment, whether through -50- interest payments, principal payments, dividends or other distributions or payments or Qualified Proceeds (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus (d) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the date of this Indenture, the lesser of (i) the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation and (ii) such fair market value as of the date on which such Subsidiary was most recently designated as an Unrestricted Subsidiary plus the amount of any Investments in such Unrestricted Subsidiary subsequent to the date such Subsidiary was most recently designated as an Unrestricted Subsidiary. The preceding provisions shall not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any Indebtedness subordinated to the Notes or any Subsidiary Guarantee or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock and other than Equity Interests issued or sold to an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of the preceding paragraph; (3) the redemption, repurchase, retirement, defeasance or other acquisition of Indebtedness subordinated to the Notes or any Subsidiary Guarantee with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis (or on a basis more favorable to the Company and its Restricted Subsidiary); (5) so long as no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company or any direct or indirect parent of the Company held by any then current or former director, officer or employee of, or consultant to, the Company or any of its Restricted Subsidiaries issued pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or the declaration and payment of dividends by the Company to, or the making of loans to, any direct or indirect parent in order to effectuate any such repurchase, redemption or other acquisition or retirement for value by such direct or indirect parent; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $5.0 million in any fiscal year; provided that the amount available in any given fiscal year shall be increased by the excess, if any, of (i) $5.0 million over (ii) the amount used pursuant to this clause (5) in the immediately preceding two fiscal years; -51- (6) any payments made in connection with the consummation of the Transactions on substantially the terms described in the offering memorandum; (7) the declaration and payment of dividends by the Company to, or the making of loans to, any direct or indirect parent in amounts required for any direct or indirect parent companies to pay: (a) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence, (b) federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Company and its Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries, (c) reasonable salary, bonus and other benefits payable to directors, officers and employees of any direct or indirect parent company of the Company to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Company and its Restricted Subsidiaries, (d) general corporate overhead expenses of any direct or indirect parent company of the Company to the extent such expenses are attributable to the ownership or operation of the Company and its Restricted Subsidiaries, and (e) amounts payable by K&F Parent, Inc. under the Tax Benefit Note; provided that the aggregate principal amount of such dividend or loan shall not exceed the lesser of (i) the amount payable thereunder and (ii) $20.0 million; provided further that any tax refund or cash benefit received by any direct or indirect parent company of the Company arising from the Tender Offers shall be contributed to the capital of the Company as a capital contribution; and (8) so long as no Default or Event of Default shall have occurred and be continuing or would be caused thereby, other Restricted Payments in an aggregate amount since the date of this Indenture not to exceed $15.0 million. The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined by (a) an executive officer of the Company if the value is less than $10.0 million or (b) in all other cases, by the Company's Board of Directors. SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or -52- participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions shall not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture; (2) this Indenture, the Notes and the Subsidiary Guarantees and any other agreement or instrument entered into after the date of this Indenture; provided that such agreement or instrument is no more restrictive, taken as a whole, than this Indenture and the Notes; (3) applicable law, rule, regulation or order (including agreements with regulatory authorities); (4) any agreement or instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred or such Capital Stock was issued in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, including any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of any such agreements or instruments, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, than those contained in the agreements governing such original agreement or instrument as in effect on the date of this Indenture, provided, further, that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (5) customary non-assignment provisions in leases, licenses or contracts entered into in the ordinary course of business; (6) Capital Lease Obligations, mortgage financings or purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (3) of the preceding paragraph; (7) any agreement for the sale or other disposition of assets or Capital Stock of a Restricted Subsidiary permitted under this Indenture that restricts the sale of assets, distributions or loans by that Restricted Subsidiary pending its sale or other disposition; -53- (8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (9) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 4.12 that limit the right of the debtor to dispose of the assets subject to such Liens; (10) provisions with respect to the disposition or distribution of assets or property in joint venture agreements; provided that such restrictions apply only to the assets or property subject to such joint venture; and (11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not issue, and shall not permit any Guarantor to issue, any Disqualified Stock and shall not permit any of its Restricted Subsidiaries that are not Guarantors to issue any shares of preferred stock; provided, however, that the Company and any Guarantor may incur Indebtedness (including Acquired Debt) and the Company and any Guarantor may issue Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The first paragraph of this covenant shall not prohibit: (1) the incurrence by the Company or any Restricted Subsidiary of additional Indebtedness and letters of credit under one or more Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed $530.0 million, less the sum of all principal payments with respect to such Indebtedness pursuant to clause (A) of Section 4.10; (2) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes (other than Additional Notes) and the related Subsidiary Guarantees and the Exchange Notes and the related Subsidiary Guarantees to be issued in exchange therefor pursuant to the registration rights agreement; (4) (A) Indebtedness incurred to finance the purchase, improvement or construction of property, plant or equipment (including through the purchase of all of the Capital Stock of a Person) so long as such Indebtedness is secured by a Lien on the property, plant or equipment so purchased, improved or constructed and such Indebtedness does not exceed the value of such -54- property, plant or equipment so purchased or constructed or the value of such improvements and such Lien shall not extend to or cover other assets of the Company or any of its Restricted Subsidiaries other than the property, plant or equipment so purchased, improved or constructed or the value of such improvements and the real property, if any, on which the property so constructed, improved or purchased, is situated and the accessions, attachments, replacements and improvements thereto or (B) Indebtedness incurred in connection with any lease financing transaction in conjunction with the acquisition of new property or improvements to existing property; provided that such lease financing transaction is consummated within 90 days of such acquisition and the aggregate of the Indebtedness incurred pursuant to clauses (A) and (B) does not exceed $15.0 million during any fiscal year (such amount is referred to as the "Maximum Amount"); provided that the Maximum Amount for each year shall be increased by the excess, if any, of (a) $30.0 million over (b) the amount of expenditures made in reliance on the provisions of this clause (4) for the immediately preceding two years; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness (other than intercompany Indebtedness) in exchange for, or the net proceeds of which are used to redeem, repurchase, retire, defease, or otherwise refund, refinance, or replace Indebtedness that was permitted by this Indenture to be incurred under the first paragraph of this covenant or clauses (2), (3), (4) or (5) of this paragraph; (6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (a) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor; and (b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company, (ii) any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Restricted Subsidiary of the Company or (iii) the designation of a Restricted Subsidiary that holds such Indebtedness as an Unrestricted Subsidiary, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations; (8) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or any Guarantor that was permitted to be incurred by another provision of this covenant; (9) obligations incurred in the ordinary course of business under (a) bankers acceptances or trade letters of credit which are to be repaid in full not more than one year after the date on which such Indebtedness is originally incurred to finance the purchase of goods by the Company or a Restricted Subsidiary of the Company; (b) standby letters of credit issued for the purpose of supporting (i) workers' compensation liabilities of the Company or any of its Restricted Subsidiaries as required by law, (ii) obligations with respect to leases of the Company or any of its Restricted Subsidiaries, or (iii) performance, payment, deposit or surety obligations -55- of the Company or any of its Restricted Subsidiaries; (c) performance bonds and surety bonds, and refinancings thereof; and (d) guarantees of Indebtedness incurred in the ordinary course of business of suppliers, licensees, franchisees, or customers in an aggregate amount not to exceed $5.0 million at any time outstanding; (10) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided, however, that such Indebtedness is extinguished within five business days of the Company or its applicable Restricted Subsidiary being advised of such incurrence; (11) Indebtedness under guarantees in respect of obligations of joint ventures of the Company or any of its Restricted Subsidiaries in aggregate principal amount not to exceed $20.0 million at any one time; (12) Indebtedness incurred in connection with any sale and leaseback transaction; provided that the aggregate of the Indebtedness incurred pursuant to this clause (12) shall not exceed $30.0 million at any time outstanding; (13) Indebtedness to repurchase shares, or cancel options to purchase shares, of Equity Interests of the Company or any Restricted Subsidiary of the Company or any direct or indirect parent of the Company held by any then current or former director, officer or employee of, or consultant to, the Company or any of its Restricted Subsidiaries; provided that the aggregate of the Indebtedness incurred pursuant to this clause (13) shall not exceed $5.0 million in any fiscal year; provided that the amount available in any given fiscal year shall be increased by the excess, if any, of (i) $5.0 million over (ii) the amount used pursuant to this clause (13) in the immediately preceding two fiscal years; (14) Indebtedness arising from any agreement providing for indemnities, guarantees, purchase price adjustments, holdbacks, contingency payment obligations based on the performance of the acquired or disposed assets or similar obligations (other than guarantees of Indebtedness) incurred by any Person in connection with the acquisition or disposition of assets; (15) the incurrence by the Company or any of its Restricted Subsidiaries of Acquired Debt related to the acquisition of a Permitted Business if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such incurrence of Acquired Debt (the "Relevant Fixed Charge Coverage Ratio") determined immediately after giving effect to such incurrence and the related acquisition (including through a merger, consolidation or otherwise) is higher than the Relevant Fixed Charge Coverage Ratio determined immediately before giving effect to such incurrence and the related acquisition; (16) the issuance of any preferred stock by a Restricted Subsidiary of the Company to the Company or to any other wholly-owned Restricted Subsidiary of the Company; and (17) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of Disqualified Stock or preferred stock of Restricted Subsidiaries in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $25.0 million. If any Non-Recourse Debt of an Unrestricted Subsidiary shall at any time cease to constitute Non-Recourse Debt or such Unrestricted Subsidiary shall be redesignated a Restricted -56- Subsidiary, such event will be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary. For purposes of determining compliance with this Section 4.09: (1) in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories described in clauses (1) through (17) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify (or later classify or reclassify in whole or in part in its sole discretion) such item of Indebtedness in any manner that complies with this covenant; (2) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same, or less onerous, terms, the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock, the accrual of dividends on Disqualified Stock and the accretion of the liquidation preference of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each such case, that the amount thereof is included in the Fixed Charges of the Company; and (3) for the purposes of determining compliance with any dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the earlier of the date that such Indebtedness was incurred or the date that the Company or its applicable Restricted Subsidiary committed to incur such Indebtedness. SECTION 4.10. ASSET SALES The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of (such fair market value to be determined on the date of contractually agreeing to such Asset Sale); (2) the fair market value is determined (a) by an executive officer of the Company if the value is less than $10.0 million or (b) in all other cases, by a resolution of the Company's Board of Directors, in either such case, as set forth in an Officers' Certificate delivered to the Trustee; and (3) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this clause (3), each of the following shall be deemed to be cash: (a) the amount of any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto, of the Company or such Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets; and -57- (b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are substantially concurrently, subject to normal settlement periods, converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received in that conversion); and (c) property received as consideration for such Asset Sale that would otherwise constitute a permitted application of Net Proceeds (or other cash in such amount) under clauses (B) or (D) under the next succeeding paragraph below. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company or any of its Restricted Subsidiaries may apply an amount of cash equal to the amount of those Net Proceeds at its option to: (A) repay Senior Debt and, if such Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (B) acquire (including by way of merger or consolidation) all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business; (C) make a capital expenditure relating to an asset used or useful in a Permitted Business; or (D) acquire other long-term assets that are used or useful in a Permitted Business. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture. To the extent that the Company and its Restricted Subsidiaries do not apply an amount of cash equal to the amount of such Net Proceeds from Asset Sales during such period as provided in the second preceding paragraph the amount not so applied shall constitute "Excess Proceeds." No later than the 365th day after the Asset Sale (or, at the Company's option, an earlier date), if the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an offer (an "Asset Sale Offer") to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds (the "Offer Amount"). The offer price in any Asset Sale Offer will be equal to 100% of the principal amount (or accreted value, as applicable) of the Notes and such other pari passu Indebtedness, plus accrued and unpaid interest and Additional Interest (or its equivalent with respect to any such pari passu Indebtedness), if any, to the date of purchase, and will be payable in cash, in each case, in integral multiples of $1,000. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered in such Asset Sale Offer exceeds the amount of Excess Proceeds, the Excess Proceeds will be allocated by the Company to the Notes and such other pari passu Indebtedness on a pro rata basis (based upon the respective principal amounts (or accreted value, if applicable) of the Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer) and the portion of each Note to be purchased will thereafter be determined by the Trustee on a pro rata basis among the Holders of such Notes with appropriate adjustments such that the Notes may only be purchased in integral multiples of $1,000. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. -58- Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (1) that the Asset Sale Offer is being made pursuant to this Section 4.11 and that such Asset Sale Offer shall remain open for 20 Business Days; (2) the Offer Amount attributable to the Notes, the purchase price and the purchase date of the Notes tendered pursuant to the Asset Sale Offer (the "Purchase Date"); (3) that any Note not tendered or accepted for payment shall continue to accrue interest and Additional Interest, if any; (4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest, and Additional Interest, if any; (5) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three Business Days before the Purchase Date; (6) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the offer period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (7) that, if the aggregate accreted value of Notes and aggregate principal amount of such other pari passu Indebtedness tendered by Holders exceeds the Offer Amount, the Company shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis on the basis of the aggregate accreted value of Notes and the aggregate principal amount of such other pari passu Indebtedness tendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 aggregate principal amount at maturity, or integral multiples thereof, shall be purchased); and (8) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes and such other pari passu Indebtedness or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes, and such other pari passu Indebtedness or portions thereof tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes, and such other pari passu Indebtedness or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.10. The Company, the Depositary or the Paying Agent, as the case may be, shall on the Purchase Date mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company -59- shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount at maturity equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer promptly after Purchase Date. If the Purchase Date is on or after an interest payment record date and on or before the related interest payment date, any accrued and unpaid interest and Additional Interest, if any, will be paid to the Holder in whose name a Note is registered at the close of business on such record date, and no interest or Additional Interest, if any, will be payable to Holders who tender Notes pursuant to the Asset Sale 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 those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such conflict. Prior to making any Asset Sale Offer, but in any event within 30 days following the date on which such Asset Sale Offer would otherwise be required, the Company shall either repay all outstanding Senior Debt (or commitments to extend Senior Debt) that prohibits prepayment or repurchase of the Notes pursuant to an Asset Sale Offer or obtain the requisite consents, if any, under all agreements governing such Senior Debt or commitments to permit the repurchase of Notes required by this Section 4.10. SECTION 4.11. TRANSACTIONS WITH AFFILIATES The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company or any of its Restricted Subsidiaries (each, an "Affiliate Transaction") involving aggregate consideration in excess of $1.0 million, unless: (1) the Affiliate Transaction is on terms that are at least as favorable to the Company or the relevant Restricted Subsidiary as those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person, provided that any such Affiliated Transaction shall be conclusively deemed to be at least as favorable as the terms which could be obtained on an arm's length basis with an unrelated Person if such transaction is approved by a majority of the Company's directors (including a majority of the disinterested members of the Board of Directors); and (2) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and -60- (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, or if the Company does not have any disinterested members, an opinion as to the fairness to the holders of the Notes of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing selected by the Company. The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (1) transactions between the Company or any of its Restricted Subsidiaries and any employee, officer or director of, or consultant to, any parent company of the Company, or any of its Restricted Subsidiaries that are approved by the disinterested members of the Board of Directors; (2) reasonable and customary directors' fees, indemnification and similar arrangements for officers, directors or employees, consulting fees, officer or employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of any parent company of the Company, or any Restricted Subsidiary and payments under any indemnification arrangements permitted by applicable law; (3) transactions between or among the Company and/or its Restricted Subsidiaries; (4) transactions with a Person that is an Affiliate of the Company or any Restricted Subsidiary solely because the Company or any Restricted Subsidiary owns an Equity Interest in, or controls, such Person; (5) the pledge of Equity Interests of Unrestricted Subsidiaries to support the Indebtedness thereof; (6) issuances and sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; (7) Restricted Payments that are permitted by the provisions of this Indenture in Section 4.07; (8) the payment of management fees and related expenses to Aurora Management Partners LLC and its Affiliates; provided that such fees shall not, in the aggregate, exceed $2.0 million (plus out of pocket expenses) in any twelve-month period commencing after the date of this Indenture; (9) the payment of transaction, consulting and advisory fees and related expenses to Aurora Management Partners LLC and its Affiliates for financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including without limitation, in connection with acquisitions or divestitures, in each case, which payments are (a) reasonably related to the services performed and (b) either (i) under $10.0 million in any fiscal year or (ii) approved by a majority of the members of the Board of Directors of the Company; and (10) the payment of all fees and expenses related to the Transactions, which are described in the Offering Memorandum. -61- SECTION 4.12. LIENS The Company shall not and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist any Lien of any kind securing Indebtedness, Attributable Debt or trade payables (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured (i) in the case of Liens securing Indebtedness that is pari passu in right of payment to the Notes or any Subsidiary Guarantee, on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien and (ii) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes or any Subsidiary Guarantee, on a senior basis to the obligations so secured with the same relative priority as the Notes or such Subsidiary Guarantee, as the case may be, shall have to that subordinated or junior Indebtedness until such time as such obligations are no longer secured by a Lien. SECTION 4.13. BUSINESS ACTIVITIES The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole. SECTION 4.14. CORPORATE EXISTENCE Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries, except where the failure to do so would not have a material adverse effect on the ability of the Company to perform its obligations under the Notes or this Indenture. SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL If a Change of Control occurs, the Company will be required to make an offer (a "Change of Control Offer") to each Holder of Notes, unless the Company has exercised its right to redeem all the Notes as described under Section 3.07, to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes on the terms set forth in this Indenture. In the Change of Control Offer, the Company will offer a payment in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased, to the date of purchase (the "Change of Control Payment Date"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder stating: (i) that the Change of Control Offer is being made pursuant to this Section 4.15 (and describing the transactions or transactions that constitute the Change of Control) and that all Notes tendered shall be accepted for payment; (ii) the purchase price and Change of Control Payment Date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed; (iii) that any Note not tendered shall continue to accrue interest and Additional Interest, if any; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest and Additional Interest, if any, after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of -62- Control Payment Date; (vi) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount at maturity of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (vii) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount at maturity to the unpurchased portion of the Notes surrendered, which unpurchased portion must be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess thereof. 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 those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the covenant described above by virtue of such conflict. On the Change of Control Payment Date, the Company shall, to the extent lawful: (1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; (2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes validly tendered the Change of Control Payment for such Notes, and the Trustee shall promptly 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, if any; provided that each new Note will be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. If the Change of Control Payment Date is on or after an interest payment record date and on or before the related interest payment date, any accrued and unpaid interest and Additional Interest, if any, shall be paid to the Holder in whose name a Note is registered at the close of business on such record date, and no other interest or Additional Interest, if any, will be payable to Holders who tender pursuant to the Change of Control Offer. 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 set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer. Prior to complying with any of the other provisions of this Section 4.15, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt (or commitments to extend Senior Debt) that prohibits prepayment or repurchase of the Notes pursuant to a Change of Control Offer or obtain the requisite consents, if any, under all agreements -63- governing such Senior Debt or commitments to permit the repurchase of Notes required by this Section 4.15. SECTION 4.16. FUTURE SUBSIDIARY GUARANTEES If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date hereof, then the Company shall cause that newly acquired or created Domestic Subsidiary, unless such newly acquired or created Subsidiary has been designated an Unrestricted Subsidiary under this Indenture, to become a Guarantor and execute a Subsidiary Guarantee pursuant to a supplemental indenture in form and substance set forth in Exhibit E-1 and deliver an Opinion of Counsel satisfactory to the Trustee, to the Trustee within ten Business Days of the date on which it was acquired or created. In addition, if any of the Company's Foreign Subsidiaries guarantee any Indebtedness of the Company, then the Company shall cause such Foreign Subsidiary to become a Guarantor and execute a Subsidiary Guarantee pursuant to a supplemental indenture in form and substance set forth in Exhibit E-1 and deliver an Opinion of Counsel satisfactory to the Trustee, to the Trustee within ten Business Days of the date on which it guaranteed such Indebtedness. Each Subsidiary Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by that Restricted Subsidiary without rendering the Subsidiary Guarantee, as it relates to such Restricted Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 4.17. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph (or clause (7) of the second paragraph) of Section 4.07 or Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. All Subsidiaries of Unrestricted Subsidiaries shall be automatically deemed to be Unrestricted Subsidiaries. All designations of Subsidiaries as Unrestricted Subsidiaries and revocations thereof must be evidenced by filing with the Trustee resolutions of the Board of Directors of the Company and an Officers' Certificate certifying compliance with the foregoing provisions. SECTION 4.18. PAYMENTS FOR CONSENT The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an 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 and is paid to all Holders of the Notes 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. LIMITATION ON LAYERING DEBT -64- The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Subsidiary Guarantee. ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS The Company may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey, lease or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless: (1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction no Default or Event of Default exists; and (4) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09. For purposes of this Section, the sale, assignment, transfer, conveyance, lease or other disposition of all or substantially all of the properties and assets of one or more Restricted Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Restricted Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Notwithstanding the preceding clause (4), (i)(x) any Restricted Subsidiary may consolidate with, merge into, sell, assign, convey, lease or otherwise transfer all or part of its properties and assets to the Company or to any other Restricted Subsidiary that is a Guarantor and (y) the Company -65- may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction to realize tax benefits and (ii) the Company may consummate the Merger. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED Upon any consolidation or merger, or any sale, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, conveyance or other disposition, the provisions of this Indenture referring to the Company shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. The predecessor company shall be relieved from the obligation to pay the principal of and interest on the Notes (and its obligations to the Trustee pursuant to Section 7.07) only in the case of a sale or other disposition of all or substantially all of the properties and assets of all of the Company and its Restricted Subsidiaries taken as a whole that meets the requirements of Section 5.01 hereof. The successor Person shall execute a supplemental indenture in form and substance set forth in Exhibit E-2 and satisfactory to the Trustee and deliver an Opinion of Counsel satisfactory to the Trustee, to the Trustee within ten Business Days of the date of any such consolidation or merger, or any sale, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT Each of the following is an Event of Default: (1) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes, whether or not prohibited by the subordination provisions of this Indenture; (2) default in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of this Indenture; (3) failure by the Company to comply with any of the provisions of Section 5.01 hereof; (4) failure by the Company or any of its Restricted Subsidiaries to purchase Notes tendered pursuant to an offer required by Section 4.10 or Section 4.15 hereof; (5) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in this Indenture; (6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed of the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default: -66- (a) is caused by a failure to pay at the final Stated Maturity the principal amount of such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its Stated Maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (7) failure by the Company or any of its Subsidiaries to pay final judgments (not subject to appeal) aggregating in excess of $15.0 million, which judgments are not paid, discharged or stayed within a period of 60 days after the date on which the right to appeal has expired; (8) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (9) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a Note Custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; and (10) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary in an involuntary case; (b) appoints a Custodian of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary; or (c) orders the liquidation of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days. -67- The term "Custodian" means any receiver, trustee, assignee, liquidation, sequestrator or similar official under any Bankruptcy Law. SECTION 6.02. ACCELERATION In the case of an Event of Default arising from clause (9) or (10) of the first paragraph of Section 6.01, with respect to the Company or any Restricted Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes, by notice in writing to the Trustee and the Company designated as a "Notice of Default," may declare all the Notes to be due and payable (a) if there shall no longer be any Credit Facility that constitutes Senior Debt, immediately or (b) if there shall be a Credit Facility that constitutes Senior Debt, upon the first to occur of (i) the declaration of an acceleration of Indebtedness outstanding under any such Credit Facility and (ii) the fifth Business Day after receipt by the Company and the agents or trustees acting on behalf of any such Credit Facility of such declaration given under the indenture and, upon any such declaration, such principal amount (and premium, if any) and accrued interest, notwithstanding anything contained in the indenture or the Notes to the contrary will become immediately due and payable. Any such declaration with respect to the Notes may be annulled by the Holders of a majority in aggregate principal amount of the then outstanding Notes upon the conditions set forth herein. Notwithstanding the foregoing, if an Event of Default specified in clause (6) of Section 6.01 shall have occurred and be continuing, such Event of Default and any consequential acceleration shall be automatically rescinded if (i) the Indebtedness that is the subject of such Event of Default has been repaid, or (ii) if the default relating to such Indebtedness is waived or cured and if such Indebtedness has been accelerated, then the Holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness. Any such declaration with respect to the Notes may be rescinded and annulled by the Holders of a majority in aggregate principal amount at maturity of the outstanding Notes by written notice to the Trustee, except a continuing Default or Event of Default in the payment of principal of, or interest or premium or Additional Interest, if any, on the Notes, if (i) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, (ii) all existing Events of Default have been cured or waived except nonpayment of principal of or interest on the Notes that has become due solely by such declaration of acceleration, (iii) to the extent the payment of such interest is lawful, interest (at the same rate specified in the Notes) on overdue installments of interest and overdue payments of principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of a Default or Event of Default of the type described in Section 6.01(9) and (10) the Trustee has received an Officers' Certificate and Opinion of Counsel that such Default or Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. OTHER REMEDIES If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium on, Additional Interest, if any, and interest 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 of a -68- Note 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. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS Subject to Section 9.02 and in any event in accordance with the conditions set forth in the last paragraph of Section 6.02, Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Additional Interest on, or interest on the Notes (including in connection with an offer to purchase); provided that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration, so long as such acceleration was not the result of a payment default. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY Holders of a majority in principal amount of the then 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 it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT -69- Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), 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 is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest 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, its agents and counsel. 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 of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding 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, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. 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, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES After an Event of Default, any money or other property distributable in respect of the Company's obligations under this Indenture shall be paid in the following order: First: to the Trustee (including any predecessor Trustee), its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Additional Interest, if any and interest, respectively; and -70- Third: to the Company or to such party as a court of competent jurisdiction shall direct in writing. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a 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 and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) or (d) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) 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 hereof. -71- (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE (a) The Trustee may, in the absence of bad faith on its part, conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. 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 Trustee may consult with counsel selected by it and the advice of such 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 it 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 or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) 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. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors of the Company may be sufficiently evidenced by a Board Resolution. (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness 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 to examine, to the extent necessary and consistent with each inquiry or investigation, the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. -72- (i) The Trustee shall not be deemed to have notice, nor shall it be charged with knowledge, of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of such Default or Event of Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. (j) 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 to each agent, custodian and other Person employed to act hereunder. (k) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles or officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. (l) In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. (m) The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; terrorism; wars and other military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunctions of utilities, computer (hardware or software) or communication services; accidents; labor disputes; acts of civil or military authority and governmental action. 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 or any Affiliate of the Company with the same rights it would have if it were not Trustee. If the Trustee does become a creditor of the Company or any Guarantor, this indenture limits its rights to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes or any security for the payment of the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS -73- If a Default or Event of Default occurs and is continuing and if it is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium and Additional Interest, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES Within 60 days after each November 15 beginning with the November 15 following the Issue Date, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2) to the extent applicable. The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the Commission and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or any delisting thereof. SECTION 7.07. COMPENSATION AND INDEMNITY The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon written request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Guarantors shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or such Guarantor shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent. The obligations of the Company and the Guarantors under this Section 7.07 shall survive the resignation or removal of the Trustee, the satisfaction and discharge of this Indenture and the termination of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the resignation or removal of the Trustee, the satisfaction and discharge of this Indenture and the termination of this Indenture. -74- In addition and without prejudice to its rights hereunder, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(9) or (10) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08. REPLACEMENT OF TRUSTEE A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC -75- If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another Person, the successor Person without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Nothing herein shall prohibit the Trustee from making the application to the Commission referred to in the penultimate paragraph of Section 310(b) of the TIA. For purposes of Section 310(b)(1) of the TIA and to the extent permitted thereby, the Trustee shall not be deemed to have a conflicting interest arising from its capacity as trustee in respect of (i) the Indenture, dated October 15, 1997, pursuant to which K&F Industries, Inc.'s 9-1/4% Senior Subordinated Notes due 2007 are outstanding and (ii) the Indenture, dated December 20, 2002, pursuant to which K&F Industries, Inc.'s 9-5/8% Senior Subordinated Notes due 2010 are outstanding. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY The Trustee is subject to 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. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from all of its obligations with respect to all outstanding Notes (including Subsidiary Guarantees) and this Indenture on the date the conditions set forth below are satisfied and the Guarantors shall be deemed to have been discharged with respect to their Subsidiary Guarantees (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including Subsidiary Guarantees), which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes, the Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the -76- expense of the Company, shall execute proper instruments acknowledging the same); provided that the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of or premium, if any, Additional Interest, if any, or interest on the Notes when such payments are due, (b) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes and mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantor's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Article 4 (other those in Sections 4.01, 4.02, 4.06 and 4.14) and in clause (3) of Section 5.01(4) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes 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, Covenant Defeasance means that, with respect to the outstanding Notes and Subsidiary Guarantees, the Company and the Guarantors 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 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guarantees shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(6) through 6.01(8) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank or firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on the outstanding Notes on the Stated Maturity or on the applicable redemption date specified by the Company, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (2) in the case of an election under Section 8.02 hereof, the Company has delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that: -77- (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (b) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of an election under Section 8.03 hereof, the Company has delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as 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 deposit; (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) 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 must have delivered to the Trustee an opinion of counsel, subject to customary qualifications, to the effect that after the 91st day following the deposit, no trust funds will be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally or in connection with Covenant Defeasance, such trust funds will be subject to a first priority lien in favor of the Trustee for the benefit of the Holders of Notes; (7) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (8) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company -78- acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal of or premium, if any, Additional Interest, if any, or interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO THE COMPANY Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or premium, if any, Additional Interest, if any, or interest on the Notes and remaining unclaimed for two years after such principal, and premium, if any, Additional Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. SECTION 8.07. REINSTATEMENT If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantor's obligations under this Indenture and the Notes and the Subsidiary Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided that, if the Company has made any payment of principal of, premium, if any, Additional Interest, if any, or interest on any Note following 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 held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES -79- Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note to: (1) cure any ambiguity, defect or inconsistency; (2) provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code); (3) provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets; (4) make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the rights under this Indenture of any such Holder; (5) provide for the issuance of Additional Notes in accordance with the provisions set forth in this Indenture; (6) evidence and provide for the acceptance of an appointment of a successor trustee; (7) conform this Indenture or the Notes to the "Description of Notes" set forth in the Offering Memorandum; (8) add Subsidiary Guarantees with respect to the Notes; or (9) comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the TIA. Upon the request of the Company accompanied by a resolution of the Board of Directors of the Company authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES Except as provided in Section 9.01 or below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at maturity of the Notes then outstanding voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount at maturity of the then outstanding Notes voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.09 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. -80- However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a nonconsenting Holder): (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of (or the premium on) or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants contained in Section 4.10 and Section 4.15); (3) reduce the rate of or change the time for payment of interest or Additional Interest on any Note; (4) waive a Default or Event of Default in the payment of principal of, or interest or premium or Additional Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in currency other than that stated in the Notes; (6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on the Notes; (7) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants contained in Section 4.10 and Section 4.15); (8) release any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture; or (9) make any change in the preceding amendment and waiver provisions. In addition, any amendment to, or waiver of, the provisions of this Indenture relating to subordination that adversely affects the rights of the Holders of the Notes will require the consent of the Holders of at least 75% in aggregate principal amount of Notes then outstanding. Upon the request of the Company accompanied by a resolution of the Board of Directors of the Company authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS -81- Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note 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. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTICE OF AMENDMENT; NOTATION ON OR EXCHANGE OF NOTES After any amendment under this Article becomes effective, the Company shall mail to Holders of Notes a notice briefly describing such amendment. The failure to give such notice to all Holders of Notes, or any defect therein, shall not impair or affect the validity of an amendment under this Article. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement, in the sole discretion of the Trustee, does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 11.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBSIDIARY GUARANTEES SECTION 10.01. GUARANTEE (a) Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of, premium and Additional Interest, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will 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 Notes or any of such other obligations, that same will be promptly paid in full when due or performed in -82- accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guarantors hereby agree that their obligations hereunder are 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 Holder with respect to any provisions hereof or thereof, 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. (c) 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 covenant that this Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (d) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect. (e) Each Guarantor agrees that it will 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. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. (f) The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. SECTION 10.02. LIMITATION ON GUARANTOR LIABILITY Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. -83- SECTION 10.03. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS No Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Company or another Guarantor, unless: (1) immediately after giving effect to such transaction, no Default or Event of Default exists; and (2) either: (a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger unconditionally assumes all the obligations of that Guarantor under this Indenture (including its Subsidiary Guarantee) and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the trustee; or (b) the Net Proceeds of such sale or other disposition will be required to be applied in accordance with the applicable provisions of this Indenture. SECTION 10.04. RELEASES OF SUBSIDIARY GUARANTEES The Subsidiary Guarantee of a Guarantor will be released: (1) in connection with any sale, disposition or other transfer (including through merger or consolidation) of (x) the Equity Interests of such Guarantor following which such Guarantor is no longer a Subsidiary of the Company or (y) all or substantially all the assets of the applicable Guarantor, in each case, to a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company if such sale, disposition or other transfer is made in compliance with the applicable provisions of this Indenture; (2) upon the release or discharge of the guarantee by such Guarantor of Indebtedness of K&F which resulted in the obligation to guarantee the Notes; (3) in connection with the Legal Defeasance of the Notes and the Subsidiary Guarantees; or (4) if the Company designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture. ARTICLE 11 SATISFACTION AND DISCHARGE SECTION 11.01. SATISFACTION AND DISCHARGE This Indenture shall be discharged and will cease to be of further effect as to all Notes and Subsidiary Guarantees issued hereunder, except as to surviving rights of registration of transfer or exchange of the Notes, when: (a) either: -84- (i) all Notes that have been previously authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has previously been deposited in trust or segregated and held in trust by the Company and is thereafter repaid to the Company or discharged from the trust) have been delivered to the Trustee for cancellation; or (ii) all Notes that have not been previously delivered to the Trustee for cancellation (A) have become due and payable or (B) will become due and payable at their maturity within one year or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of a notice of redemption by the Trustee, and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not previously delivered to the Trustee for cancellation for principal, premium, if any, and interest and Additional Interest, if any, on the Notes to the date of deposit, in the case of Notes that have become due and payable, or to the Stated Maturity or redemption date, as the case may be; (b) the Company or any Guarantor has paid or caused to be paid all other sums payable by it under this Indenture; (c) no Default or Event of Default has occurred and is continuing on the date of such deposit or shall occur as a result of such deposit and such deposit shall not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which the Company or any Guarantor is bound; and (d) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 7.07 and, if money shall have been deposited with the Trustee pursuant to subclause (C) of Clause (ii) of this Section, the obligations of the Trustee under Section 11.02 shall survive. SECTION 11.02. APPLICATION OF TRUST FUNDS Subject to Section 11.03 hereof, all cash and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee pursuant to Section 11.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest and Additional Interest, if any, but such cash and securities need not be segregated from other funds except to the extent required by law. SECTION 11.03. REPAYMENT TO COMPANY -85- Any cash or non-callable Government Securities deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest or Additional Interest, if any, on, any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest or Additional Interest, if any, has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder shall thereafter, as an unsecured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such cash and securities, and all liability of the Company as trustee thereof, shall thereupon cease; provided that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such cash and securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such cash and securities then remaining will be repaid to the Company. SECTION 11.04. REINSTATEMENT If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Sections 11.01 and 11.02, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Sections 11.01 and 11.02 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Sections 11.01 and 11.02 hereof, as the case may be; provided that, if the Company makes any payment of principal of, premium on, if any, or interest or Additional Interest, if any, on any Note following 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 held by the Trustee or Paying Agent. ARTICLE 12 SUBORDINATION SECTION 12.01. AGREEMENT TO SUBORDINATE The Company agrees, and each Holder by accepting a Note agrees, that the payment of principal, interest and premium and Additional Interest, if any, and interest on, and other Obligations evidenced by, the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter incurred) of the Company, and that the subordination is for the benefit of the holders of Senior Debt. SECTION 12.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities: (1) holders of Senior Debt shall be entitled to receive payment in full in cash (or U.S. dollar-denominated Cash Equivalents) of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the -86- rate specified in the applicable Senior Debt) before the Holders of Notes shall be entitled to receive any payment of any kind or character with respect to the Notes; and (2) until all Obligations with respect to Senior Debt are paid in full in cash (or U.S. dollar-denominated Cash Equivalents), any distribution to which the Holders of Notes would be entitled but for this Article 12 shall be made to the holders of such Senior Debt. Notwithstanding the foregoing, Holders of Notes may receive and retain (i) Permitted Junior Securities and (ii) payments made from the trusts described in Article 8 hereof. SECTION 12.03. DEFAULT ON DESIGNATED SENIOR DEBT The Company may not redeem or make any payment of any kind or character upon or in respect of the Notes (other than in (1) Permitted Junior Securities and (2) payments made from the trusts described in Article 8 hereof) if: (i) a default in the payment of the principal of, premium, if any, or interest on, or fees or any other amount payable with respect to, any Designated Senior Debt occurs and is continuing beyond any applicable grace period; or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity (or that would permit such holders to accelerate with the giving of notice or passage of time or both) and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Company or the holders of such Designated Senior Debt. Payments or distributions on the Notes or redemption of the Notes may and shall be resumed: (a) in the case of default referred to in Section 12.03(i), upon the date on which such default is cured or waived, and (b) in case of a default referred to in Section 12.03(ii), upon the earlier of (i) the date on which such default is cured or waived or (ii) 179 days after the date on which the applicable Payment Blockage Notice is received by the Trustee (unless the maturity of any Designated Senior Debt has been accelerated or unless the provisions of this Article 12 otherwise do not permit such payment). No new Payment Blockage Notice may be delivered unless and until (a) 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice and (2) all scheduled payments of principal of, premium and Additional Interest, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of receipt by the Trustee of any Payment Blockage Notice shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default has been cured or waived for a period of not less than 90 consecutive days. Following the expiration of any period during which the Company is prohibited from making payments on the Notes pursuant to a Payment Blockage Notice, the Company will be obligated to resume making any and all required payments in respect of the Notes, including without limitation any missed payments. SECTION 12.04. ACCELERATION OF NOTES -87- The Company shall promptly notify holders of Designated Senior Debt if payment of the Notes is accelerated because of an Event of Default. SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes (other than in (1) Permitted Junior Securities and (2) payments made from the trusts described in Article 8 hereof) at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 12.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of and, upon written request, shall be paid forthwith over and delivered to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 12, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 12, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 12.06. NOTICE BY THE COMPANY The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 12, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article. SECTION 12.07. SUBROGATION After all Senior Debt is irrevocably paid in full in cash or U.S. dollar-denominated Cash Equivalents reasonably satisfactory to the holders thereof and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt. A distribution made under this Article to holders of Senior Debt that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. SECTION 12.08. RELATIVE RIGHTS This Article defines the relative rights of Holders and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; -88- (2) affect the relative rights of Holders and other creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article 12 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 12.09. SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 12, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. SECTION 12.11. RIGHTS OF TRUSTEE AND PAYING AGENT Notwithstanding the provisions of this Article 12 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article. Only the Company or a Representative may give the notice. Nothing in this Article 12 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt (or a Representative of such holder) to establish that such notice has been given by a holder of Senior Debt (or a Representative of any such holder). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 12, and if such evidence is not furnished, the Trustee may defer any payment which it may be required to make for the benefit of such Person pursuant to the terms of this Indenture pending judicial determination as to the rights of such Person to receive such payment. -89- The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 12.12. AUTHORIZATION TO EFFECT SUBORDINATION Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 12, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. SECTION 12.13. SUBORDINATION OF SUBSIDIARY GUARANTEES The Obligations of each Guarantor under its Subsidiary Guarantee are subordinated in right of payment to the Obligations of each Guarantor under its Senior Debt in the same manner and to the same extent that the Notes are subordinated to Senior Debt of the Company pursuant to this Article 12. ARTICLE 13 MISCELLANEOUS SECTION 13.01. TRUST INDENTURE ACT CONTROLS If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act which is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 13.02. NOTICES Any notice or communication by the Company, any Guarantor or the Trustee shall be in writing (which may be a facsimile, receipt confirmed) and delivered in person or mailed by first class mail addressed as follows: If to the Company or any Guarantor (prior to the Merger): K&F Acquisition, Inc. c/o Aurora Capital Group 10877 Wilshire Boulevard, Suite 2100 Los Angeles, CA 90024 Attn: Richard K. Roeder Fax: (310) 824-2791 If to the Company or any Guarantor (after the Merger): K&F Industries, Inc. 600 Third Avenue 27th Floor New York, NY 10016 Attn: General Counsel Fax: (212) 297-0900 -90- With a copy to: Gibson, Dunn & Crutcher LLP 333 Grand Avenue Los Angeles, CA 90071 Attention: Bruce D. Meyer Facsimile: (213) 229-6979 If to the Trustee: U.S. Bank National Association Goodwin Square 224 Asylum Street Hartford, CT 06103 Attention: Corporate Trust/C. Silva Facsimile: (860) 241-6881 Re: K&F Acquisition, Inc. The Company, any Guarantor or the Trustee, by notice to the other may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be in writing and shall be deemed to have been duly given when received. Any notice or communication to a Holder shall be mailed by first class mail to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. 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 the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent (including any covenants compliance with which constitutes a condition precedent) provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent (including any covenants compliance with which constitutes a condition precedent) have been satisfied. -91- 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 such eligible and qualified Persons as to other matters, and any such Person may certify or given 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 related to legal matters, upon a certificate or opinion of, or representations 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 certificate or opinion of 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 the information on which counsel is relying unless such counsel knows, or in the exercise of reasonable care should know, 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. SECTION 13.05. 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 a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the person(s) making such certificate or opinion has read such covenant or condition; (b) 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; (c) a statement that, in the opinion of such person, he or she has or they have made such examination or investigation as is necessary to enable such person or persons to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such persons, such condition or covenant has been satisfied. SECTION 13.06. RULES BY TRUSTEE AND AGENTS The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator, Affiliate or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Subsidiary Guarantees or the Registration Rights Agreement, 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 such Note waives and releases all such liability. The waiver and release are part of the -92- consideration for issuance of the Notes. The wavier may not be effective to waive liabilities under the federal securities laws SECTION 13.08. GOVERNING LAW THIS INDENTURE, THE Subsidiary GUARANTEES AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. SUCCESSORS All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 10.05. SECTION 13.11. SEVERABILITY In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby to the extent permitted by applicable law. SECTION 13.12. COUNTERPART ORIGINALS The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 13.14. BENEFITS OF INDENTURE Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Debt and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture, except as may otherwise be provided pursuant to this Indenture with respect to such Notes. SECTION 13.15. LEGAL HOLIDAYS In any case where any interest payment date, redemption date or maturity of any Note, or any date on which a Holder has the right to convert his Note, shall not be a Business Day at any place of payment, then (notwithstanding any other provision of this Indenture or of the Notes (other than a provision of any Note which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any), or conversion of such Note need not be made at -93- such place of payment on such date, but may be made on the next succeeding Business Day at such place of payment with the same force and effect as if made on the interest payment date or redemption date, or at the maturity, or on such date for conversion, as the case may be. [Signatures on following page] -94- IN WITNESS WHEREOF, the parties hereto have executed this Indenture this 18th of November 2004. K&F ACQUISITION, INC. By: /s/ Richard K. Roeder -------------------------------------- Name: Richard K. Roeder Title: Vice President and Secretary U.S. BANK NATIONAL ASSOCIATION, as Trustee By: /s/ Cauna M. Silva -------------------------------------- Name: Cauna M. Silva Title: Vice President -95- EXHIBIT A [Insert the Global Note Legend, if applicable, pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable, pursuant to the provisions of the Indenture] [Insert the Regulation S Legend, if applicable, pursuant to the provisions of the Indenture] CUSIP No. ISIN No. [Face of Note] 7-3/4% Senior Subordinated Notes due 2014 Principal amount at Maturity $ ______ K&F Acquisition, Inc. K&F Acquisition, Inc., a Delaware corporation (the "Company") promises to pay to ______________, or registered assigns, the principal sum of _____________ Dollars on _____________, 20[__] [or such greater or lesser amount as may be indicated on Schedule A hereto](1). Interest Payment Dates: May 15 and November 15, commencing __________, ___ Record Dates: May 1 and November 1 Additional provisions of this Note are set forth on the other side of this Note. - ---------------------- (1) If this Note is a Global Note, include this provision. A-1 Dated: K&F ACQUISITION, INC. By:______________________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the [Global] Notes referred to in the within-mentioned Indenture: U.S. BANK NATIONAL ASSOCIATION, as Trustee By:_________________________________ Authorized Signatory A-2 [FORM OF REVERSE OF NOTES] 7-3/4% Senior Subordinated Notes due 2014 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) Interest. K&F Acquisition, Inc., a Delaware corporation (together with its permitted successors, the "Company"), promises to pay interest on the principal amount of this Note at 7-3/4% per annum from November 18, 2004 until maturity and shall pay the Additional Interest, if any, payable pursuant to Section 5 of the Registration Rights Agreement. The Company shall pay interest and Additional Interest, if any, semi-annually in arrears on May 15 and November 15 of each such year, commencing May 15, 2005 or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance[; provided that if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be the first of May 15 or November 15 to occur after the date of issuance, unless such May 15 or November 15 occurs within one calendar month of such date of issuance, in which case the first Interest Payment Date shall be the second of May 15 or November 15 to occur after the date of issuance](2). Interest shall be computed on the basis of a 360-day year of twelve 30-day months. (2) Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons in whose name(s) this Note (or one or more Predecessor Notes) who are registered Holders of Notes at the close of business on the May 1 or November 1 next preceding the Interest Payment Date (each, a "Record Date"), even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal of or premium, if any, Additional Interest, if any, or interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of or premium, if any, Additional Interest, if any, or interest on, the Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent prior to the applicable Record Date. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. (3) Paying Agent and Registrar. Initially, U.S. Bank National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. (4) Indenture. The Company issued the Notes under an Indenture, dated as of November 18, 2004 ("Indenture"), between the Company 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 - ------------------------- (2) Insert if Notes are Additional Notes. A-3 of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company initially in the aggregate principal amount of $315,000,000. Subject to compliance with Section 2.15 of the Indenture, the Company is permitted to issue Additional Notes under the Indenture in an unlimited principal amount. Any such Additional Notes that are actually issued shall be treated as issued and outstanding Notes (and as the same class as the Initial Notes) for all purposes of the Indenture, unless the context clearly indicated otherwise. (5) Subordination. The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purposes. (6) Guarantees. This Note is guaranteed by the Persons, if any, specified as Guarantors in the Indenture to the extent provided in the Indenture. The Subsidiary Guarantees are subordinated to the Senior Debt of the applicable Guarantor in the manner and to the extent provided in the Indenture. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purposes. (7) Optional Redemption. (a) Except as set forth in clause (b) of this Paragraph 7, the Company shall not have the option to redeem the Notes pursuant to Section 3.07 of the Indenture prior to November 15, 2009. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest thereon, if any, to the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on November 15 of the years indicated below:
YEAR Percentage - ---- ---------- 2009..................................................................... 103.875% 2010..................................................................... 102.583% 2011..................................................................... 101.292% 2012 and thereafter...................................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Paragraph 7, at any time prior to November 15, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture (including any Additional Notes) at a redemption price equal to 107.750% of the principal amount thereof on the redemption date, plus accrued and unpaid Additional Interest, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings by the Company; provided that (1) at least 65% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) that such redemption shall occur within 90 days of the date of the closing of such offering. A-4 (c) On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. (8) Special Mandatory Redemption. Notwithstanding the foregoing, in the event that the Acquisition is not consummated on or prior to December 27, 2004 or if the Acquisition Agreement is terminated prior to such time, the Company shall redeem (the "Special Redemption") the Notes, in whole but not in part, on or prior to December 28, 2004, at a redemption price (the "Special Redemption Price") in cash equal to 100.0% of the principal amount of the Notes plus accrued and unpaid interest on the Special Redemption Date. The "Special Redemption Date" means the earlier of the date specified by the Company in an Officers' Certificate delivered in accordance with the Escrow Agreement and December 28, 2004. The Trustee shall deliver to each Holder a written notice (specifying the information specified in Section 3.03) of the Special Redemption one Business Day prior to the Special Redemption Date. (9) Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $10 million, the Company or the applicable Restricted Subsidiary shall commence an offer to all Holders pursuant to Section 4.10 of the Indenture to purchase the maximum principal amount of Notes (an "Asset Sale Offer") to all Holders of Notes and all holders of such other Indebtedness of the Company that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered in such Asset Sale Offer exceeds the amount of Excess Proceeds, the Excess Proceeds will be allocated by the Company to the Notes and such other pari passu Indebtedness on a pro rata basis (based upon the respective principal amounts (or accreted value, if applicable) of the Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer) and the portion of each Note to be purchased will thereafter be determined by the Trustee on a pro rata basis among the Holders of such Notes with appropriate adjustments such that the Notes may only be purchased in integral multiples of $1,000. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero. Holders of Notes that are the subject of an offer to purchase shall receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. (10) Notice of Redemption. Except as provided in paragraph (8), notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to A-5 be redeemed on the basis of the aggregate principal amount (or accreted value, as applicable) of Notes and other pari passu Indebtedness tendered. (11) Denominations, Transfer, Exchange. The Notes are in registered form without coupons in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (12) Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. (13) Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary Guarantees or the Notes (other than a Default or Event of Default in the payment of the principal of or premium, if any, Additional Interest, if any, or interest on the Notes) or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency; provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code); provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets; make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the rights under the Indenture of any such Holder; provide for the issuance of Additional Notes in accordance with the provisions set forth in this Indenture; evidence and provide for the acceptance of an appointment of a successor trustee; conform this Indenture or the Notes to the "Description of Notes" set forth in the Offering Memorandum; add Subsidiary Guarantees with respect to the Notes; or comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the TIA. (14) Events of Default. Events of Default include (1) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes, whether or not prohibited by the subordination provisions of the Indenture; (2) default in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of the Indenture; (3) failure by the Company to comply with any of the provisions of Section 5.01 of the Indenture; (4) failure by the Company or any of its Restricted Subsidiaries to purchase Notes tendered pursuant to an offer required by Section 4.10 or Section 4.15 of the Indenture; (5) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in the Indenture; (6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed of the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its A-6 Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default: (a) is caused by a failure to pay at the final Stated Maturity the principal amount of such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its Stated Maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (7) failure by the Company or any of its Subsidiaries to pay final judgments (not subject to appeal) aggregating in excess of $15.0 million, which judgments are not paid, discharged or stayed within a period of 60 days after the date on which the right to appeal has expired; (8) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (9) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary. If any Event of Default (other than an Event of Default specified in clause (9) of this Section 14) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency as specified in clause (9) of this Section 14, all outstanding Notes shall become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture, except a continuing Default or Event of Default in the payment of interest or Additional Interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Event of Default, to deliver to the Trustee a statement specifying such Event of Default. (15) Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. (16) No Recourse Against Others. No director, officer, employee, incorporator, Affiliate or stockholder of the Company or any of the Guarantors, as such, will have any liability for any obligations of the Company or such Guarantor under the Notes, the Indenture, the Subsidiary Guarantee, the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes 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) Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an Authenticating Agent. (18) Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). A-7 (19) Registration Rights Agreement. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of November 18, 2004 between the Company and the Initial Purchasers. (20) CUSIP, ISIN or Other Similar Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP, ISIN or other similar numbers to be printed on the Notes and the Trustee may use CUSIP, ISIN or other similar numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. (21) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. A-8 ASSIGNMENT FORM To assign this Note, fill in the form below and have your signature guaranteed: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date:______________________ Your Name:______________________________________ (Print your name exactly as it appears on the face of this Note) Your Signature:_________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*:___________________________ - ---------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-9 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 4.15 of the Indenture, check the box below: [_] Section 4.10 [_] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $_________________ Date:_____________ Your Signature:_________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No:__________________________ Signature Guarantee*: _____________________________________ (*Participant in a Recognized Signature Guarantee Medallion Program) A-10 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(3) The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of this Global Note Signature of Amount of decrease Amount of increase in following such authorized officer in Principal Amount Principal Amount of decrease (or of Trustee or Date of Exchange of this Global Note this Global Note increase) Note Custodian - ---------------- ------------------- ---------------- --------- --------------
- -------------------------- (3) If this Note is a Global Note, include this schedule. A-11 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER [Prior to the Merger: K&F Acquisition, Inc. c/o Aurora Capital Group 10877 Wilshire Boulevard, Suite 2100 Los Angeles, CA 90024 Attn: Richard K. Roeder Fax: (310) 824-2791] [After the Merger: K&F Industries, Inc. 600 Third Avenue 27th Floor New York, NY 10016 Attn: General Counsel Fax: (212) 297-0900] U.S. Bank National Association Goodwin Square 224 Asylum Street Hartford, CT 06103 Attention: Corporate Trust Division Re: 7-3/4% Senior Subordinated Notes due 2014 Reference is hereby made to the Indenture, dated as of November 18, 2004 (the "Indenture"), between K&F Acquisition, Inc., as issuer (the "Company"), and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount at maturity of $____ in such Note[s] or interests (the "Transfer"), to _____________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: 1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. B-1 2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S TEMPORARY GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN IAI GLOBAL NOTE, AN AI DEFINITIVE NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [_] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [_] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [_] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act. or (d) [_] such Transfer is being effected to an Accredited Investor or an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has B-2 attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the AI Definitive Note and in the Indenture and the Securities Act. 4. [_] Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ____________________________________________ [Insert Name of Transferor] By:_________________________________________ Name: Title: Dated: _________, __ B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE] (a) [_] a beneficial interest in the: (i) [_] 144A Global Note (CUSIP _______); or (ii) [_] Regulation S Global Note (CUSIP ______); or (iii) [_] IAI Global Note (CUSIP ______); or (b) [_] an AI Definitive Note; or (c) [_] a Restricted Definitive Note; or 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [_] a beneficial interest in the: (i) [_] 144A Global Note (CUSIP ); or (ii) [_] Regulation S Global Note (CUSIP ); or (iii) [_] IAI Global Note (CUSIP ______); or (iv) [_] Unrestricted Global Note (CUSIP ); or (b) [_] an AI Definitive Note; or (c) [_] a Restricted Definitive Note; or (d) [_] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE [Prior to the Merger: K&F Acquisition, Inc. c/o Aurora Capital Group 10877 Wilshire Boulevard, Suite 2100 Los Angeles, CA 90024 Attn: Richard K. Roeder Fax: (310) 824-2791] [After the Merger: K&F Industries, Inc. 600 Third Avenue 27th Floor New York, NY 10016 Attn: General Counsel Fax: (212) 297-0900] U.S. Bank National Association Goodwin Square 224 Asylum Street Hartford, CT 06103 Attention: Corporate Trust Division Re: 7-3/4% Senior Subordinated Notes due 2014 (CUSIP _________) Reference is hereby made to the Indenture, dated as of November 18, 2004 (the "Indenture"), between K&F Acquisition, Inc., as issuer (the "Company") and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _______, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $______ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial C-1 interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, IAI Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such C-2 Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ____________________________________ [Insert Name of Transferor] By:_________________________________ Name: Title: Dated: _________, ____ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACCREDITED INVESTOR/INSTITUTIONAL ACCREDITED INVESTOR [Prior to the Merger: K&F Acquisition, Inc. c/o Aurora Capital Group 10877 Wilshire Boulevard, Suite 2100 Los Angeles, CA 90024 Attn: Richard K. Roeder Fax: (310) 824-2791] [After the Merger: K&F Industries, Inc. 600 Third Avenue 27th Floor New York, NY 10016 Attn: Fax: (212)] U.S. Bank National Association Goodwin Square 224 Asylum Street Hartford, CT 06103 Attention: Corporate Trust Division Re: 7-3/4% Senior Subordinated Notes due 2014 (CUSIP _________) Reference is hereby made to the Indenture, dated as of November 18, 2004 (the "Indenture"), between K&F Acquisition, Inc., as issuer (the "Company") and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with my proposed purchase of $________ aggregate principal amount of an 7-3/4% Senior Subordinated Notes due 2014 (the "Notes"), I hereby confirm that: 1. I am an "accredited investor" (as defined in 501(a)(1), (2), (3), (4), (5), (6) or (7) under the Securities Act of 1933, as amended (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 my investment in the Notes, and I and any accounts for which I am acting are each able to bear the economic risk of my or its investment. 2. I am acquiring the Notes or beneficial interest therein for my own account or for one or more accounts (each of which is an "accredited investor") as to each of which I exercise sole investment discretion. 3. I understand that any subsequent transfer of the Notes, or any interest therein is subject to certain restrictions and conditions set forth in the Notes and the Indenture and the undersigned agrees to D-1 be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 4. I understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. I agree, on my own behalf and on behalf of any accounts for which I am acting, that if I should sell the Notes or any interest therein, I will do so only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Notes are eligible for resale pursuant to Rule 144A, to a "Qualified Institutional Buyer" as defined in Rule 144A under the Securities Act that purchases for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the transfer is being made in reliance on Rule 144A inside the United States, (d) pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S under the Securities Act or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, and I further agree to provide to any person purchasing a Note from me in a transaction meeting the requirements of clauses (a) through (e) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 5. I understand that, on any proposed resale of the Notes or beneficial interest therein, I will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. I further understand that the Notes purchased by me will bear a legend to the foregoing effect. 6. I am acquiring the Notes for investment purposes only with no present intention to resell the Notes, and agree not to sell, transfer, assign, pledge or hypothecate any of the Notes for at least three months following the completion of the offering. 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. ____________________________________ [Insert Name of Accredited Investor] By:_________________________________ Name: Title: Dated: _________, __ D-2 EXHIBIT E-1 [FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS] This SUPPLEMENTAL INDENTURE, dated as of ________________, 200__, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of K&F Acquisition, Inc. (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as Trustee. W I T N E S S E T H WHEREAS, the Company and the Trustee entered into an Indenture (the "Indenture"), dated as of November 18, 2004, pursuant to which the Company has issued $___________ in principal amount of 7-3/4% Senior Subordinated Notes due 2014 (the "Notes"); WHEREAS, Section 9.01(8) of the Indenture provides that the Company, the Guarantors and the Trustee may amend or supplement the Indenture in order to add Subsidiary Guarantees with respect to the Notes, without the consent of the Holders of the Notes; and WHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation and the Bylaws (or comparable constituent documents) of the Company, the Guarantors and the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Company, the Guarantors and the Trustee, in accordance with its terms, have been duly done and performed; NOW THEREFORE, to comply with the provisions of the Indenture, and in consideration of the foregoing, the Guaranteeing Subsidiary, the Company, the Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: ARTICLE 1 Section 1.01. This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes. Section 1.02. This Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Guaranteeing Subsidiaries, the Company, the Guarantors and the Trustee. ARTICLE 2 Section 2.01. Each of the Guaranteeing Subsidiaries hereby agrees to be bound by the terms, conditions and other provisions of the Indenture with all attendant rights, duties and obligations stated therein, on a joint and several basis with the parties hereto and thereto, with the same force and effect as if originally named as a Guarantor therein and as if such party executed the Indenture on the date thereof. E-1-1 ARTICLE 3 Section 3.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms. Section 3.02. All capitalized terms used but not defined herein shall have the same respective meanings ascribed to them in the Indenture. Section 3.03. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture. This Supplemental Indenture is executed and accepted by the Trustee subject to all of the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto. Section 3.04. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Section 3.05. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 3.06. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this letter agreement. Section 3.07. The recitals hereto are statements only of the Company, the Guarantors and the Guaranteeing Subsidiaries and shall not be considered statements of or attributable to the Trustee. E-1-2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. [GUARANTEEING SUBSIDIARY] By:_________________________________ Name: Title: K&F ACQUISITION, INC. By:_________________________________ Name: Title: [EXISTING GUARANTORS] By:_________________________________ Name: Title: U.S. BANK NATIONAL ASSOCIATION, as Trustee By:_________________________________ Name: Title: E-1-3 EXHIBIT E-2 [FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY A PERMITTED SUCCESSOR TO THE COMPANY] This SUPPLEMENTAL INDENTURE, dated as of ________________, 200__, among __________________ (the "Successor Company"), a permitted successor to K&F Acquisition, Inc., a Delaware corporation (the "Company"), the Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as Trustee. W I T N E S S E T H WHEREAS, the Company and the Trustee entered into an Indenture (the "Indenture"), dated as of November 18, 2004, pursuant to which the Company has issued $___________ in principal amount of 7-3/4% Senior Subordinated Notes due 2014 (the "Notes"); WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Guarantors and the Trustee may amend or supplement the Indenture in order to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets, without the consent of the Holders of the Notes; and WHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation and the Bylaws (or comparable constituent documents) of the Successor Company, the Guarantors and the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Successor Company, the Guarantors and the Trustee, in accordance with its terms, have been duly done and performed; NOW THEREFORE, to comply with the provisions of the Indenture, and in consideration of the foregoing, the Successor Company, the Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: ARTICLE 4 Section 1.01. This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes. Section 1.02. This Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Guaranteeing Subsidiaries, the Company, the Guarantors and the Trustee. ARTICLE 5 Section 2.01. In accordance with Section 5.02 of the Indenture, the Successor Company hereby agrees to be bound by the terms, conditions and other provisions of, and assumes all of the obligations of the Company under, the Indenture and the Notes with all attendant rights, duties and obligations stated therein, on a joint and several basis with the parties hereto and thereto, with the same force and effect as if originally named as the Company therein and as if such party executed the Indenture on the date thereof. The Successor Company represents and warrants that all of the conditions set forth in Section 5.01 of the Indenture are satisfied. E-2-1 ARTICLE 6 Section 3.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms. Section 3.02. All capitalized terms used but not defined herein shall have the same respective meanings ascribed to them in the Indenture. Section 3.03. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture. This Supplemental Indenture is executed and accepted by the Trustee subject to all of the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto. Section 3.04. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Section 3.05. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 3.06. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this letter agreement. Section 3.07. The recitals hereto are statements only of the Company and the Guarantors and shall not be considered statements of or attributable to the Trustee. E-2-2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. [SUCCESSOR COMPANY] By:_________________________________ Name: Title: [GUARANTORS] By:_________________________________ Name: Title: U.S. BANK NATIONAL ASSOCIATION, as Trustee By:_________________________________ Name: Title: E-2-3 EX-4.2 4 y69010exv4w2.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2 EXECUTION COPY REGISTRATION RIGHTS AGREEMENT DATED AS OF NOVEMBER 18, 2004 BY AND AMONG K&F ACQUISITION, INC. AS ISSUER AND LEHMAN BROTHERS INC. GOLDMAN, SACHS & CO. CITIGROUP GLOBAL MARKETS INC. J.P. MORGAN SECURITIES INC. AS THE INITIAL PURCHASERS This Registration Rights Agreement (this "AGREEMENT") is dated as of November 18, 2004 by and among K&F Acquisition, Inc., a Delaware corporation (the "ISSUER", and prior to the Merger Closing (as defined in the Purchase Agreement), the "COMPANY") and Lehman Brothers Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. (each an "INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom has agreed to purchase the Company's 7-3/4% Senior Subordinated Notes due 2014 (the "NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated November 5, 2004 (the "PURCHASE AGREEMENT"), by and among the Issuer, K&F Industries, Inc. ("K&F" and after the Merger Closing and upon the execution of a joinder agreement, the "COMPANY")), Aircraft Braking Systems Corporation, Engineered Fabrics Corporation and Aircraft Braking Services, Inc. (collectively, the "GUARANTORS") and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Notes, the Issuer, K&F and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7 of the Purchase Agreement. The representations, warranties and obligations of and relating to K&F and each of the Guarantors shall not become effective until the Merger Closing, at which time such representations, warranties and agreements shall become effective pursuant to the terms of a joinder agreement as required by Section 10 of this Agreement and thereafter all representations, warranties, agreements and obligations of K&F and the Guarantors shall be joint and several. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Indenture, dated the date hereof (the "INDENTURE"), among the Issuer and U.S. Bank National Association, as Trustee (the "TRUSTEE"), relating to the Notes and the Exchange Notes (as defined below). The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The U.S. Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 of the Act. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture. CLOSING DATE: The date of this Agreement. COMMISSION: The U.S. Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) 2 the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes tendered by Holders thereof pursuant to the Exchange Offer. CONSUMMATION DEADLINE: As defined in Section 3(b) hereof. EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof. EXCHANGE ACT: The U.S. Securities Exchange Act of 1934, as amended. EXCHANGE NOTES: The Company's 7-3/4% Senior Subordinated Notes due 2014, registered under the Act, to be issued pursuant to the Indenture (a) in the Exchange Offer or (b) as contemplated by Section 4 hereof. EXCHANGE OFFER: The exchange and issuance by the Company of a principal amount of Exchange Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Notes that are tendered by such Holders in connection with such exchange and issuance. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Initial Purchasers propose to sell the Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, pursuant to Regulation S under the Act and to a limited number of "accredited investors," as such term is defined in Rule 501(a)(3), (4), (5), (6) or (7) under the Act. FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof. HOLDERS: As defined in Section 2 hereof. INTEREST PAYMENT DATE: As defined in the Notes and the Exchange Notes. PERSON: As defined in the Indenture. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. RECOMMENCEMENT DATE: As defined in Section 6(e) hereof. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors relating to (a) an offering of Exchange Notes and related Subsidiary Guarantees pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. REGULATION S: Regulation S promulgated under the Act. 3 RULE 144: Rule 144 promulgated under the Act. SHELF REGISTRATION STATEMENT: As defined in Section 4(a) hereof. SUBSIDIARY GUARANTEES: The guarantees of the Notes and Exchange Notes of the Guarantors under the Indenture, as amended from time to time. SUSPENSION NOTICE: As defined in Section 6(e) hereof. TIA: The U.S. Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: (a) Each Note, and the related Subsidiary Guarantees, until the earliest to occur of (i) the date on which such Note has been exchanged by a Person other than a Broker-Dealer for an Exchange Note in the Exchange Offer and is entitled to be resold to the public by such Person without complying with the prospectus delivery requirements of the Act, (ii) the date on which such Note has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement, or (iii) the date on which such Note is eligible to be distributed to the public pursuant to Rule 144 under the Act, and (b) each Exchange Note and the related Subsidiary Guarantees acquired by a Broker-Dealer in the Exchange Offer of a Note for such Exchange Note, until the date on which such Exchange Note is sold to a purchaser who receives from such Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement. SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) The Company and the Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 90 days after the Closing Date (such 90th day being the "FILING DEADLINE"), (ii) use their commercially reasonable efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 180 days after the Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, unless the Exchange Offer shall not be permitted by applicable law or Commission policy, use their commercially reasonable efforts to commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (I) registration of the Exchange Notes to be offered in exchange for the Notes that are Transfer Restricted Securities and (II) resales of Exchange Notes by Broker-Dealers that tendered into the Exchange Offer Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Notes acquired directly from the Company or any its Affiliates) as contemplated by Section 3(c) below. 4 (b) The Company and the Guarantors shall use their commercially reasonable efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their commercially reasonable efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event (unless required by federal securities laws) later than 30 business days thereafter (such 30th business day being the "CONSUMMATION DEADLINE"). (c) The Company and the Guarantors shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Notes acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by Broker-Dealers, the Company and the Guarantors agree to use their commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer is Consummated or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Company shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than one day after such request, at any time during such period. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company and the Guarantors are not required to file the Exchange Offer Registration Statement, (ii) the Exchange Offer is not permitted by applicable law or Commission policy (after the Company and the Guarantors have complied with the procedures set forth in Section 6(a)(i) hereof) or (iii) if any Holder of Transfer Restricted Securities shall notify the Company prior to the 20th business day following the Consummation of the Exchange Offer that (A) such Holder was prohibited by applicable law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not 5 appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes acquired directly from the Company or any of its Affiliates or (D) if the Company otherwise receives a written request from the Holders set forth on Schedule B hereto, then the Company and the Guarantors shall: (I) use their commercially reasonable efforts to cause to be filed, on or prior to 30 days after the earlier of (x) the date on which the Company determines that the Exchange Offer Registration Statement is not required to be filed or cannot be filed as a result of clause (a)(i) or (a)(ii) of this Section and (y) the date on which the Company receives the notice specified in clause (a)(iii) of this Section (the 30th day after such earlier date, the "FILING DEADLINE"), a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities; and (II) use their commercially reasonable efforts to cause such Shelf Registration Statement to become effective at the earliest possible time, but in no event later than on or prior to 90 days after the Filing Deadline for the Shelf Registration Statement (such 90th day the "EFFECTIVENESS DEADLINE"). If, after the Company has and the Guarantors have filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company is and the Guarantors are required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(ii) of this Section), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (I) above; provided that, in such event, the Company and the Guarantors shall remain obligated to meet the Effectiveness Deadline set forth in clause (II) above. To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use their commercially reasonable efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)hereof) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a written request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to additional interest pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. By its acceptance of Transfer Restricted Securities, each Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. 6 SECTION 5. ADDITIONAL INTEREST If (a) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (b) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (c) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (d) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by an additional Registration Statement which becomes effective (each such event referred to in clauses (a) through (d), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby additional interest in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the additional interest shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of additional interest of $.50 per week per $1,000 in principal amount of Transfer Restricted Securities; provided that the Company and the Guarantors shall in no event be required to pay additional interest for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (i) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (a) above, (ii) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable the Shelf Registration Statement), in the case of (b) above, (iii) upon Consummation of the Exchange Offer, in the case of (c) above, or (iv) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable, in the case of (d) above, the additional interest payable with respect to the Transfer Restricted Securities as a result of such clause (a), (b), (c) or (d), as applicable, shall cease. All accrued additional interest shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes and the Exchange Notes. Notwithstanding the fact that any securities for which additional interest are due cease to be Transfer Restricted Securities, all obligations of the Company and the Guarantors to pay additional interest with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall (i) comply with all applicable provisions of Section 6(c) below, (ii) use their commercially reasonable efforts to effect such exchange and to permit the resale of Exchange Notes by any Broker-Dealer that tendered Notes in the Exchange Offer that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Notes acquired directly from the Company or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (iii) comply with all of the following provisions: (A) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. The 7 Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (I) participating in telephonic conferences with the Commission staff, (II) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (III) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (B) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (I) it is not an Affiliate of the Company, (II) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (III) it is acquiring the Exchange Notes in its ordinary course of business. Each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes will be required to acknowledge and agree that, if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (A) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective Registration Statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K (C) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (I) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (A) above, (II) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and each Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (III) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (A) above, if applicable. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall: (i) comply with all the provisions of Section 6(c) and (d) below and use their commercially reasonable efforts to effect such registration to permit the sale of the Transfer 8 Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof; and (ii) issue, upon the request of any Holder or purchaser of Notes covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Notes having an aggregate principal amount equal to the aggregate principal amount of Notes sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation; the Company and the Guarantors shall register Exchange Notes and the related Subsidiary Guarantees on the Shelf Registration Statement for this purpose and issue the Exchange Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Company and the Guarantors shall: (i) use their commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 hereof, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their commercially reasonable efforts to cause such amendment to be declared effective as soon as practicable. If at any time the Commission shall issue any stop order suspending the effectiveness of any Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two business days prior to such sale of Transfer Restricted Securities; 9 (iv) use their commercially reasonable efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (v) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depository Trust Company; (vi) otherwise use their commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the registration statement (as such term is defined in paragraph (c) of Rule 158 under the Act); and (vii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use their commercially reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. (d) Additional Provisions Applicable to Shelf Registration Statements and Certain Exchange Offer Prospectuses. In connection with each Shelf Registration Statement, and each Exchange Offer Registration Statement if and to the extent that an Initial Purchaser has notified the Company that it is a holder of Transfer Restricted Securities (for so long as such Notes are Transfer Restricted Securities or for the period provided in Section 3 hereof, whichever is shorter), with respect to any Holder selling pursuant to the Shelf Registration Statement or with respect to any such Initial Purchaser, the Company and the Guarantors shall: (i) advise such Holder promptly and, if requested by such Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making 10 of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) if any fact or event contemplated by Section 6(d)(i)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (iii) furnish to such Holder in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein (except the Prospectus included in the Exchange Offer Registration Statement at the time it was declared effective) or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within five business days after the receipt thereof, or 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 Act; (iv) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document, upon request, to such Holder in connection with such exchange or sale, if any, make the Company's and the Guarantors' representatives reasonably available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such Holders may reasonably request; (v) make available, at reasonable times, for inspection by such Holder and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (vi) if requested by any such Holders in connection with such exchange or sale, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (vii) furnish to such Holder in connection with such exchange or sale without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); 11 (viii) deliver to such Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Holder reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (ix) upon the request of any such Holder, enter into such agreements (including underwriting agreements) and make such reasonable and customary representations and warranties and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any such Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Company and the Guarantors shall: (A) upon request of such Holder, furnish (or in the case of paragraphs (2) and (3), use their commercially reasonable efforts to cause to be furnished) to each such Holder, upon Consummation of the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: (1) a certificate, dated such date, signed on behalf of the Company and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and such Guarantor, confirming, as of the date thereof, the matters set forth in Sections 7(i) and (k) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors covering matters set forth in Sections 7(a) and (b) of the Purchase Agreement and such other matters as such Holder may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors and has considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing, no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and 12 (3) a customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 7(d) of the Purchase Agreement; and (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in any agreement entered into by the Company and the Guarantors pursuant to this clause (ix); (x) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; and (xi) provide promptly to each such Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. (e) Restrictions on Holders. Each Holder's acquisition of a Transfer Restricted Security constitutes such Holder's agreement that, upon receipt of the notice referred to in Section 6(d)(i)(C) or any notice from the Company of the existence of any fact of the kind described in Section 6(d)(i)(D) hereof (in each case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(d)(ii) hereof, or (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice shall be required to either (I) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession that have been replaced by the Company with a more recently dated Prospectus or (II) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectuses covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and 13 disbursements of counsel for the Company, the Guarantors and one counsel for the Holders of Transfer Restricted Securities (which shall be Simpson Thacher & Bartlett LLP or such other counsel as may be selected by a majority of such Holders); (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Notes into in the Exchange Offer and/or selling or reselling Notes or Exchange Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel (who shall be Simpson Thacher & Bartlett LLP unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared). (c) Notwithstanding Sections 7(a) and (b), the Company and the Guarantors shall not be obligated to reimburse any Holder set forth on Schedule B hereto for any such fees or expenses incurred with respect to the inclusion by any such Holder of Transfer Restricted Securities in a Shelf Registration Statement and each such Holder shall be responsible to reimburse the Company and the Guarantors for their portion of any such fees and expenses (calculated on a pro rata basis in accordance with the amount of Transfer Restricted Securities so included by each Holder). SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities or judgments (including without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company to any Holder or any prospective purchaser of Exchange Notes or registered Notes, or caused by any omission alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to such Holder furnished in writing to the Company by such Holder. (b) By its acquisition of Transfer Restricted Securities, each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or the Guarantors to the same extent as the foregoing indemnity from the Company and the Guarantors set forth in Section 14 8(a) hereof, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) In case any action shall be commenced involving any Person in respect of which indemnity may be sought pursuant to Section 8(a) or (b) hereof (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the Person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and (b) hereof, a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions 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 (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified, pursuant to Section 8(a) hereof, and by the Company and the Guarantors, in the case of parties indemnified, pursuant to Section 8(b) hereof. The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (A) effected with its written consent or (B) effected without its written consent if the settlement is entered into more than 20 business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (I) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (II) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. 15 (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand, and the Holders, on the other hand, from the initial sale by the Issuer of Transfer Restricted Securities (or in the case of Exchange Notes that are Transfer Restricted Securities, the sale of the Notes for which such Exchange Notes were exchanged) or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause 8(d)(i) but also the relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Guarantor, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Guarantors and, by its acquisition of Transfer Restricted Securities, each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which 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 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 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint. SECTION 9. RULE 144A AND RULE 144 The Company and each Guarantor agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company or such Guarantor (a) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such 16 Transfer Restricted Securities pursuant to Rule 144A, and (b) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 10. FUTURE PARTIES If, prior to the Consummation of the Exchange Offer or prior to the effectiveness of the Shelf Registration Statement, as the case may be, (i) the Company merges with or into another Person in accordance with the terms and provisions of the Indenture, such Person shall execute and deliver to the parties hereto a joinder agreement to this Agreement substantially in the form attached hereto as Exhibit A and such Person shall be bound by all the provisions of this Agreement as the "Company," or (ii) any subsidiary of the Company executes a Subsidiary Guarantee in accordance with the terms and provisions of the Indenture, the Company shall cause such subsidiary to execute and deliver to the parties hereto a a joinder agreement to this Agreement substantially in the form attached hereto as Exhibit A and such subsidiary shall be bound by all the provisions of this Agreement as a "Guarantor." It is hereby acknowledged that upon the Merger Closing, K&F Industries, Inc. and each of the parties listed on Schedule A hereto to will become a party to this Agreement by executing and delivering a joinder agreement to this Agreement substantially in the form attached hereto as Exhibit A. SECTION 11. MISCELLANEOUS (a) Remedies. The Company and the Guarantors acknowledge and agree that any failure by the Company and/or the Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantor's obligations under Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company and the Guarantors will not, on or after the date of this Agreement, enter into any agreement with respect to their respective securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The Company and the Guarantors have not previously entered into any agreement granting any registration rights with respect to their respective securities to any Person that would require such securities to be included in any Registration Statement filed hereunder. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's and the Guarantors' securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 11(c)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver of or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. 17 (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or any of the Guarantors: c/o K&F Industries Inc. 600 Third Avenue New York, New York 10016 Attention: Kenneth M. Schwartz Facsimile: (212) 867-1182) All such notices and communications shall be deemed to have been duly given at the time delivered by hand, when receipt is acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the 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, including without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (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. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the 18 validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signature Pages to Follow] IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. K&F ACQUISITION, INC. By: /s/ Richard K. Roeder -------------------------------- Name: Richard K. Roeder Title: Vice President and Secretary LEHMAN BROTHERS INC. GOLDMAN, SACHS & CO. CITIGROUP GLOBAL MARKETS INC. J.P. MORGAN SECURITIES INC. By: LEHMAN BROTHERS INC. By: /s/ [signature illegible] ------------------------------------ Authorized Representative By: GOLDMAN, SACHS & CO. By: /s/ Goldman Sachs & Co. ------------------------------------ (Goldman Sachs & Co.) On behalf of each of the Initial Purchasers EXHIBIT A [Form of Joinder to Registration Rights Agreement] ___________ __, 20__ Lehman Brothers Inc. Goldman, Sachs & Co. Citigroup Global Markets Inc. J.P. Morgan Securities Inc. c/o Lehman Brothers Inc. 745 Seventh Avenue New York, New York 10017 Ladies and Gentlemen: Reference is made to the Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") dated as of November 18, 2004 among K&F Acquisition, Inc., a Delaware corporation (the "ISSUER") and Lehman Brothers Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. (collectively, the "INITIAL PURCHASERS") concerning the purchase of the Notes (as defined in the Registration Rights Agreement) from the Issuer by the several Initial Purchasers. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Registration Rights Agreement. [___________](1) (the "SUCCESSOR COMPANY") and [___________],[___________] and [___________] (the "GUARANTORS") agree that this letter agreement is being executed and delivered in connection with the issue and sale of the Notes pursuant to the Purchase Agreement. 1. Joinder of the Successor Company. The Successor Company hereby agrees to become bound by the terms, conditions and other provisions of the Registration Rights Agreement with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as the Company therein and as if such party executed the Registration Rights Agreement on the date thereof. 2. Joinder of the Guarantors. Each of the Guarantors hereby agrees to become bound by the terms, conditions and other provisions of the Registration Rights Agreement with all attendant rights, duties and obligations stated therein, with the same force and effect as if originally named as a Guarantor therein and as if such party executed the Registration Rights Agreement on the date thereof. 3. Governing Law. THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. - -------------------- (1) Insert name of Person, if any, that the Company merges with or into in accordance with the terms and provisions of the Indenture. 5 4. Counterparts. This letter 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. 5. Amendments. No amendment or waiver of any provision of this letter agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 6. Headings. The headings in this letter agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 6 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this letter agreement will become a binding agreement between the Successor Company, the Guarantors party hereto and the several Initial Purchasers in accordance with its terms. Very truly yours, [SUCCESSOR COMPANY] By:_________________________________ Name: Title: GUARANTORS: [GUARANTOR] By:_________________________________ Name: Title: 7 Accepted: ____________ __, 20__ LEHMAN BROTHERS INC. GOLDMAN, SACHS & CO. CITIGROUP GLOBAL MARKETS INC. J.P. MORGAN SECURITIES INC. By: LEHMAN BROTHERS INC. By: _____________________________________ Authorized Representative By: GOLDMAN, SACHS & CO. By:______________________________________ (Goldman, Schs & Co.) On behalf of each of the Initial Purchasers EX-10.1 5 y69010exv10w1.txt CREDIT AGREEMENT EXECUTION COPY EXHIBIT 10.1 ================================================================================ $530,000,000 CREDIT AGREEMENT AMONG K&F INTERMEDIATE HOLDCO, INC. K&F ACQUISITION, INC., (TO BE MERGED WITH AND INTO K&F INDUSTRIES, INC.) AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, LEHMAN BROTHERS INC. AND J.P. MORGAN SECURITIES INC., AS JOINT LEAD ARRANGERS AND JOINT BOOKRUNNERS, J.P. MORGAN SECURITIES INC., AS SYNDICATION AGENT, GOLDMAN SACHS CREDIT PARTNERS L.P. AND CITIGROUP GLOBAL MARKETS INC., AS CO-DOCUMENTATION AGENTS AND LEHMAN COMMERCIAL PAPER INC., AS ADMINISTRATIVE AGENT DATED AS OF NOVEMBER 18, 2004 ================================================================================ TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS........................................................................................... 1 1.1 Defined Terms.................................................................................. 1 1.2 Other Definitional Provisions.................................................................. 26 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS....................................................................... 26 2.1 Term Loan Commitments.......................................................................... 26 2.2 Procedure for Term Loan Borrowing.............................................................. 27 2.3 Repayment of Term Loans........................................................................ 27 2.4 Revolving Credit Commitments................................................................... 28 2.5 Procedure for Revolving Credit Borrowing....................................................... 28 2.6 Swing Line Commitment.......................................................................... 29 2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans.............................. 29 2.8 Repayment of Loans; Evidence of Debt........................................................... 31 2.9 Commitment Fees, etc........................................................................... 32 2.10 Termination or Reduction of Revolving Credit Commitments....................................... 32 2.11 Optional Prepayments........................................................................... 32 2.12 Mandatory Prepayments.......................................................................... 33 2.13 Conversion and Continuation Options............................................................ 34 2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches...................................... 34 2.15 Interest Rates and Payment Dates............................................................... 35 2.16 Computation of Interest and Fees............................................................... 35 2.17 Inability to Determine Interest Rate........................................................... 36 2.18 Pro Rata Treatment and Payments................................................................ 36 2.19 Requirements of Law............................................................................ 38 2.20 Taxes.......................................................................................... 39 2.21 Indemnity...................................................................................... 41 2.22 Illegality..................................................................................... 41 2.23 Change of Lending Office....................................................................... 41 SECTION 3. LETTERS OF CREDIT..................................................................................... 42 3.1 L/C Commitment................................................................................. 42 3.2 Procedure for Issuance of Letter of Credit..................................................... 42 3.3 Fees and Other Charges......................................................................... 42 3.4 L/C Participations............................................................................. 43 3.5 Reimbursement Obligation of the Borrower....................................................... 44 3.6 Obligations Absolute........................................................................... 45 3.7 Letter of Credit Payments...................................................................... 45 3.8 Applications................................................................................... 45 SECTION 4. REPRESENTATIONS AND WARRANTIES........................................................................ 45 4.1 Financial Condition............................................................................ 45 4.2 No Change...................................................................................... 46 4.3 Corporate Existence; Compliance with Law....................................................... 46
Page ---- 4.4 Corporate Power; Authorization; Enforceable Obligations........................................ 47 4.5 No Legal Bar................................................................................... 47 4.6 No Material Litigation......................................................................... 47 4.7 No Default..................................................................................... 47 4.8 Ownership of Property; Liens................................................................... 47 4.9 Intellectual Property.......................................................................... 48 4.10 No Burdensome Restrictions..................................................................... 48 4.11 Taxes.......................................................................................... 48 4.12 Federal Regulations............................................................................ 48 4.13 Labor Matters.................................................................................. 48 4.14 ERISA.......................................................................................... 49 4.15 Investment Company Act; Other Regulations...................................................... 49 4.16 Subsidiaries................................................................................... 49 4.17 Use of Proceeds................................................................................ 50 4.18 Environmental Matters.......................................................................... 50 4.19 Accuracy of Information, etc................................................................... 51 4.20 Security Documents............................................................................. 51 4.21 Solvency....................................................................................... 52 4.22 Senior Indebtedness............................................................................ 52 4.23 Regulation H................................................................................... 52 4.24 Certain Documents.............................................................................. 52 SECTION 5. CONDITIONS PRECEDENT.................................................................................. 52 5.1 Conditions to Initial Extension of Credit...................................................... 52 5.2 Conditions to Each Extension of Credit......................................................... 57 SECTION 6. AFFIRMATIVE COVENANTS................................................................................. 58 6.1 Financial Statements........................................................................... 58 6.2 Certificates; Other Information................................................................ 59 6.3 Payment of Obligations......................................................................... 60 6.4 Conduct of Business and Maintenance of Existence; Compliance................................... 60 6.5 Maintenance of Property; Insurance............................................................. 61 6.6 Inspection of Property; Books and Records; Discussions......................................... 61 6.7 Notices........................................................................................ 61 6.8 Environmental Laws............................................................................. 62 6.9 Interest Rate Protection....................................................................... 63 6.10 Additional Collateral, etc..................................................................... 63 6.11 Government Contracts........................................................................... 64 6.12 Further Assurances............................................................................. 64 6.13 Aircraft Braking Systems, Inc.................................................................. 65 SECTION 7. NEGATIVE COVENANTS.................................................................................... 65 7.1 Financial Condition Covenants.................................................................. 65 7.2 Limitation on Indebtedness..................................................................... 66 7.3 Limitation on Liens............................................................................ 68 7.4 Limitation on Fundamental Changes.............................................................. 70 7.5 Limitation on Disposition of Property.......................................................... 71
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Page ---- 7.6 Limitation on Restricted Payments.............................................................. 72 7.7 Limitation on Capital Expenditures............................................................. 73 7.8 Limitation on Investments...................................................................... 74 7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc..................... 75 7.10 Limitation on Transactions with Affiliates..................................................... 76 7.11 Limitation on Sales and Leasebacks............................................................. 76 7.12 Limitation on Changes in Fiscal Periods........................................................ 76 7.13 Limitation on Negative Pledge Clauses.......................................................... 76 7.14 Limitation on Restrictions on Subsidiary Distributions......................................... 77 7.15 Limitation on Lines of Business................................................................ 77 7.16 Limitation on Amendments to Acquisition Documentation.......................................... 77 7.17 Limitation on Amendments to Other Documents.................................................... 77 7.18 Limitation on Activities of Holdings........................................................... 78 SECTION 8. EVENTS OF DEFAULT..................................................................................... 78 SECTION 9. THE AGENTS............................................................................................ 81 9.1 Appointment.................................................................................... 81 9.2 Delegation of Duties........................................................................... 82 9.3 Exculpatory Provisions......................................................................... 82 9.4 Reliance by Agents............................................................................. 82 9.5 Notice of Default.............................................................................. 83 9.6 Non-Reliance on Agents and Other Lenders....................................................... 83 9.7 Indemnification................................................................................ 83 9.8 Agent in Its Individual Capacity............................................................... 84 9.9 Successor Administrative Agent................................................................. 84 9.10 Authorization to Release Liens and Guarantees.................................................. 85 9.11 The Arrangers; the Syndication Agent; the Co-Documentation Agents.............................. 85 SECTION 10. MISCELLANEOUS........................................................................................ 85 10.1 Amendments and Waivers......................................................................... 85 10.2 Notices........................................................................................ 88 10.3 No Waiver; Cumulative Remedies................................................................. 89 10.4 Survival of Representations and Warranties..................................................... 90 10.5 Payment of Expenses............................................................................ 90 10.6 Successors and Assigns; Participations and Assignments......................................... 91 10.7 Adjustments; Set-off........................................................................... 94 10.8 Counterparts................................................................................... 95 10.9 Severability................................................................................... 95 10.10 Integration.................................................................................... 95 10.11 GOVERNING LAW.................................................................................. 95 10.12 Submission To Jurisdiction; Waivers............................................................ 95 10.13 Acknowledgments................................................................................ 96 10.14 Confidentiality................................................................................ 96 10.15 Release of Collateral and Guarantee Obligations................................................ 97 10.16 Accounting Changes............................................................................. 98 10.17 Delivery of Lender Addenda..................................................................... 98
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Page ---- 10.18 WAIVERS OF JURY TRIAL.......................................................................... 98
iv ANNEXES: A Pricing Grid B Existing Letters of Credit SCHEDULES: 1.1A Mortgaged Property 1.1B Real Property 4.4 Consents, Authorizations, Filings and Notices 4.6 Litigation 4.16 Subsidiaries 4.20(a) UCC Filing Jurisdictions 4.20(b) Mortgage Filing Jurisdictions 5.1(b)(vi) Capital Structure 7.2(d) Existing Indebtedness 7.3(f) Existing Liens EXHIBITS: A Form of Guarantee and Collateral Agreement B Form of Compliance Certificate C Form of Closing Certificate D Form of Mortgage E Form of Assignment and Acceptance F-1 Form of Legal Opinion of Gibson, Dunn & Crutcher LLP F-2 Form of Legal Opinion of Ronald Kisner, Esq., general counsel of Holdings, the Borrower and its Subsidiaries G-1 Form of Term Note G-2 Form of Revolving Credit Note G-3 Form of Swing Line Note H Form of Lender Addendum I Form of Borrowing Notice -v- CREDIT AGREEMENT, dated as of November 18, 2004, among K&F INTERMEDIATE HOLDCO, INC., a Delaware corporation ("Holdings"), K&F ACQUISITION, INC., a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC. and J.P. MORGAN SECURITIES INC., as exclusive advisors, joint lead arrangers and joint bookrunners (in such capacity, the "Arrangers"), J.P. MORGAN SECURITIES INC., as syndication agent (in such capacity, the "Syndication Agent"), GOLDMAN SACHS CREDIT PARTNERS L.P. and CITIGROUP GLOBAL MARKETS INC., as co-documentation agents (in such capacity, the "Co-Documentation Agents") and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, Holdings has entered into a Stock Purchase Agreement, dated as of October 15, 2004 (as amended, supplemented or otherwise modified as permitted by Section 7.16, the "Acquisition Agreement"), by and among the Parent (as defined below), K&F Industries, Inc., a Delaware corporation (the "Target"), and the other parties listed therein as the stockholders, pursuant to which Holdings will purchase all of the outstanding shares of common stock, and options to purchase common stock, of the Target (the "Acquisition"); WHEREAS, immediately after the Acquisition, the Borrower will merge with and into the Target (the "Merger"), with the Target continuing as the surviving corporation and, upon the effectiveness of the Merger, the Target will succeed to all rights and obligations of the Borrower by operation of law, and all references herein and in the other Loan Documents to the term "Borrower" shall thereupon be deemed to be references to the Target as the surviving entity of the Merger; WHEREAS, the Borrower has requested the Lenders make available the credit facilities described in this Agreement in order to finance a portion of the purchase price of the Acquisition and the payment of certain fees and expenses related to the Acquisition, and to provide for the ongoing general corporate needs of the Borrower and its Subsidiaries; and WHEREAS, the Lenders are willing to make such credit facilities available upon and subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1. "Acquired Entity": any Person, assets of a Person or line of business or division of a Person acquired by the Borrower or any of its Subsidiaries pursuant to a Permitted Acquisition. "Acquisition": as defined in the recitals hereto. 2 "Acquisition Agreement": as defined in the recitals hereto. "Acquisition Documentation": collectively, the Acquisition Agreement and all schedules, exhibits, annexes and amendments thereto and all side letters and agreements affecting the terms thereof or entered into in connection therewith, in each case, as amended, supplemented or otherwise modified from time to time. "Adjustment Date": as defined in the Pricing Grid. "Administrative Agent": as defined in the preamble hereto. "Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Co-Documentation Agents and the Administrative Agent. "Aggregate Exposure": with respect to any Lender at any time, an amount equal to (a) until the Closing Date, the aggregate amount of such Lender's Commitments at such time and (b) thereafter, the sum of (i) the aggregate then unpaid principal amount of such Lender's Term Loans and (ii) the amount of such Lender's Revolving Credit Commitment then in effect or, if the Revolving Credit Commitments have been terminated, the amount of such Lender's Revolving Extensions of Credit then outstanding. "Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the sum of the Aggregate Exposures of all Lenders at such time. "Agreement": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Applicable Margin": for each Type of Loan under each Facility, the rate per annum set forth opposite such Facility under the relevant column heading below:
Base Rate Eurodollar Loans Loans --------- ---------- Revolving Credit Facility (including Swing Line Loans) 1.50% 2.50% Term Loan Facility 1.50% 2.50%
provided, that on and after the first Adjustment Date occurring after the completion of two full fiscal quarters of the Borrower after the Closing Date, the Applicable Margins will be determined pursuant to the Pricing Grid. 3 "Application": an application, in such form as the relevant Issuing Lender may specify from time to time, requesting such Issuing Lender to issue a Letter of Credit. "Arrangers": as defined in the preamble hereto. "Asset Sale": any Disposition of Property or series of related Dispositions of Property (excluding any such Disposition permitted by clause (a), (b), (c), (d), (e), (f), (g) or (h) of Section 7.5) which yields gross proceeds to Holdings, the Borrower or any of its Subsidiaries (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $500,000. "Assignee": as defined in Section 10.6(c). "Assignment and Acceptance": an assignment and acceptance delivered by an Assignor and related Assignee in accordance with Section 10.6(c), substantially in the form of Exhibit E. "Assignor": as defined in Section 10.6(c). "Attributable Debt": as to any sale and leaseback transaction, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Available Revolving Credit Commitment": with respect to any Revolving Credit Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Revolving Credit Commitment then in effect over (b) such Lender's Revolving Extensions of Credit then outstanding; provided, that in calculating any Lender's Revolving Extensions of Credit for the purpose of determining such Lender's Available Revolving Credit Commitment pursuant to Section 2.9(a), the aggregate principal amount of Swing Line Loans then outstanding shall be deemed to be zero. "Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus -1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the prime lending rate as set forth on the British Banking Association Telerate Page 5 (or such other comparable publicly available page as may, in the reasonable opinion of the Administrative Agent after notice to the Borrower, replace such page for the purpose of displaying such rate if such rate no longer appears on the British Bankers Association Telerate page 5), as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually available. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. 4 "Base Rate Loans": Loans for which the applicable rate of interest is based upon the Base Rate. "Benefitted Lender": as defined in Section 10.7. "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor). "Borrower": as defined in the preamble hereto. "Borrower Equity Financing": the issuance of equity by the Borrower to Holdings described in Section 5.1(b)(ii). "Borrower Preferred Stock": the preferred stock of the Borrower issued and sold on the Closing Date pursuant to the Stock Purchase Agreement. "Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder. "Borrowing Notice": with respect to any request for borrowing of Loans hereunder, a notice from the Borrower, substantially in the form of, and containing the information prescribed by, Exhibit J, delivered to the Administrative Agent. "Business": as defined in Section 4.18. "Business Day": (a) for all purposes other than as covered by clause (b) below, a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (a) and which is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market. "Business Properties": as defined in Section 4.18. "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which are required to be capitalized under GAAP on a balance sheet of such Person. "Capital Lease Obligations": with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP; and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. 5 "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Cash Equivalents": (a) marketable obligations issued by, or directly and 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; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of one year or less from the date of acquisition issued by any commercial bank organized under the laws of the United States of America or any state thereof having combined capital and surplus of not less than $100,000,000; (c) commercial paper of an issuer rated at least A-2 by Standard & Poor's Ratings Services ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within one year from the date of acquisition; (d) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition; and (g) shares of money market mutual or similar funds which invest primarily in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control": the occurrence of any of the following events: (a) the Permitted Investors shall cease to have the power to elect (directly or indirectly, by proxy or by other agreement) a majority of directors of the Parent, Holdings and the Borrower; (b) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Exchange Act), excluding the Permitted Investors, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 40% of the outstanding common stock of Holdings; (c) Continuing Directors shall cease to be a majority of the board of directors of the Parent, Holdings and the Borrower; (d) the Parent shall cease to own and control, of record and beneficially, directly, 100% of each class of outstanding Capital Stock of Holdings (other than the Holdings Preferred Stock) free and clear of all Liens (except Liens created by the Guarantee and Collateral Agreement), (e) Holdings shall cease to own and control, of record and beneficially, directly, 100% of each class of outstanding Capital Stock of the Borrower (other than the Borrower Preferred Stock) free and clear of all Liens (except Liens created by the Guarantee and Collateral Agreement); or (f) a Specified Change of Control. "Closing Date": the date on which the conditions precedent set forth in Section 5.1 shall have been satisfied, which date shall be not later than November 18, 2004. 6 "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all Property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. "Commitment": with respect to any Lender, each of the Term Loan Commitment and the Revolving Credit Commitment of such Lender. "Commitment Fee Rate": 1/2 of 1% per annum. "Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code. "Compliance Certificate": a certificate duly executed by a Responsible Officer, substantially in the form of Exhibit B. "Confidential Information Memorandum": the Confidential Information Memorandum dated October, 2004 and furnished to the initial Lenders in connection with the syndication of the Facilities. "Consolidated Current Assets": of any Person at any date of determination, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of such Person and its Subsidiaries at such date. "Consolidated Current Liabilities": of any Person at any date of determination, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of such Person and its Subsidiaries at such date, but excluding, with respect to the Borrower, (a) the current portion of any Funded Debt of the Borrower and its Subsidiaries and (b), without duplication, all Indebtedness consisting of Revolving Credit Loans or Swing Line Loans, to the extent otherwise included therein. "Consolidated EBITDA": of any Person for any period, Consolidated Net Income of such Person and its Subsidiaries for such period plus, without duplication and to the extent deducted in the calculation of such Consolidated Net Income for such period, the sum of (a) income tax expense (including franchise, value added and similar taxes), (b) interest expense of such Person and its Subsidiaries, amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness, (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business), (f) fees and expenses under the Management Agreement and (g) any other non-cash charges (including non-cash expenses for grants of options), minus, without duplication and to the extent included in the calculation of such Consolidated Net 7 Income for such period, the sum of (a) interest income (except to the extent deducted in determining such Consolidated Net Income), (b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business), (c) any other non-cash income (other than the accrual of revenue in the ordinary course of business), (d) any cash payments made during such period reducing reserves or liabilities for accruals made in any prior fiscal quarter but only to the extent such reserves or accruals were included in the determination of Consolidated EBITDA for such prior fiscal quarter, all as determined on a consolidated basis and (e) upon and following the election of the Borrower to capitalize Program Investments on its balance sheet, the amount of such capitalized Program Investments for such period; provided that for purposes of calculating Consolidated EBITDA of the Borrower and its Subsidiaries for any period, (i) the Consolidated EBITDA of any Person acquired by the Borrower or its Subsidiaries during such period shall be included on a pro forma basis (including adjustments for non-recurring items) for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred on the first day of such period) if the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at the end of the period preceding the acquisition of such Person and the related consolidated statements of income and stockholders' equity and of cash flows for the period in respect of which Consolidated EBITDA is to be calculated (x) have been previously provided to the Administrative Agent and the Lenders and (y) either (1) have been reported on without a qualification arising out of the scope of the audit by independent certified public accountants of nationally recognized standing or (2) have been found reasonably acceptable by the Administrative Agent (or, in the case of this clause (2), if such financial statements are not reasonably acceptable to the Administrative Agent, the Consolidated EBITDA of such acquired Person shall be included to the extent reasonably satisfactory to the Administrative Agent) and (ii) the Consolidated EBITDA of any Person Disposed of by the Borrower or its Subsidiaries during such period shall be excluded for such period (assuming the consummation of such Disposition and the repayment of any Indebtedness in connection therewith occurred on the first day of such period). For the purposes of determining Consolidated EBITDA of the Borrower and its Subsidiaries, (i) Consolidated EBITDA for the quarter ending June 30, 2004 shall be deemed to be $26,917,000, (ii) Consolidated EBITDA for the quarter ending September 30, 2004 shall be deemed to be $31,472,000, and (iii) Consolidated EBITDA for the quarter ending December 31, 2004 shall be deemed to be $33,000,000. "Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA of the Borrower and its Subsidiaries for such period to (b) Consolidated Interest Expense of the Borrower and its Subsidiaries for such period; provided, that for the purposes of determining the Consolidated Interest Coverage Ratio for the fiscal quarters of the Borrower ending March 31, 2005, June 30, 2005 and September 30, 2005, Consolidated Interest Expense for the relevant period shall be deemed to equal Consolidated Interest Expense for such fiscal quarter (and, in the case of the latter two such determinations, each previous fiscal quarter commencing after December 31, 2004) multiplied by 4, 2 and 4/3, respectively. "Consolidated Interest Expense": of any Person for any period, total cash interest expense (including that attributable to Capital Lease Obligations in accordance with GAAP) of 8 such Person and its Subsidiaries on a consolidated basis for such period with respect to all outstanding Indebtedness of such Person and its Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed by such Person with respect to letters of credit and bankers' acceptance financing and net cash costs of such Person under Hedge Agreements in respect of interest rates) (except for fees or other upfront costs of swaps, cap or collar arrangements in respect of acquiring or entering into any such arrangement during such period), minus total net cash interest income of such Person for such period. "Consolidated Leverage Ratio": as at the last day of any period of four consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA of the Borrower and its Subsidiaries for such period. "Consolidated Net Income": of any Person for any period, the consolidated net income (or loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided, that in calculating Consolidated Net Income of the Borrower and its consolidated Subsidiaries for any period, there shall be excluded (a) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which any other Person (other than the Borrower or any of its Subsidiaries) has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of cash dividends or similar distributions during such period, (b) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary, (c) any step-up in costs of sales of inventory arising out of the application of purchase accounting treatment in connection with the Acquisition and financing related to the Acquisition, (d) the fees, expenses and other costs incurred in connection with the consummation and the financing of the Acquisition and (e) any increase in amortization or write-off of goodwill or other intangible assets or increased depreciation or amortization expense arising solely from the Acquisition and financing related to the Acquisition. "Consolidated Total Debt": at any date of determination, (a) the aggregate stated balance sheet amount of all Indebtedness of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP less (b) unrestricted cash and Cash Equivalents held by the Borrower and its Subsidiaries on such date, provided that, the aggregate amount of cash and Cash Equivalents in clause (b) shall not exceed (x) $50,000,000, solely for the purpose of determining compliance with the financial covenant in Section 7.1(a), and (y) $15,000,000, for any other purpose. "Consolidated Working Capital": at any date of determination, the difference of (a) Consolidated Current Assets of the Borrower on such date less (b) Consolidated Current Liabilities of the Borrower on such date. "Continuing Directors": with respect to the Parent, Holdings and the Borrower, the directors of any such Person on the Closing Date, after giving effect to the Acquisition and the other transactions contemplated hereby, and each other director of such Person, if, in each case, such other director's nomination for election to the board of directors of such Person is 9 recommended by at least 66-2/3% of the then Continuing Directors or such other director receives the vote of the Permitted Investors in his or her election by the stockholders of such Person. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound. "Control Investment Affiliate": as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by either such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, "control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Defeasance Costs Tax Note": the Defeasance Costs Tax Note, dated as of the date hereof, made by the Parent to Bernard L. Schwartz and Alan H. Washkowitz for the benefit of certain stockholders of the Target. "Derivatives Counterparty": as defined in Section 7.6. "Development Participation Costs": cash funding to original equipment manufacturers to fund the co-development of aircraft wheels, brakes and brake control systems for new aircraft platforms. "Disposition": with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof; and the terms "Dispose" and "Disposed of" shall have correlative meanings. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States of America. "ECF Percentage": with respect to any fiscal year of the Borrower, 75%; provided, that, with respect to any fiscal year of the Borrower ending on or after December 31, 2005, the ECF Percentage shall be (x) 50% if the Consolidated Leverage Ratio as of the last day of such fiscal year is not greater than 5.5 to 1.0 and (y) 0% if the Consolidated Leverage Ratio as of the last day of such fiscal year is not greater than 4.0 to 1.0. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirements (including, without limitation, common law) of any international authority, foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health, or employee health and safety, as has been, is now, or may at any time hereafter be, in effect. 10 "Environmental Permits": any and all permits, licenses, approvals, registrations, notifications, exemptions and other authorizations required under any Environmental Law. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period, the rate per annum determined on the basis of the rate for eurodollar deposits for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" for purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent. "Eurodollar Loans": Loans for which the applicable rate of interest is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Eurodollar Tranche": the collective reference to Eurodollar Loans under a particular Facility the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income of the Borrower for such fiscal year, (ii) an amount equal to all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, (iii) the amount of the decrease, if any, in Consolidated Working Capital for such fiscal year, (iv) the aggregate net amount of non-cash loss on the Disposition of Property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in 11 arriving at such Consolidated Net Income, (v) the net increase during such fiscal year (if any) in deferred tax accounts of the Borrower and (vi) the amount of any cash increase in Other Long-Term Liabilities during such fiscal year minus (b) the sum, without duplication, of (i) the amount of all non-cash credits included in arriving at such Consolidated Net Income, (ii) the aggregate amount actually paid by the Borrower and its Subsidiaries in cash during such fiscal year on account of Capital Expenditures and Development Participation Costs (in each case, minus the principal amount of Indebtedness incurred in connection with such expenditures and minus the amount of any such expenditures financed with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate amount of all prepayments of Revolving Credit Loans and Swing Line Loans during such fiscal year to the extent accompanying permanent optional reductions of the Revolving Credit Commitments and all optional prepayments of the Term Loans during such fiscal year, (iv) the aggregate amount of all regularly scheduled principal payments of Funded Debt (including, without limitation, the Term Loans and Capital Lease Obligations) of the Borrower and its Subsidiaries made during such fiscal year (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (v) the aggregate amount of all mandatory and voluntary principal prepayments of Funded Debt of the Borrower and its Subsidiaries made during such fiscal year in an aggregate amount not to exceed $5,000,000 during such fiscal year (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (vi) the amount of the increase, if any, in Consolidated Working Capital for such fiscal year, (vii) the aggregate net amount of non-cash gain on the Disposition of Property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income, (viii) the net decrease during such fiscal year (if any) in deferred tax accounts of the Borrower, (ix) the aggregate amount of Restricted Payments during such fiscal year that were permitted under Section 7.6 (excluding Section 7.6(d), to the extent such Restricted Payment was made with the portion of Excess Cash Flow for any preceding fiscal year which was not required to be applied pursuant to Section 2.12(d), and the aggregate amount of any Indebtedness incurred to finance such Restricted Payments), (ix) the amount of any cash decrease in Other Long-Term Liabilities and (x) the aggregate amount of cash consideration paid for Permitted Acquisitions (or other acquisitions otherwise approved by the Required Lenders) during such period, except to the extent that such cash consideration was funded with the proceeds of any Disposition of Property, incurrence of Indebtedness or issuance of Capital Stock of the Parent. "Excess Cash Flow Application Date": as defined in Section 2.12(d). "Excluded Foreign Subsidiary": any Foreign Subsidiary in respect of which either (a) the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would, in the good faith judgment of the Borrower, result in adverse tax consequences to the Borrower under Section 956 of the Code or any other similar provision under foreign, state or local law. "Existing Credit Facility": the Amended and Restated Credit Agreement, dated as of December 20, 2002, among Aircraft Braking Systems Corporation and Engineered Fabrics Corporation, as borrowers, the several lenders party thereto, the several agents named therein, 12 and Lehman Commercial Paper Inc., as administrative agent, as amended, supplemented or otherwise modified prior to the date hereof. "Existing Issuing Lender": JPMorgan Chase Bank, N.A. (successor by merger to Bank One, N.A. (Main Office Chicago)), as issuer of the Existing Letters of Credit. "Existing Letters of Credit": the letters of credit described in Annex B. "Existing Notes": the Target's 9.25% Senior Subordinated Notes Due 2007 having an outstanding principal amount of approximately $145.0 million and 9.625% Senior Subordinated Notes Due 2010 having an outstanding principal amount of approximately $250.0 million. "Facility": each of (a) the Term Loan Commitments and the Term Loans made thereunder (the "Term Loan Facility") and (b) the Revolving Credit Commitments and the extensions of credit made thereunder (the "Revolving Credit Facility"). "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Foreign Subsidiary": any Subsidiary of the Borrower that is not a Domestic Subsidiary. "Funded Debt": with respect to any Person, all Indebtedness of such Person of the types described in clauses (a) through (e) of the definition of "Indebtedness" in this Section 1.1. "Funding Office": the office specified from time to time by the Administrative Agent as its funding office by notice to the Borrower and the Lenders. "GAAP": generally accepted accounting principles in the United States of America as in effect from time to time. "Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners). "Guarantee and Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by Holdings, the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time. 13 "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any Property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantors": the collective reference to Holdings and the Subsidiary Guarantors. "Hedge Agreements": all interest rate or currency swaps, caps or collar agreements, foreign exchange agreements, commodity contracts or similar arrangements entered into by the Borrower or its Subsidiaries providing for protection against fluctuations in interest rates, currency exchange rates, commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies. "Holdings Equity Financings": a collective reference to the issuance of equity by Holdings described in Section 5.1(b)(i). "Holdings Preferred Stock": the preferred stock of Holdings issued and sold on the Closing Date pursuant to the Stock Purchase Agreement. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such 14 Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit, surety bond or similar facilities, (g) the liquidation value of all the Capital Stock of such Person that is mandatorily redeemable (other than as a result of a change of control or an asset sale) prior to the date that is one year after the final payment is due on the Term Loans, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation and (j) for the purposes of Section 8(e) only, all obligations of such Person in respect of Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. "Indemnified Liabilities": as defined in Section 10.5. "Indemnitee": as defined in Section 10.5. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Intercompany Loans": (a) the loan in the original principal amount of $48,400,000 made by the Target to Engineered Fabrics Corporation on or about April 28, 1989 and (b) the loan in the original principal amount of $304,600,000 made by the Target to Aircraft Braking Systems Corporation on or about April 28, 1989. "Interest Payment Date": (a) as to any Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or shorter, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period and (d) as to any Loan or portion thereof that is repaid or prepaid (other than any Revolving Credit 15 Loan that is a Base Rate Loan and any Swing Line Loan), the date of any such repayment or prepayment made in respect thereof. "Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six or (if consented to by all Lenders under the relevant Facility, as determined by such Lenders in their sole discretion) nine or twelve months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six or (if consented to by all Lenders under the relevant Facility, as determined by such Lenders in their sole discretion) nine or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, on the date that is three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period that would otherwise extend beyond the Revolving Credit Termination Date or beyond the date final payment is due on the Term Loans shall end on the Revolving Credit Termination Date or such due date, as applicable; and (3) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period. "Investments": as defined in Section 7.8. "Issuing Lender": the Existing Issuing Lender and any Revolving Credit Lender from time to time designated by the Borrower as an Issuing Lender with the consent of such Revolving Credit Lender and the Administrative Agent. "L/C Commitment": $10,000,000. "L/C Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Credit Commitment Period. "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 3.5. 16 "L/C Participants": with respect to any Letter of Credit, the collective reference to all the Revolving Credit Lenders other than the Issuing Lender that issued such letter of Credit. "Lehman Entity": any of Lehman Commercial Paper Inc. or any of its affiliates (including Syndicated Loan Funding Trust). "Lender Addendum": with respect to any initial Lender, a Lender Addendum, substantially in the form of Exhibit I, to be executed and delivered by such Lender on the Closing Date as provided in Section 10.17. "Lenders": as defined in the preamble hereto. "Letters of Credit": as defined in Section 3.1(a). "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Documents": this Agreement, the Security Documents, the Applications and the Notes. "Loan Parties": Holdings, the Borrower and each Subsidiary of the Borrower that is a party to a Loan Document. "Majority Facility Lenders": with respect to any Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans or the Total Revolving Extensions of Credit, as the case may be, outstanding under such Facility (or, in the case of the Revolving Credit Facility, prior to any termination of the Revolving Credit Commitments, the holders of more than 50% of the Total Revolving Credit Commitments). "Majority Revolving Credit Facility Lenders": the Majority Facility Lenders in respect of the Revolving Credit Facility. "Management Agreement": the Management Services Agreement, dated as of November 18, 2004, among Holdings, the Borrower and Aurora Management Partners LLC, a Delaware limited liability company, as the same may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.17. "Material Adverse Effect": a material adverse effect on (a) the condition (financial or otherwise), results of operation, assets or liabilities of Holdings, the Borrower (or, on the Closing Date, the Target) and its Subsidiaries, taken as a whole, or (b) the ability of the Loan Parties to perform their obligations under the Loan Documents, or (c) the validity or 17 enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. "Material Environmental Amount": an amount or amounts payable by the Borrower and/or any of its Subsidiaries, in the aggregate in excess of $5,000,000, for: costs to comply with any Environmental Law; costs of any investigation, and any remediation, of any Material of Environmental Concern; and compensatory damages (including, without limitation damages to natural resources), punitive damages, fines, and penalties pursuant to any Environmental Law. "Materials of Environmental Concern": any gasoline or petroleum (including, without limitation, crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants, contaminants, radioactivity, and any other substances of any kind, whether or not any such substance is defined as hazardous or toxic under any Environmental Law, that is regulated pursuant to or could give rise to liability under any Environmental Law. "Merger": as defined in the recitals hereto. "Mortgaged Properties": (a) the real properties listed on Schedule 1.1A and identified as "Mortgaged Property," as to which the Administrative Agent for the benefit of the Secured Parties shall be granted a Lien pursuant to one or more Mortgages and (b) any fee owned real property subject to a Mortgage pursuant to Section 6.10(b). "Mortgages": each of the mortgages, deeds to secure debt and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Secured Parties, substantially in the form of Exhibit D (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded to create a valid and enforceable Lien securing the obligations and liabilities of any Borrower or any guarantor under any Loan Document), as the same may be amended, supplemented or otherwise modified from time to time. "Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received 18 from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith, (c) in the case of any Asset Sale, any reserves required to be established by such Person in accordance with GAAP against liabilities reasonably anticipated and directly attributable to such Asset Sale, it being understood and agreed that "Net Cash Proceeds" shall include any net cash received by Holdings, the Borrower or any of its Subsidiaries upon any release of such reserves and (d) in connection with any Purchase Price Refund, the cash amount thereof, net of any expenses incurred in the collection thereof. "Non-Excluded Taxes": as defined in Section 2.20(a). "Non-U.S. Lender": as defined in Section 2.20(d). "Note": any promissory note evidencing any Loan. "Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans, the Reimbursement Obligations and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender or any Qualified Counterparty, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Hedge Agreement, cash management arrangement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise; provided, that (i) obligations of the Borrower or any Subsidiary under any Specified Hedge Agreement shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (ii) any release of Collateral or Guarantors effected in the manner permitted by this Agreement shall not require the consent of holders of obligations under Specified Hedge Agreements. "Other Long-Term Liabilities": on any date of determination, all amounts which would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries under the item "Other Long-Term Liabilities", including, without limitation, amounts accrued under FASB No. 106 and under FASB No. 87. "Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Parent": K&F Parent, Inc., a Delaware corporation and direct parent of Holdings. 19 "Participant": as defined in Section 10.6(b). "Payment Office": the office specified from time to time by the Administrative Agent as its payment office by notice to the Borrower and the Lenders. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor). "Permitted Acquisition": the acquisition by the Borrower or any Subsidiary of all or substantially all the assets of a Person or line of business of such Person, or not less than 100% of the Capital Stock (except for directors' qualifying shares) of a Person; provided that (i) the Acquired Entity shall be a going concern and after giving effect to the acquisition the Borrower shall be in compliance with Section 7.15; (ii) the Acquired Entity is located, and substantially all of its operations are conducted, in the United States of America; (iii) at the time of such transaction (A) both before and after giving effect thereto, no Event of Default or Default shall have occurred and be continuing; (B) the Borrower shall have demonstrated to the reasonable satisfaction of the Administrative Agent that the Borrower would be in pro forma compliance with the financial covenants in Section 7.1; (C) after giving effect to such acquisition, the amount of the Available Revolving Credit Commitments of all the Lenders must be at least $10,000,000; and (D) the total consideration paid in connection with such acquisition and any other acquisitions pursuant to Section 7.8(j) (including any Indebtedness of the Acquired Entity that is assumed, refinanced or repaid by the Borrower or any Subsidiary in connection with or following such acquisition) shall not in the aggregate exceed (x) $150,000,000 during the term of this Agreement or (y) $50,000,000 prior to the first anniversary of the Closing Date; (iv) the Administrative Agent shall have received, to the extent available, the most recently available audited financial statements with respect to such Person, assets or line of business; and (v) the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 6.10 and the Security Documents. "Permitted Investors": the collective reference to: (i) Aurora Industrial Holdings LLC, Aurora Equity Partners II L.P., Aurora Overseas Equity Partners II, L.P., Aurora Equity Partners III L.P. and Aurora Overseas Capital Partners III, L.P. (collectively, the "Limited Partnerships"); (ii) Aurora Capital Partners II L.P., Aurora Overseas Capital Partners II, L.P., Aurora Capital Partners III L.P. and Aurora Overseas Capital Partners III, L.P. (collectively, the "General Partners"); (iii) Aurora Advisors II LLC, Aurora Advisors III LLC, Aurora Overseas Advisors II, LDC and Aurora Overseas Advisors III, LDC (collectively, the "Ultimate General Partners"); (iv) any limited partners of the Limited Partnerships, any limited partners of the General Partners or any Control Investment Affiliate of such limited partners, provided that such limited partner or Control Investment Affiliate 20 gives a proxy to, or otherwise agrees that it will vote in a manner consistent with, any of the Limited Partnerships or the General Partners; (v) any managing director, consultant or employee of Aurora Management Partners LLC, provided that such managing director, consultant or employee gives a proxy to, or otherwise agrees that he or she will vote in a manner consistent with the Limited Partnerships; (vi) any member of the Advisory Board of Aurora Management Partners LLC, provided that such member gives a proxy to, or otherwise agrees that he or she will vote in a manner consistent with the Limited Partnerships; (vii) any Affiliate of Aurora Management Partners LLC, provided that such Affiliate agrees that it will vote in a manner consistent with the Limited Partnerships; or (viii) any investment fund or other entity controlled by or under common control with, any one or more of the Ultimate General Partners or Aurora Management Partners LLC or the principals that control any one or more of the Ultimate General Partners or Aurora Management Partners LLC. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pricing Grid": the pricing grid attached hereto as Annex A. "Principal Officer": as to any Person, the chief executive officer, president, chief financial officer, general counsel, treasurer or controller of such Person. "Pro Forma Balance Sheet": as defined in Section 4.1(a). "Program Investments": for any period, the amount of investments capitalized by the Borrower and its Subsidiaries during such period consisting of the sale of original wheel and brake assemblies to customers below factory cost in accordance with industry practice in the commercial, military and general aviation industries. "Projections": as defined in Section 6.2(c). "Property": any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock. 21 "Purchase Price Refund": any amount received by Holdings, the Borrower or any Subsidiary as a result of a purchase price adjustment or similar event in connection with any acquisition of Property by Holdings, the Borrower or any Subsidiary. "Qualified Counterparty": with respect to any Specified Hedge Agreement, any counterparty thereto that, at the time such Specified Hedge Agreement was entered into, was a Lender or an affiliate of a Lender. "Recovery Event": any settlement of or payment of $250,000 or more in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of Holdings, the Borrower or any of its Subsidiaries. "Refunded Swing Line Loans": as defined in Section 2.7. "Refunding Date": as defined in Section 2.7. "Register": as defined in Section 10.6(d). "Regulation G": Regulation G under the Securities Exchange Act of 1934, as amended. "Regulation H": Regulation H of the Board as in effect from time to time. "Regulation U": Regulation U of the Board as in effect from time to time. "Reimbursement Obligation": the obligation of the Borrower to reimburse each Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit issued by such Issuing Lender. "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by Holdings, the Borrower or any of its Subsidiaries in connection therewith that are not applied to prepay the Term Loans or reduce the Revolving Credit Commitments pursuant to Section 2.12(c) as a result of the delivery of a Reinvestment Notice. "Reinvestment Event": any Asset Sale, Purchase Price Refund or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice. "Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Default or Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale, Purchase Price Refund or Recovery Event to acquire, construct, improve or repair assets useful in its business. "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire assets useful in the Borrower's business. 22 "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring eleven months (or, in the event any Senior Preferred Stock is outstanding, ten months) after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire or repair assets useful in the Borrower's business with all or any portion of the relevant Reinvestment Deferred Amount. "Related Fund": with respect to any Lender, any fund that (x) makes purchases, holds or otherwise invests in commercial loans and similar extensions of credit and (y) is managed, administered or advised by the same investment advisor as such Lender or an Affiliate of such investment advisor, by such Lender or an Affiliate of such Lender. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .21 through .35 of PBGC Reg. Section 4043. "Required Lenders": at any time, the holders of more than 50% of (a) until the Closing Date, the Commitments and (b) thereafter, the sum of (i) the aggregate unpaid principal amount of the Term Loans then outstanding and (ii) the Total Revolving Credit Commitments then in effect or, if the Revolving Credit Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding. "Required Prepayment Lenders": the Majority Facility Lenders in respect of each Facility. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower. "Restricted Payments": as defined in Section 7.6. "Revolving Credit Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving Credit Loans and participate in Swing Line Loans and Letters of Credit, in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Revolving Credit Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the Total Revolving Credit Commitments is $50,000,000. 23 "Revolving Credit Commitment Period": the period from and including the Closing Date to the Revolving Credit Termination Date. "Revolving Credit Facility": as defined in the definition of "Facility" in this Section 1.1. "Revolving Credit Lender": each Lender that has a Revolving Credit Commitment or that is the holder of Revolving Credit Loans. "Revolving Credit Loans": as defined in Section 2.4. "Revolving Credit Note": as defined in Section 2.8. "Revolving Credit Percentage": as to any Revolving Credit Lender at any time, the percentage which such Lender's Revolving Credit Commitment then constitutes of the Total Revolving Credit Commitments (or, at any time after the Revolving Credit Commitments shall have expired or terminated, the percentage which the aggregate amount of such Lender's Revolving Extensions of Credit then outstanding constitutes of the Total Revolving Extensions of Credit then outstanding). "Revolving Credit Termination Date": November 18, 2010. "Revolving Extensions of Credit": as to any Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (b) such Lender's Revolving Credit Percentage of the L/C Obligations then outstanding and (c) such Lender's Revolving Credit Percentage of the aggregate principal amount of Swing Line Loans then outstanding. "SEC": the Securities and Exchange Commission (or successors thereto or an analogous Governmental Authority). "Secured Parties": as defined in the Guarantee and Collateral Agreement. "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any Property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document. "Senior Preferred Stock": as defined in the Stock Purchase Agreement. "Senior Subordinated Note Indenture": the Indenture entered into by the Borrower and certain of its Subsidiaries in connection with the issuance of the Senior Subordinated Notes, together with all instruments and other agreements entered into by the Borrower or such Subsidiaries in connection therewith, as the same may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.9. 24 "Senior Subordinated Notes": the $315,000,000 aggregate principal amount of senior subordinated notes of the Borrower issued on the Closing Date pursuant to the Senior Subordinated Note Indenture and any exchange notes issued in respect thereof thereunder. "Single Employer Plan": any Plan that is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Solvent": with respect to any Person, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Specified Change of Control": a "Change of Control", (or any other defined term having a similar purpose), as defined in the Senior Subordinated Note Indenture. "Specified Hedge Agreement": any Hedge Agreement entered into by the Borrower or any Subsidiary Guarantor and any Qualified Counterparty. "Stock Purchase Agreement": the Stock Purchase Agreement dated as of November 18, 2004, among the Parent, Holdings, the Borrower and Cerberus Partners, L.P., as amended, supplemented or otherwise modified from time to time in accordance with Section 7.17. "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantor": each Subsidiary of the Borrower that is a party to the Guarantee and Collateral Agreement. 25 "Swing Line Commitment": the obligation of the Swing Line Lender to make Swing Line Loans pursuant to Section 2.6 in an aggregate principal amount at any one time outstanding not to exceed $5,000,000. "Swing Line Lender": Lehman Commercial Paper Inc., in its capacity as the lender of Swing Line Loans. "Swing Line Loans": as defined in Section 2.6. "Swing Line Note": as defined in Section 2.8. "Swing Line Participation Amount": as defined in Section 2.7. "Syndication Agent": as defined in the preamble hereto. "Target": as defined in the recitals hereto. "Tax Sharing Agreement": the Tax Sharing Agreement, dated as of November 18, 2004, by and between the Parent and the Target, as the same may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.17. "Tender Offers": offers made by the Target to repurchase any and all of the Existing Notes. "Term Loan": as defined in Section 2.1. "Term Loan Commitment": as to any Lender, the obligation of such Lender, if any, to make a Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Term Loan Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the Term Loan Commitments is $480,000,000. "Term Loan Facility": as defined in the definition of "Facility" in this Section 1.1. "Term Loan Lender": each Lender that has a Term Loan Commitment or is the holder of a Term Loan. "Term Loan Percentage": as to any Term Loan Lender at any time, the percentage which such Lender's Term Loan Commitment then constitutes of the aggregate Term Loan Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Term Loan then outstanding constitutes of the aggregate principal amount of the Term Loans then outstanding). "Term Note": as defined in Section 2.8(e). 26 "Total Revolving Credit Commitments": at any time, the aggregate amount of the Revolving Credit Commitments then in effect. "Total Revolving Extensions of Credit": at any time, the aggregate amount of the Revolving Extensions of Credit of the Revolving Credit Lenders outstanding at such time. "Transferee": as defined in Section 10.14. "Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan. "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries. "Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is a Wholly Owned Subsidiary of the Borrower. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. (a) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to Holdings, the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (d) All calculations of financial ratios set forth in Section 7.1 and the calculation of the Consolidated Leverage Ratio for purposes of determining the Applicable Margin and any other purpose specified herein shall be calculated to the same number of decimal places as the relevant ratios are expressed in and shall be rounded upward if the number in the decimal place immediately following the last calculated decimal place is five or greater. For example, if the relevant ratio is to be calculated to the hundredth decimal place and the calculation of the ratio is 5.126, the ratio will be rounded up to 5.13. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Term Loan Commitments. Subject to the terms and conditions hereof, the Term Loan Lenders severally agree to make term loans (each, a "Term Loan") to the Borrower on the Closing Date in an amount for each Term Loan Lender not to exceed the amount of the 27 Term Loan Commitment of such Lender. The Term Loans may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.13. 2.2 Procedure for Term Loan Borrowing. The Borrower shall deliver to the Administrative Agent a Borrowing Notice (which Borrowing Notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the anticipated Closing Date) requesting that the Term Loan Lenders make the Term Loans on the Closing Date. The Term Loans made on the Closing Date shall initially be Base Rate Loans, and no Term Loan may be converted into or continued as a Eurodollar Loan having an Interest Period in excess of one month prior to the date which is 60 days after the Closing Date. Upon receipt of such Borrowing Notice the Administrative Agent shall promptly notify each Term Loan Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date each Term Loan Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the Term Loan or Term Loans to be made by such Lender. The Administrative Agent shall make available to the Borrower the aggregate of the amounts made available to the Administrative Agent by the Term Loan Lenders, in like funds as received by the Administrative Agent. 2.3 Repayment of Term Loans. The Term Loan of each Term Loan Lender shall mature in 32 consecutive quarterly installments, commencing on March 31, 2005, each of which shall be in an amount equal to such Lender's Term Loan Percentage multiplied by the percentage set forth below opposite such installment of the aggregate amount of Term Loans made on the Closing Date:
Installment Percentage - ----------- ---------- March 31, 2005 0.25% June 30, 2005 0.25% September 30, 2005 0.25% December 31, 2005 0.25% March 31, 2006 0.25% June 30, 2006 0.25% September 30, 2006 0.25% December 31, 2006 0.25% March 31, 2007 0.25% June 30, 2007 0.25% September 30, 2007 0.25% December 31, 2007 0.25% March 31, 2008 0.25% June 30, 2008 0.25% September 30, 2008 0.25% December 31, 2008 0.25% March 31, 2009 0.25% June 30, 2009 0.25%
28
Installment Percentage - ----------- ---------- September 30, 2009 0.25% December 31, 2009 0.25% March 31, 2010 0.25% June 30, 2010 0.25% September 30, 2010 0.25% December 31, 2010 0.25% March 31, 2011 0.25% June 30, 2011 0.25% September 30, 2011 0.25% December 31, 2011 0.25% March 31, 2012 23.25% June 30, 2012 23.25% September 30, 2012 23.25% November 18, 2012 All amounts outstanding in respect of the Term Loans
2.4 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, the Revolving Credit Lenders severally agree to make revolving credit loans ("Revolving Credit Loans") to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding for each Revolving Credit Lender which, when added to such Lender's Revolving Credit Percentage of the sum of (i) the L/C Obligations then outstanding and (ii) the aggregate principal amount of the Swing Line Loans then outstanding, does not exceed the amount of such Lender's Revolving Credit Commitment. During the Revolving Credit Commitment Period the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving Credit Loans may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.5 and 2.13, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Credit Termination Date. (b) The Borrower shall repay all outstanding Revolving Credit Loans on the Revolving Credit Termination Date. 2.5 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the Revolving Credit Commitments on any Business Day during the Revolving Credit Commitment Period, provided that the Borrower shall deliver to the Administrative Agent a Borrowing Notice (which Borrowing Notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans). Each borrowing of Revolving Credit Loans under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple thereof (or, if the then aggregate Available Revolving 29 Credit Commitments are less than $1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof; provided, that the Swing Line Lender may request, on behalf of the Borrower, borrowings of Base Rate Loans under the Revolving Credit Commitments in other amounts pursuant to Section 2.7. Upon receipt of any such Borrowing Notice from the Borrower, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof. Each Revolving Credit Lender will make its Revolving Credit Percentage of the amount of each borrowing of Revolving Credit Loans available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in like funds as received by the Administrative Agent. 2.6 Swing Line Commitment. (a) Subject to the terms and conditions hereof, the Swing Line Lender agrees that, during the Revolving Credit Commitment Period, it will make available to the Borrower in the form of swing line loans ("Swing Line Loans") a portion of the credit otherwise available to the Borrower under the Revolving Credit Commitments; provided that (i) the aggregate principal amount of Swing Line Loans outstanding at any time shall not exceed the Swing Line Commitment then in effect (notwithstanding that the Swing Line Loans outstanding at any time, when aggregated with the Swing Line Lender's other outstanding Revolving Credit Loans hereunder, may exceed the Swing Line Commitment then in effect or such Swing Line Lender's Revolving Credit Commitment then in effect) and (ii) the Borrower shall not request, and the Swing Line Lender shall not make, any Swing Line Loan if, after giving effect to the making of such Swing Line Loan, the aggregate amount of the Available Revolving Credit Commitments would be less than zero. During the Revolving Credit Commitment Period, the Borrower may use the Swing Line Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. Swing Line Loans shall be Base Rate Loans only. (b) The Borrower shall repay all outstanding Swing Line Loans on the Revolving Credit Termination Date. 2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans. (a) The Borrower may borrow under the Swing Line Commitment on any Business Day during the Revolving Credit Commitment Period, provided, the Borrower shall give the Swing Line Lender irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by the Swing Line Lender not later than 1:00 P.M., New York City time, on the proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date. Each borrowing under the Swing Line Commitment shall be in an amount equal to $500,000 or a whole multiple of $100,000 in excess thereof. Not later than 3:00 P.M., New York City time, on the Borrowing Date specified in the borrowing notice in respect of any Swing Line Loan, the Swing Line Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the amount of such Swing Line Loan. The Administrative Agent shall make the proceeds of such Swing Line Loan available to the Borrower on such Borrowing Date in like funds as received by the Administrative Agent. 30 (b) The Swing Line Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf), on one Business Day's notice given by the Swing Line Lender no later than 12:00 Noon, New York City time, request each Revolving Credit Lender to make, and each Revolving Credit Lender hereby agrees to make, a Revolving Credit Loan (which shall initially be a Base Rate Loan), in an amount equal to such Revolving Credit Lender's Revolving Credit Percentage of the aggregate amount of the Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date of such notice, to repay the Swing Line Lender. Each Revolving Credit Lender shall make the amount of such Revolving Credit Loan available to the Administrative Agent at the Funding Office in immediately available funds, not later than 10:00 A.M., New York City time, one Business Day after the date of such notice. The proceeds of such Revolving Credit Loans shall be made immediately available by the Administrative Agent to the Swing Line Lender for application by the Swing Line Lender to the repayment of the Refunded Swing Line Loans. (c) If prior to the time a Revolving Credit Loan would have otherwise been made pursuant to Section 2.7(b), one of the events described in Section 8(f) shall have occurred and be continuing with respect to the Borrower, or if for any other reason, as determined by the Swing Line Lender in its sole discretion, Revolving Credit Loans may not be made as contemplated by Section 2.7(b), each Revolving Credit Lender shall, on the date such Revolving Credit Loan was to have been made pursuant to the notice referred to in Section 2.7(b) (the "Refunding Date"), purchase for cash an undivided participating interest in the then outstanding Swing Line Loans by paying to the Swing Line Lender an amount (the "Swing Line Participation Amount") equal to (i) such Revolving Credit Lender's Revolving Credit Percentage times (ii) the sum of the aggregate principal amount of Swing Line Loans then outstanding which were to have been repaid with such Revolving Credit Loans. (d) Whenever, at any time after the Swing Line Lender has received from any Revolving Credit Lender such Lender's Swing Line Participation Amount, the Swing Line Lender receives any payment on account of the Swing Line Loans, the Swing Line Lender will distribute to such Lender its Swing Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such Lender's pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swing Line Loans then due); provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Revolving Credit Lender will return to the Swing Line Lender any portion thereof previously distributed to it by the Swing Line Lender. (e) Each Revolving Credit Lender's obligation to make the Loans referred to in Section 2.7(b) and to purchase participating interests pursuant to Section 2.7(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Revolving Credit Lender or the Borrower may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach 31 of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other Revolving Credit Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be, (i) the then unpaid principal amount of each Revolving Credit Loan of such Revolving Credit Lender on the Revolving Credit Termination Date (or on such earlier date on which the Loans become due and payable pursuant to Section 8), (ii) the then unpaid principal amount of each Swing Line Loan of such Swing Line Lender on the Revolving Credit Termination Date (or on such earlier date on which the Loans become due and payable pursuant to Section 8) and (iii) the principal amount of each Term Loan of such Term Loan Lender in installments according to the amortization schedule set forth in Section 2.3 (or on such earlier date on which the Loans become due and payable pursuant to Section 8). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.15. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 10.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, the Type of such Loan and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (d) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.8(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. (e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will promptly execute and deliver to such Lender a promissory note of the Borrower evidencing any Term Loans, Revolving Credit Loans or Swing Line Loans, as the case may be, of such Lender, substantially in the forms of Exhibit G-1, G-2 or G-3, respectively (a "Term Note", "Revolving Credit Note" or "Swing Line Note", respectively), with appropriate insertions as to date and principal amount; provided, that delivery of Notes shall not be a condition precedent to the occurrence of the Closing Date or the making of the Loans or issuance of Letters of Credit on the Closing Date. 32 2.9 Commitment Fees, etc. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the Closing Date to the last day of the Revolving Credit Commitment Period, computed at the Commitment Fee Rate on the average daily amount of the Available Revolving Credit Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Credit Termination Date, commencing on the first of such dates to occur after the date hereof. (b) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates from time to time agreed to in writing by the Borrower and the Administrative Agent. 2.10 Termination or Reduction of Revolving Credit Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the aggregate amount of the Revolving Credit Commitments; provided that no such termination or reduction of Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans and Swing Line Loans made on the effective date thereof, the Total Revolving Extensions of Credit would exceed the Total Revolving Credit Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Credit Commitments then in effect. 2.11 Optional Prepayments. (a) The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty (except as otherwise provided herein), upon irrevocable notice delivered to the Administrative Agent no later than 11:00 A.M., New York City time, three Business Days prior thereto in the case of Eurodollar Loans and no later than 11:00 A.M., New York City time, one Business Day prior thereto in the case of Base Rate Loans, which notice shall specify the date and amount of such prepayment, whether such prepayment is of Term Loans or Revolving Credit Loans; provided, that (i) if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.21 and (ii) no prior notice is required for the prepayment of Swing Line Loans. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (except in the case of Revolving Credit Loans that are Base Rate Loans and Swing Line Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Term Loans and Revolving Credit Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Partial prepayments of Swing Line Loans shall be in an aggregate principal amount of $100,000 or a whole multiple thereof. (b) Any prepayment of the Loans upon the refinancing thereof (whether with proceeds of equity or Indebtedness) or upon the occurrence of a Change of Control shall be deemed to be an optional prepayment. 33 2.12 Mandatory Prepayments . (a) Unless the Required Prepayment Lenders shall otherwise agree, if any Capital Stock shall be issued by Holdings, the Borrower or any of its Subsidiaries (excluding (i) any Capital Stock of Holdings issued to the Parent, (ii) any convertible debt securities or (iii) any Capital Stock issued to Holdings or its Subsidiaries), then on the date of such issuance, the Term Loans and/or the Total Revolving Extensions of Credit then outstanding (without resulting in a permanent reduction of the Revolving Credit Commitments) shall be prepaid by an amount equal to 50% of the Net Cash Proceeds of such issuance, as set forth in Section 2.12(e), provided that, the foregoing percentage shall be reduced to (i) 25%, if the Consolidated Leverage Ratio on the date of such issuance is not greater than 5.5 to 1.0 and is greater than 4.0 to 1.0 and (ii) 0%, if the Consolidated Leverage Ratio on the date of such issuance is not greater than 4.0 to 1.0. The provisions of this Section do not constitute a consent to the issuance of any equity securities by any entity whose equity securities are pledged pursuant to the Guarantee and Collateral Agreement. (b Unless the Required Prepayment Lenders shall otherwise agree, if any Indebtedness shall be incurred by Holdings, the Borrower or any of its Subsidiaries (excluding any Indebtedness incurred in accordance with Section 7.2 as in effect on the date of this Agreement), then on the date of such incurrence, the Term Loans and/or the Total Revolving Extensions of Credit then outstanding (without resulting in a permanent reduction of the Revolving Credit Commitments) shall be prepaid by an amount equal to the amount of the Net Cash Proceeds of such incurrence, as set forth in Section 2.12(e). The provisions of this Section do not constitute a consent to the incurrence of any Indebtedness by Holdings, the Borrower or any of its Subsidiaries. (c) Unless the Required Prepayment Lenders shall otherwise agree, if on any date Holdings, the Borrower or any of its Subsidiaries shall receive Net Cash Proceeds from any Asset Sale, Purchase Price Refund or Recovery Event then, unless a Reinvestment Notice shall be delivered in respect thereof, on the date of receipt by Holdings, the Borrower or such Subsidiary of such Net Cash Proceeds, the Term Loans and/or the Total Revolving Extensions of Credit then outstanding (without resulting in a permanent reduction of the Revolving Credit Commitments) shall be prepaid by an amount equal to the amount of such Net Cash Proceeds, as set forth in Section 2.12(e); provided, that, notwithstanding the foregoing, on each Reinvestment Prepayment Date the Term Loans and/or the Revolving Credit Loans shall be prepaid by an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event, as set forth in Section 2.12(e). The provisions of this Section do not constitute a consent to the consummation of any Disposition not permitted by Section 7.5. (d) Unless the Required Prepayment Lenders shall otherwise agree, if, for any fiscal year of the Borrower commencing with the fiscal year ending December 31, 2005, there shall be Excess Cash Flow, then, on the relevant Excess Cash Flow Application Date, the Term Loans and/or the Total Revolving Extensions of Credit then outstanding (without resulting in a permanent reduction of the Revolving Credit Commitments) shall be prepaid by an amount equal to the ECF Percentage of such Excess Cash Flow, as set forth in Section 2.12(e). Each such prepayment shall be made on a date (an "Excess Cash Flow Application Date") no later than five days after the date on which the financial statements of the Borrower referred to in Section 6.1(a), for the fiscal year with respect to which such prepayment is made, are required to be delivered to the Lenders. 34 (e) Amounts to be applied in connection with prepayments made pursuant to this Section shall be applied, first, to the prepayment of the Term Loans and, second, to the prepayment of amounts outstanding under the Revolving Credit Facility (without resulting in a permanent reduction of the Revolving Credit Facility). Amounts to be applied to prepay the Total Revolving Extensions of Credit outstanding under the Revolving Credit Facility shall be applied, first, to the prepayment of the Revolving Credit Loans and the Swing Line Loans, and second, to replace outstanding Letters of Credit and/or deposit an amount in a cash collateral account established with the Administrative Agent for the benefit of the Secured Parties on terms and conditions satisfactory to the Administrative Agent. 2.13 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion of Eurodollar Loans may be made only on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor), provided that no Base Rate Loan under a particular Facility may be converted into a Eurodollar Loan (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Facility Lenders in respect of such Facility have, determined in its or their sole discretion not to permit such conversions or (ii) after the date that is one month prior to the final scheduled termination or maturity date of such Facility. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. (b) The Borrower may elect to continue any Eurodollar Loan as such upon the expiration of the then current Interest Period with respect thereto by giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loan, provided that no Eurodollar Loan under a particular Facility may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Facility Lenders in respect of such Facility have, determined in its or their sole discretion not to permit such continuations or (ii) after the date that is one month prior to the final scheduled termination or maturity date of such Facility, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso, such Loans shall be converted automatically to Base Rate Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. 2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional prepayments of Eurodollar Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall be outstanding at any one time. 35 2.15 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin in effect for such day. (b) Each Base Rate Loan shall bear interest for each day on which it is outstanding at a rate per annum equal to the Base Rate in effect for such day plus the Applicable Margin in effect for such day. (c) (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement Obligations (whether or not overdue) (to the extent legally permitted) shall bear interest at a rate per annum that is equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% and (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans under the relevant Facility plus 2% (or, in the case of any such other amounts that do not relate to a particular Facility, the rate then applicable to Base Rate Loans under the Revolving Credit Facility plus 2%), in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (after as well as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand. 2.16 Computation of Interest and Fees. (a) Interest, fees and commissions payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Loans on which interest is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.15(a). 36 2.17 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Majority Facility Lenders in respect of the relevant Facility that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans under the relevant Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans under the relevant Facility that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans under the relevant Facility shall be converted, on the last day of the then current Interest Period with respect thereto, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans under the relevant Facility shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Facility to Eurodollar Loans. 2.18 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee or Letter of Credit fee, and any reduction of the Commitments of the Lenders, shall be made pro rata according to the respective Term Loan Percentages or Revolving Credit Percentages, as the case may be, of the relevant Lenders. Each payment of interest in respect of the Loans and each payment in respect of fees payable hereunder shall be applied to the amounts of such obligations owing to the Lenders pro rata according to the respective amounts then due and owing to the Lenders. (b) Each payment (including each prepayment) on account of principal of the Term Loans shall be allocated among the Term Loan Lenders pro rata based on the principal amount of such Term Loans held by such Term Loan Lenders, and shall be applied (other than in the case of installment payments made in accordance with Section 2.3) to the installments of such Term Loans first, to the four immediately succeeding quarterly installments and thereafter, ratably to the remaining installments in accordance with the then outstanding amounts thereof. Amounts prepaid or repaid on account of the Term Loans may not be reborrowed. (c) Each payment (including each prepayment) by the Borrower on account of principal of the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then held by the Revolving Credit Lenders. Each payment in respect of Reimbursement Obligations in respect of any Letter of Credit shall be made to the Issuing Lender that issued such Letter of Credit. 37 (d) The application of any payment of Loans under any Facility (including optional and mandatory prepayments) shall be made, first, to Base Rate Loans under such Facility and, second, to Eurodollar Loans under such Facility. Each payment of the Loans (except in the case of Swing Line Loans and Revolving Credit Loans that are Base Rate Loans) shall be accompanied by accrued interest to the date of such payment on the amount paid. (e) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at the Payment Office, in Dollars and in immediately available funds. Any payment made by the Borrower after 12:00 Noon, New York City time, on any Business Day shall be deemed to have been on the next following Business Day. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension. (f) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the greater of (i) the Federal Funds Effective Rate and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the relevant Facility, on demand, from the Borrower. (g) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the 38 Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower. (h) Upon receipt by the Administrative Agent of payments on behalf of Lenders, the Administrative Agent shall promptly distribute such payments to the Lender or Lenders entitled thereto, in like funds as received by the Administrative Agent. 2.19 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.20 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) 39 by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction; provided that the Borrower shall not be required to compensate a Lender pursuant to this paragraph for any amounts incurred more than six months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and provided further that, if the circumstances giving rise to such claim have a retroactive effect, then such six-month period shall be extended to include the period of such retroactive effect. (c) A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.20 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between such Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent's or such Lender's having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or any Other Taxes are required to be withheld from any amounts payable to any Agent or any Lender hereunder, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph (a). (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for the account of the relevant Agent or Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower 40 fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (d) Each Lender (or Transferee) that is not a "U.S. Person" as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN, Form W-8ECI, or W-8IMY or any subsequent versions thereof or successors thereto or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", such Non-U.S. Lender delivers a Form W-8BEN or W-8IMY with the appropriate forms attached thereto, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender and represents that such Non-U.S. Lender is the sole record and beneficial owner of the Loans or the obligations evidenced by Note(s) in respect of which it is providing the following representations and is not (A) a "bank" within the meaning of section 881(c)(3)(A) of the Code and furthermore (i) is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and (ii) has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements, (B) a "10 percent shareholder" of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a "controlled foreign corporation" described in section 881(c)(3)(C) of the Code. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver. (e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender's reasonable judgment such completion, execution or submission would not prejudice the legal position of such Lender. 41 2.21 Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of Eurodollar Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.22 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.21. 2.23 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.19, 2.20(a) or 2.22 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of any Borrower or the rights of any Lender pursuant to Section 2.19, 2.20(a) or 2.22. 42 SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Prior to the Closing Date, the Existing Issuing Lender has issued the Existing Letters of Credit which, from and after the Closing Date, shall constitute Letters of Credit hereunder. Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the other Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue letters of credit (the letters of credit issued on and after the Closing Date pursuant to this Section 3, together with the Existing Letters of Credit, collectively, the "Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by such Issuing Lender; provided, that no Issuing Lender shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Revolving Credit Commitments would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date which is five Business Days prior to the Revolving Credit Termination Date; provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above). (b) No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 3.2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender may request. Concurrently with the delivery of an Application to an Issuing Lender, the Borrower shall deliver a copy thereof to the Administrative Agent. Upon receipt of any Application, an Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by such Issuing Lender and the Borrower (but in no event shall any Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto). Promptly after issuance by an Issuing Lender of a Letter of Credit, such Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower. Each Issuing Lender shall promptly give notice to the Administrative Agent of the issuance of each Letter of Credit issued by such Issuing Lender (including the face amount thereof), and shall provide a copy of such Letter of Credit to the Administrative Agent as soon as possible after the date of issuance. 3.3 Fees and Other Charges. (a) The Borrower will pay a fee on the aggregate drawable amount of all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurodollar Loans under the Revolving Credit Facility, shared ratably among the Revolving Credit Lenders in accordance with their respective 43 Revolving Credit Percentages and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the relevant Issuing Lender for its own account a fronting fee on the aggregate drawable amount of all outstanding Letters of Credit issued by it of a percentage per annum to be agreed upon by the Borrower and such Issuing Lender, payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. (b) In addition to the foregoing fees, the Borrower shall pay or reimburse each Issuing Lender for such normal and customary costs and expenses as are incurred or charged by such Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit. 3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce each Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from each Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk, an undivided interest equal to such L/C Participant's Revolving Credit Percentage in each Issuing Lender's obligations and rights under each Letter of Credit issued by such Issuing Lender hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Administrative Agent for the account of such Issuing Lender upon demand at such Issuing Lender's address for notices specified herein (and thereafter the Administrative Agent shall promptly pay to such Issuing Lender) an amount equal to such L/C Participant's Revolving Credit Percentage of the amount of such draft, or any part thereof, that is not so reimbursed. Each L/C Participant's obligation to pay such amount shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such L/C Participant may have against the Issuing Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other L/C Participant or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (b) If any amount (a "Participation Amount") required to be paid by any L/C Participant to an Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit is paid to such Issuing Lender within three Business Days after the date such payment is due, such Issuing Lender shall so notify the Administrative Agent, which shall promptly notify the L/C Participants, and each L/C Participant shall pay to the Administrative Agent, for the account of such Issuing Lender, on demand (and thereafter the Administrative Agent shall promptly pay to such Issuing Lender) an amount equal to the product of (i) such Participation Amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse 44 during such period and the denominator of which is 360. If any Participation Amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made available to the Administrative Agent for the account of the relevant Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Administrative Agent on behalf of such Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such Participation Amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans under the Revolving Facility. A certificate of the Administrative Agent submitted on behalf of an Issuing Lender to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. (c) Whenever, at any time after an Issuing Lender has made payment under any Letter of Credit and has received from the Administrative Agent any L/C Participant's pro rata share of such payment in accordance with Section 3.4(a), such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by such Issuing Lender), or any payment of interest on account thereof, such Issuing Lender will distribute to the Administrative Agent for the account of such L/C Participant (and thereafter the Administrative Agent will promptly distribute to such L/C Participant) its pro rata share thereof; provided, however, that in the event that any such payment received by such Issuing Lender shall be required to be returned by such Issuing Lender, such L/C Participant shall return to the Administrative Agent for the account of such Issuing Lender (and thereafter the Administrative Agent shall promptly return to such Issuing Lender) the portion thereof previously distributed by such Issuing Lender. 3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse each Issuing Lender, on each date on which such Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by such Issuing Lender, for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by such Issuing Lender in connection with such payment (the amounts described in the foregoing clauses (a) and (b) in respect of any drawing, collectively, the "Payment Amount"). Each such payment shall be made to such Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. Interest shall be payable on each Payment Amount from the date of the applicable drawing until payment in full at the rate set forth in (i) until the second Business Day following the date of the applicable drawing, Section 2.15(b) and (ii) thereafter, Section 2.15(c). Each drawing under any Letter of Credit shall (unless an event of the type described in clause (i) or (ii) of Section 8(f) shall have occurred and be continuing with respect to the Borrower, in which case the procedures specified in Section 3.4 for funding by L/C Participants shall apply) constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 2.5 of Base Rate Loans (or, at the option of the Administrative Agent and the Swing Line Lender in their sole discretion, a borrowing pursuant to Section 2.7 of Swing Line Loans) in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the first date on which a borrowing of Revolving Credit Loans (or, if applicable, Swing Line Loans) could be made, pursuant to Section 2.5 (or, if applicable, Section 2.7), if the Administrative Agent had received a notice of such borrowing at the time the Administrative Agent receives notice from the relevant Issuing Lender of such drawing under such Letter of Credit. 45 3.6 Obligations Absolute. The Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against any Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with each Issuing Lender that such Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Issuing Lender. The Borrower agrees that any action taken or omitted by an Issuing Lender under or in connection with any Letter of Credit issued by it or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards or care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of such Issuing Lender to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the relevant Issuing Lender shall promptly notify the Borrower and the Administrative Agent of the date and amount thereof. The responsibility of the relevant Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit, in addition to any payment obligation expressly provided for in such Letter of Credit issued by such Issuing Lender, shall be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. 3.8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, each of Holdings and the Borrower hereby represents and warrants to each Agent and each Lender on the Closing Date and each Borrowing Date that: 4.1 Financial Condition. (a) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2004 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the consummation of the Acquisition, (ii) the Loans to be made and the Senior Subordinated Notes to be issued on the Closing Date and the use of proceeds thereof and (iii) the payment of 46 fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the good faith assumptions and best information available to the Borrower as of the date of delivery thereof, and reflects on a pro forma basis the estimated financial position of the Borrower and its consolidated Subsidiaries as at September 30, 2004, assuming that the events specified in the preceding sentence (and the other events specified in the Pro Forma Balance Sheet) had actually occurred at such date. (b) The audited consolidated balance sheets of the Target and its Subsidiaries as at December 31, 2002 and December 31, 2003, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Deloitte & Touche LLP, copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial condition of the Target and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Target and its Subsidiaries as at September 30, 2004, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial condition of the Target and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to the absence of footnotes and normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein and except for the absence of notes and normal year-end adjustments in the unaudited financial statements). As of the most recent financial statements referred to in this Section 4.1(b), Holdings, the Borrower and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any material long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from December 31, 2003 to and including the date hereof there has been no Disposition by Holdings, the Borrower or any of its Subsidiaries of any material part of its business or Property. 4.2 No Change. Since June 30, 2004 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of Holdings, the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its Property, to lease the Property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification, except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not reasonably be expected to have, a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 47 4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party, to consummate the Acquisition and, in the case of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary corporate or other action to authorize the execution, delivery and performance of the Loan Documents to which it is a party, to consummate the Acquisition and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required for Holdings, Borrower or any of its Subsidiaries in connection with the consummation of the Acquisition, the borrowings hereunder or the execution, delivery, performance, validity or enforceability of this Agreement or any of the other Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 4.20. Each Loan Document has been duly executed and delivered on behalf of each Loan Party that is a party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party that is a party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the consummation of the Acquisition, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of Holdings, the Borrower or any of its Subsidiaries, except for such violations that would not reasonably be expected to have a Material Adverse Effect, and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). 4.6 No Material Litigation. Except as set forth on Schedule 4.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of a Principal Officer of Holdings or the Borrower, threatened by or against Holdings, the Borrower or any of its Subsidiaries or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect. 4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other Property material to the conduct of its business, and none of such Property is subject to any Lien except as permitted by Section 7.3. 48 The Borrower and its Subsidiaries have (a) title in fee simple to no real property other than as specified on Schedule 1.1B and (b) a valid leasehold interest in no real property other than as specified on Schedule 1.1B, provided that the Borrower may revise the information set forth on Schedule 1.1A from time to time upon notice to the Administrative Agent with a copy to each Lender. 4.9 Intellectual Property. Each of Holdings, the Borrower and each of its Subsidiaries owns, or is validly licensed to use, all material Intellectual Property necessary for the conduct of its business as currently conducted, except for such Intellectual Property that is readily available from alternative sources. No Principal Officer of Holdings or the Borrower has been made aware of any material claim by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property. To the knowledge of the Principal Officers of the Borrower and its Subsidiaries, the use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries exists that could reasonably be expected to have a Material Adverse Effect. 4.11 Taxes. Each of Holdings, the Borrower and each of its Subsidiaries has filed or caused to be filed all federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any material assessments made against it or any of its Property and all other material taxes, fees or other charges imposed on it or any of its Property by any Governmental Authority (other than any such taxes, assessments, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); and no tax Lien has been filed (other than inchoate tax Liens on real property or as otherwise permitted by Section 7.3(a)), and, to the knowledge of Holdings and the Borrower, no claim is being asserted for payment, with respect to any material tax, fee or other charge (other than any such taxes, assessments, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be). 4.12 Federal Regulations. No part of the proceeds of any Loans, and no other extensions of credit hereunder, will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U. 4.13 Labor Matters. There are no strikes or other labor disputes against Holdings, the Borrower or any of its Subsidiaries pending or, to the knowledge of Holdings or 49 the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of Holdings, the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from Holdings, the Borrower or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of Holdings, the Borrower or the relevant Subsidiary. 4.14 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan (other than with respect to the K&F Industries Retirement Plan for Salaried Employees and the Aircraft Braking Systems/Engineered Fabrics Retirement Plan for Bargaining Unit Employees for which, in each case, as of December 31, 2002, no such event or condition exists), and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. Other than with respect to the K&F Industries Retirement Plan for Salaried Employees and the Aircraft Braking Systems/Engineered Fabrics Retirement Plan for Bargaining Unit Employees for which, in each case, as of December 31, 2002, no liability remains unsatisfied or Lien remains outstanding, no termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those actuarial methods and assumptions used to fund such Plans for the purposes of Section 412 of the Code and indicated in the most recent applicable actuarial valuation reports) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. 4.15 Investment Company Act; Other Regulations. No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness. 4.16 Subsidiaries. (a) Except as disclosed to the Administrative Agent by any Loan Party in writing from time to time after the Closing Date, the Subsidiaries listed on Schedule 4.16 constitute all the Subsidiaries of the Borrower at the date hereof. Schedule 4.16 sets forth as of the Closing Date the name and jurisdiction of incorporation of each Subsidiary 50 and, as to each Subsidiary, the percentage of each class of Capital Stock owned by each Loan Party. (b) Except as disclosed to the Administrative Agent by any Loan Party in writing from time to time after the Closing Date, Holdings, the Borrower and its Subsidiaries are not parties to, or granted any, outstanding subscriptions, options, warrants, calls or other rights to purchase (other than rights in favor of the Parent, Holdings, the Borrower or its Subsidiaries and directors' qualifying shares) any Capital Stock of Holdings, the Borrower or any Subsidiary, except as disclosed on Schedule 4.16. 4.17 Use of Proceeds. The proceeds of the Term Loans shall be used to finance a portion of the Acquisition and to pay related fees and expenses. The proceeds of the Revolving Credit Loans and the Swing Line Loans, and the Letters of Credit, shall be used for general corporate purposes of the Borrower and its Subsidiaries, in the ordinary course of business and for other transactions to the extent permitted by this Agreement. 4.18 Environmental Matters. Other than exceptions to any of the following that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect: (a) Materials of Environmental Concern have not been generated, treated, stored, disposed of, arranged to be disposed of, installed or released at, on, under or from facilities or properties currently or formerly owned, leased or operated by the Borrower or any of its Subsidiaries (the "Business Properties") in amounts or concentrations or under circumstances which would reasonably be expected to (i) constitute or have constituted a violation of, or (ii) give rise to liability under, any Environmental Law. (b) The Business Properties, all operations at the Business Properties and the Borrower and its Subsidiaries and the business operated by the Borrower and any of its Subsidiaries (the "Business") are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws. Neither Borrower nor any of its Subsidiaries has assumed any liability of any other Person under Environmental Laws. (c) Neither Borrower nor any of its Subsidiaries has received or is aware of any written notice of (i) violation, (ii) alleged violation, (iii) non-compliance, (iv) liability or (v) potential liability regarding Environmental Laws, including without limitation, with regard to any of the Business Properties or the Business, nor does any Principal Officer of the Borrower or any of its Subsidiaries have knowledge that any such notice will be received or is being threatened. (d) To the knowledge of the Principal Officers of the Borrower or any of its Subsidiaries, Materials of Environmental Concern have not been transported or disposed of from the Business Properties in violation of, or in a manner or to a location which could give rise to liability under, any Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Principal Officers of the Borrower or any of its Subsidiaries, threatened, under any Environmental Law to which the Borrower or any of 51 its Subsidiaries is or, to the knowledge of the Principal Officers of the Borrower or any of its Subsidiaries, will be named as a party with respect to the Business Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders outstanding under any Environmental Law with respect to the Business Properties or the Business. 4.19 Accuracy of Information, etc. No statement or information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document, certificate or statement furnished to the Administrative Agent or the Lenders or any of them, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement), any untrue statement of a material fact or, when considered as a whole, omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. There is no fact known to any Principal Officer of any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Agents and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents. 4.20 Security Documents. (a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement, when any stock certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements in appropriate form are filed in the offices specified on Schedule 4.20(a) (which financing statements have been duly completed and delivered to the Administrative Agent) and such other filings as are specified on Schedule 3 to the Guarantee and Collateral Agreement have been completed (all of which filings have been duly completed), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than Liens on Collateral that cannot be perfected under the Uniform Commercial Code by filing or as otherwise specified on Schedule 3 to the Guarantee and Collateral Agreement) and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Liens permitted by Section 7.3). (b) Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof; and when the Mortgages are filed 52 in the offices specified on Schedule 4.20(b) (in the case of the Mortgages to be executed and delivered on the Closing Date) or in the recording office designated by the Borrower (in the case of any Mortgage to be executed and delivered pursuant to Section 6.10(b)), each Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties described therein and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (other than Persons holding Liens or other encumbrances or rights permitted by the relevant Mortgage or otherwise permitted by Sections 7.3(a) through (e) or Section 7.3(r) (to the extent that such Liens (i) are incurred in the ordinary course of business, (ii) are not substantial in amount and (iii) do not in any case materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries)). Schedule 1.1B lists, as of the Closing Date, each parcel of owned real property and each leasehold interest in real property located in the United States and held by the Borrower or any of its Subsidiaries that has a value, in the reasonable opinion of the Borrower, in excess of $1,000,000. 4.21 Solvency. Each Loan Party is, and after giving effect to the Acquisition and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent. 4.22 Senior Indebtedness. The Obligations constitute "Senior Debt" of the Borrower under and as defined in the Senior Subordinated Note Indenture. The obligations of each Subsidiary Guarantor under the Guarantee and Collateral Agreement constitute "Senior Debt" of such Subsidiary Guarantor under and as defined in the Senior Subordinated Note Indenture. 4.23 Regulation H. No Mortgage encumbers improved real property which is located in an area that has been publicly identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (except any Mortgaged Properties as to which such flood insurance as required by Regulation H has been obtained and is in full force and effect as required by this Agreement). 4.24 Certain Documents. The Borrower has delivered to the Administrative Agent a complete and correct copy of the Acquisition Documentation, the Senior Subordinated Note Indenture and the Management Agreement, including any amendments, supplements or modifications with respect to any of the foregoing. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Initial Extension of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it hereunder is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date, of the following conditions precedent: (a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of Holdings and the 53 Borrower, (ii) the Guarantee and Collateral Agreement, executed and delivered by a duly authorized officer of Holdings, the Borrower and each Subsidiary (other than any Excluded Foreign Subsidiary or any Subsidiary of an Excluded Foreign Subsidiary), (iii) a Mortgage covering each of the Mortgaged Properties, executed and delivered by a duly authorized officer of each party thereto and (iv) a Lender Addendum executed and delivered by each Lender and accepted by the Borrower. (b) Acquisition, etc. The following transactions shall have been consummated, or shall be consummated substantially concurrently with the making of the Loans on the Closing Date: (i) Holdings shall have received at least $310,000,000 in cash from the issuance of its common stock to the Parent; (ii) the Borrower shall have issued $310,000,000 of common stock for cash to Holdings; (iii) the Borrower shall have received at least $315,000,000 in gross cash proceeds from the issuance of the Senior Subordinated Notes, provided that, the amount of the Senior Subordinated Notes shall be reduced by the aggregate principal amount of Existing Notes not purchased in the Tender Offers, or for which a defeasance deposit has not been made; (iv) the Administrative Agent shall have received satisfactory evidence that the Borrower shall have issued on or prior to the Closing Date a notice to the holders of its 9-1/4% Senior Subordinated Notes due 2007 redeeming the remaining outstanding principal amount of such notes which were not tendered in accordance with Section 5.1(e); (v) the Acquisition shall have been consummated pursuant to the Acquisition Agreement for an aggregate purchase price not exceeding $1,105,000,000 (including fees and expenses not exceeding $45,000,000 in the aggregate and excluding the increase in the purchase price resulting from existing cash balances at the Target and excluding the Defeasance Costs Tax Note), and no material provision thereof shall have been waived, amended, supplemented or otherwise modified without the consent of the Agents (such consent not to be unreasonably withheld or delayed), and immediately thereafter the Merger shall have been consummated; and (vi) the capital structure of each Loan Party after the Acquisition shall be as described in Schedule 5.1(b)(vi). (c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated financial statements of the Target and its Subsidiaries for the 2002 and 2003 fiscal years and (iii) unaudited interim consolidated financial statements of the Target and its Subsidiaries for each quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (ii) of this paragraph as to which such financial statements 54 are available; and such financial statements shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of the Target and its Subsidiaries, as reflected in the financial statements or projections contained in the Confidential Information Memorandum. (d) Capitalization. The total equity capitalization of Holdings shall not be less than 25% of the consolidated total capitalization of Holdings after giving effect to the Holdings Equity Financings. The total equity capitalization of the Borrower shall not be less than 25% of the consolidated total capitalization of the Borrower after giving effect to the Borrower Equity Financing. (e) Notes Satisfaction. The Notes Satisfaction Condition (as defined in the Acquisition Agreement) shall have been satisfied. (f) Pro Forma Leverage Ratio. The ratio of pro forma Consolidated Total Debt of the Borrower at the Closing Date to pro forma Consolidated EBITDA of the Borrower (as adjusted to give effect to the consummation of the Acquisition and the financings contemplated hereby and calculated in accordance with Regulation G and including adjustments described in footnote (d) under "Summary Historical and Pro Forma Consolidated Financial Information" in the Offering Memorandum for the Senior Subordinated Notes and such other adjustments as the Agents agree are appropriate) for the Borrower's most recently ended four fiscal quarters for which internal financial statements are available shall not exceed 6.52 to 1.00. (g) No Material Adverse Effect. There shall not have occurred or become known to the Lenders any event, development or circumstance since June 30, 2004 that has caused or could reasonably be expected to cause a Material Adverse Effect. (h) Approvals. All governmental and third party approvals (including landlords' and other consents) required pursuant to the Acquisition Agreement shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose material adverse conditions on the Acquisition or the financing contemplated hereby. (i) Related Agreements. The Administrative Agent shall have received (in a form reasonably satisfactory to the Administrative Agent), true and correct copies, certified as to authenticity by the Borrower, of (i) the Senior Subordinated Note Indenture, (ii) the Acquisition Agreement, (iii) the Management Agreement and the Tax Sharing Agreement and (iv) such other documents or instruments as may be reasonably requested by the Administrative Agent, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Loan Parties may be a party. (j) Termination of Existing Credit Facility. The Administrative Agent shall have received evidence satisfactory to the Administrative Agent that the Existing Credit Facility shall be 55 simultaneously terminated, all amounts thereunder shall be simultaneously paid in full and arrangements reasonably satisfactory to the Administrative Agent shall have been made for the termination of Liens and security interests granted in connection therewith. (k) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including reasonable fees, disbursements and other charges of counsel to the Administrative Agent), on or before the Closing Date. All such amounts will be paid with proceeds of Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Administrative Agent on or before the Closing Date. (l) Solvency Analysis. The Lenders shall have received a solvency analysis in customary form certified by the chief financial officer of the Borrower which shall document the solvency of the Borrower and its Subsidiaries considered as a whole after giving effect to the Acquisition and the other transactions contemplated hereby, in form and substance satisfactory to the Lenders. (m) Lien Searches. The Lenders shall have received the results of a recent lien search in each of the jurisdictions in which Uniform Commercial Code financing statement or other filings or recordations should be made to evidence or perfect security interests in all assets of the Loan Parties, and such search shall reveal no liens on any of the assets of the Loan Party, except for Liens permitted by Section 7.3 or Liens to be discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Administrative Agent. (n) Closing Certificate. The Administrative Agent shall have received a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments. (o) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions: (i) the legal opinion of Gibson, Dunn & Crutcher LLP, counsel to Holdings, the Borrower and its Subsidiaries, substantially in the form of Exhibit F-1; (ii) the legal opinion of Ronald Kisner, Esq., general counsel of the Target and its Subsidiaries, substantially in the form of Exhibit F-2; (iii) to the extent consented to by the relevant counsel, each legal opinion, if any, delivered to Holdings in connection with the Acquisition Agreement, accompanied by a reliance letter in favor of the Lenders; and (iv) the legal opinion of local counsel in each of Georgia and Ohio and of such other special and local counsel as may be required by the Administrative Agent. 56 Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require and shall be addressed to the Administrative Agent and the Lenders. (p) Pledged Stock; Stock Powers; Acknowledgment and Consent; Pledged Notes. Subject to Section 6.13, the Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof, (ii) an Acknowledgment and Consent, substantially in the form of Annex II to the Guarantee and Collateral Agreement, duly executed by any issuer of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement that is not itself a party to the Guarantee and Collateral Agreement and (iii) each promissory note, if any, pledged pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank reasonably satisfactory to the Administrative Agent) by the pledgor thereof. (q) Filings, Registrations and Recordings. Each document (including, without limitation, any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall have been filed, registered or recorded or shall have been delivered to the Administrative Agent and shall be in proper form for filing, registration or recordation. (r) Title Insurance; Flood Insurance. (i) If requested by the Administrative Agent, the Administrative Agent shall have received, and the title insurance company issuing the policy referred to in clause (ii) below (the "Title Insurance Company") shall have received, maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Administrative Agent and the Title Insurance Company in a manner satisfactory to them, dated a date satisfactory to the Administrative Agent and the Title Insurance Company by an independent professional licensed land surveyor satisfactory to the Administrative Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (B) the lines of streets abutting the sites and width thereof; (C) all access and other easements appurtenant to the sites; (D) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (E) any encroachments on any adjoining property by the building structures and improvements on the sites; (F) if the site is described as being 57 on a filed map, a legend relating the survey to said map; and (G) the flood zone designations, if any, in which the Mortgaged Properties are located. (ii) The Administrative Agent shall have received in respect of each Mortgaged Property a mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (A) be in an amount satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage insured thereby creates a valid first Lien on such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (D) name the Administrative Agent for the benefit of the Secured Parties as the insured thereunder; (E) be in the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request and (G) be issued by title companies satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent). The Administrative Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid. (ii) If requested by the Administrative Agent, the Administrative Agent shall have received confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board. (iii) The Administrative Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in clause (ii) above and a copy of all other material documents affecting the Mortgaged Properties. (s) Insurance. The Administrative Agent shall have received insurance certificates satisfying the requirements of Section 5.3 of the Guarantee and Collateral Agreement. (t) PATRIOT Act. The Lenders shall have received, sufficiently in advance of the Closing Date, all documentation and other information required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including without limitation the United States PATRIOT Act. 5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it hereunder on any date (including, without limitation, its initial extension of credit) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date (except to the extent such representations and warranties were expressly made only as of a specified date). 58 (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date (and, on the Closing Date, after giving effect to the Acquisition and the financing thereof). Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.2 have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or any Agent hereunder, each of Holdings and the Borrower shall and shall cause each of its Subsidiaries to: 6.1 Financial Statements. Furnish to the Administrative Agent (for prompt distribution to each Lender): (a) as soon as available, but in any event within 90 days (or, in the event the Borrower is required to file such reports with the SEC, such earlier date specified for filing annual reports on Form 10-K under Section 13 or Section 15 of the Exchange Act or the date on which the Borrower has filed such reports with the SEC) after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures as of the end of and for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Deloitte & Touche LLP or other "Big Four" independent certified public accountants of nationally recognized standing; (b) as soon as available, but in any event not later than 45 days (or, in the event the Borrower is required to file such reports with the SEC, such earlier date specified for filing quarterly reports on Form 10-Q under Section 13 or Section 15 of the Exchange Act or the date on which the Borrower has filed such reports with the SEC) after the end of each of the first three quarterly periods of each fiscal year of the Borrower commencing with the quarter ending March 31, 2005, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, certified by a Responsible Officer of the Borrower (subject to changes resulting from audit, normal year-end adjustments and the absence of footnotes), setting forth in each case in comparative form the figures as of the end of and for the corresponding period in the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and 59 (c) as soon as available, but in any event not later than 45 days after the end of each month occurring during each fiscal year of the Borrower (other than the third, sixth, ninth and twelfth such month), commencing with the month ending January 31, 2005, the unaudited consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and of cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures as of the end of and for the corresponding period in the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to changes resulting from audit, normal year-end audit adjustments and the absence of footnotes); all such financial statements shall (i) in the case of financial statements referred to in Sections 6.1(a) and (b), contain such information as may be necessary to calculate compliance with Sections 7.1 and 7.7 for the four-quarter period ending on the date of such balance sheets and (ii) be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Administrative Agent (for prompt distribution to each Lender), or, in the case of Section 6.2(h), to the relevant Lender: (a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate (it being understood that such certificate shall be limited to the items that independent certified public accountants are permitted to cover in such certificates pursuant to their professional standards and customs of the profession); (b) concurrently with the delivery of any financial statements pursuant to Sections 6.1(a) and (b), (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) in the case of quarterly or annual financial statements, a Compliance Certificate containing all information and calculations necessary for determining compliance by Holdings, the Borrower and its Subsidiaries with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be; (c) as soon as available, and in any event no later than 120 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, and the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto), and, as soon 60 as available, materially adverse revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on good faith estimates, information and assumptions believed by such Responsible Officer to be reasonable under the circumstances and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect, provided that, each Lender recognizes that such Projections are not to be viewed as fact and that actual results during the period or periods covered by such Projections may differ from the projected results set forth therein by a material amount; (d) within 45 days after the end of each fiscal quarter of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the comparable periods of the previous year; (e) no later than 10 Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Senior Subordinated Note Indenture or the Acquisition Agreement; (f) within five days after the same are sent, copies of all financial statements and reports that Holdings or the Borrower sends to the holders of any class of its debt securities or public equity securities (other than any certificate required to be delivered to the trustee pursuant to the Senior Subordinated Note Indenture, which is not distributed to the holders of the Senior Subordinated Notes) and, within five days after the same are filed, copies of all financial statements and reports that Holdings or the Borrower may make to, or file with, the SEC; (g) promptly after the Borrower's receipt thereof, a copy of any "management letter" received by the Borrower from its independent certified public accountants; and (h) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where (i) the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be or (ii) the failure to pay, discharge or satisfy such obligation could not reasonably be expected to have a Material Adverse Effect. 6.4 Conduct of Business and Maintenance of Existence; Compliance. (a)(i) Preserve, renew and keep in full force and effect its organizational existence and (ii) take 61 all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law, except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.5 Maintenance of Property; Insurance. (a) Keep all material Property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its Property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent, upon written request, full information as to the insurance carried. The Borrower and its Subsidiaries shall retain the right to self-insure all or a portion of the required coverages (other than property insurance and product liability insurance relating to aircraft and aerospace products; provided that deductibles consistent with past practice shall not be considered self-insurance for purposes of this sentence) to the extent such self-insurance is reasonable and customary. 6.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of any Lender during normal business hours and without any unreasonable disruption to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and upon reasonable notice (which visits and inspections shall not be made more than once each year unless an Event of Default shall have occurred and is continuing) and to discuss the business, operations, properties and financial and other condition of Holdings, the Borrower and its Subsidiaries with officers and employees of Holdings, the Borrower and its Subsidiaries and with its independent certified public accountants. 6.7 Notices. Promptly, once any Principal Officer of the Borrower obtains knowledge thereof, give notice to the Administrative Agent, addressed to the Administrative Agent and each Lender, of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of Holdings, the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between Holdings, the Borrower or any of its Subsidiaries and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting Holdings, the Borrower or any of its Subsidiaries (i) in which the amount involved is $7,500,000 or more and not covered by 62 insurance or the escrow established pursuant to the Acquisition Agreement, (ii) in which injunctive or similar relief is sought that could materially and adversely affect Holdings, the Borrower or any of its Subsidiaries or (iii) which relates to any Loan Document, the Merger or the Acquisition; (d) the following events, as soon as possible and in any event within 30 days after the Borrower obtains knowledge thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; (e) as soon as possible and in any event within 30 days after any Principal Officer obtains knowledge thereof: (i) any development, event, or condition that, individually or in the aggregate with other developments, events or conditions, could reasonably be expected to result in the payment by the Borrower and its Subsidiaries, in the aggregate, of a Material Environmental Amount; and (ii) any notice that any governmental authority may deny any application for an Environmental Permit sought by, or revoke or refuse to renew any Environmental Permit held by, the Borrower, the absence of which Environmental Permit could reasonably be expected to result in a Material Adverse Effect; and (f) any development or event that has had or could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action Holdings, the Borrower or the relevant Subsidiary proposes to take with respect thereto. 6.8 Environmental Laws. (a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any required Environmental Permit. Noncompliance with any applicable Environmental Law or Environmental Permit, or the failure to obtain and maintain any Environmental Permit, shall be deemed not to constitute a breach of this Section 6.8(a) if, (i) upon obtaining knowledge of any such noncompliance or failure, the Borrower or the relevant Subsidiary, as appropriate, promptly undertakes reasonable efforts to achieve compliance or to obtain and maintain the Environmental Permit, and (ii) in any case, such noncompliance or failure, and any other noncompliance with any Environmental Law or Environmental Permit, individually or in the aggregate, could not reasonably be expected to give rise to a Material Adverse Effect. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly 63 comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws, other than such orders and directives as to which an appeal or other challenge has been timely and properly taken in good faith and the pendency of any and all such appeals and other challenges could not reasonably be expected to give rise to a Material Adverse Effect. 6.9 Interest Rate Protection. In the case of the Borrower, within 90 days after the Closing Date, enter into, and thereafter maintain for a period of not less than three years, Hedge Agreements to the extent necessary to provide that at least 50% of the aggregate principal amount of the Term Loans is subject to either a fixed interest rate or interest rate protection for a period of not less than three years, which Hedge Agreements shall have terms and conditions reasonably satisfactory to the Administrative Agent. 6.10 Additional Collateral, etc. (a) With respect to any Property acquired after the Closing Date by Holdings, the Borrower or any of its Subsidiaries (other than (w) any real property or any Property described in paragraph (c) of this Section, (x) any Property subject to a Lien expressly permitted by Section 7.3(g), (y) Property acquired by an Excluded Foreign Subsidiary and (z) any Excluded Assets (as defined in the Guarantee and Collateral Agreement) as to which the Administrative Agent, for the benefit of the Secured Parties, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in such Property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in such Property, including without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent. (b) With respect to any fee interest in any real property having a value (together with improvements thereof) of at least $1,000,000 acquired after the Closing Date by Holdings, the Borrower or any of its Subsidiaries (other than any such real property owned by an Excluded Foreign Subsidiary or subject to a Lien expressly permitted by Section 7.3(g)), promptly (i) execute and deliver a first priority Mortgage in favor of the Administrative Agent, for the benefit of the Secured Parties, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor's certificate and (y) use reasonable best efforts to obtain any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (c) With respect to any new Subsidiary or any Subsidiary not a party to the Guarantee and Collateral Agreement that owns assets or property with a fair market value in 64 excess of $250,000 (other than an Excluded Foreign Subsidiary) created or acquired after the Closing Date (which, for the purposes of this paragraph, shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary), by Holdings, the Borrower or any of its Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by Holdings, the Borrower or any of its Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of Holdings, the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Secured Parties a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including, without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (d) With respect to any new Excluded Foreign Subsidiary created or acquired after the Closing Date by Holdings, the Borrower or any of its Subsidiaries (other than any Excluded Foreign Subsidiaries), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by Holdings, the Borrower or any of its Subsidiaries (other than any Excluded Foreign Subsidiaries), (provided that in no event shall more than 65% of the total outstanding voting Capital Stock of any such new Excluded Foreign Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of Holdings, the Borrower or such Subsidiary, as the case may be, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Lien of the Administrative Agent thereon, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. 6.11 Government Contracts. At such times as the Administrative Agent may reasonably request, furnish the Administrative Agent with a list of all contracts entered into between the United States Government and the Borrower or any of its Subsidiaries. 6.12 Further Assurances. From time to time execute and deliver, or cause to be executed and delivered, such additional instruments, certificates or documents, and take such actions, as the Administrative Agent may reasonably request for the purposes of implementing or effectuating the provisions of this Agreement and the other Loan Documents, or of more fully 65 perfecting or renewing the rights of the Administrative Agent and the Lenders with respect to the Collateral (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower or any Subsidiary which may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan Documents which requires any consent, approval, recording, qualification or authorization of any Governmental Authority, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that the Administrative Agent or such Lender may be required to obtain from the Borrower or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization. 6.13 Post-Closing Actions. No later than 30 days after the Closing Date: (a) Aircraft Braking Systems. Cause the Certificate of Incorporation of Aircraft Braking Systems, Inc. to be amended to delete Section 7 thereof to eliminate the settlement requirement following the occurrence of certain bankruptcy and insolvency events. (b) Pledged Notes. Cause to be delivered to the Administrative Agent, the promissory notes and endorsements referred to in Section 5.1(p)(iii). (c) Pledged Stock. Cause to be delivered to the Administrative Agent, stock certificates for each of Aircraft Braking Foreign Sales Ltd. and Aircraft Braking Systems Europe Limited referred to in Section 5.1(p)(i). (d) Schedule 6 to the Guarantee and Collateral Agreement. Cause to be delivered to the Administrative Agent a revised Schedule 6 to the Guarantee and Collateral Agreement reflecting the Intellectual Property owned by the Loan Parties after giving effect to the Merger, in form and substance reasonably satisfactory to the Administrative Agent. SECTION 7. NEGATIVE COVENANTS Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or any Agent hereunder, each of Holdings and the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending during any period set forth below to exceed the ratio set forth opposite such period: 66
Consolidated Period Leverage Ratio - ----------------------------------- -------------- January 1, 2005 to March 31, 2006 7.75 to 1.00 April 1, 2006 to September 30, 2006 7.65 to 1.00 October 1, 2006 to March 31, 2007 7.50 to 1.00 April 1, 2007 to June 30, 2007 7.25 to 1.00 July 1, 2007 to September 30, 2007 7.00 to 1.00 October 1, 2007 to March 31, 2008 6.75 to 1.00 April 1, 2008 to September 30, 2008 6.50 to 1.00 October 1, 2008 to March 31, 2009 6.25 to 1.00 April 1, 2009 to September 30, 2009 6.00 to 1.00 October 1, 2009 to March 31, 2010 5.75 to 1.00 April 1, 2010 to June 30, 2010 5.50 to 1.00 July 1, 2010 to September 30, 2010 5.25 to 1.00 October 1, 2010 to March 31, 2011 5.00 to 1.00 April 1, 2011 to September 30, 2011 4.75 to 1.00 October 1, 2011 and thereafter 4.50 to 1.00
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending during any period set forth below to be less than the ratio set forth below opposite such period:
Consolidated Period Interest Coverage Ratio - ----------------------------------- ----------------------- January 1, 2005 to March 31, 2007 1.65 to 1.00 April 1, 2007 to September 30, 2007 1.70 to 1.00 October 1, 2007 to March 31, 2008 1.75 to 1.00 April 1, 2008 to September 30, 2008 1.80 to 1.00 October 1, 2008 to March 31, 2009 1.85 to 1.00 April 1, 2009 to June 30, 2009 1.95 to 1.00 July 1, 2009 to September 30, 2009 2.05 to 1.00 October 1, 2009 to March 31, 2010 2.15 to 1.00 April 1, 2010 to June 30, 2010 2.25 to 1.00 July 1, 2010 to September 30, 2010 2.35 to 1.00 October 1, 2010 to March 31, 2011 2.50 to 1.00 April 1, 2011 to September 30, 2011 2.65 to 1.00 October 1, 2011 and thereafter 2.75 to 1.00
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of any Loan Party pursuant to any Loan Document; (b) Indebtedness of (i) the Borrower to any Subsidiary and of any Wholly Owned Subsidiary Guarantor to the Borrower or any other Subsidiary and (ii) to the 67 extent permitted by Section 7.8(p), of any Foreign Subsidiary to the Borrower or any Subsidiary Guarantor; (c) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate principal amount not to exceed $60,000,000 at any one time outstanding, provided that, such amount shall be reduced by the aggregate amount of Indebtedness outstanding pursuant to Section 7.2(h); (d) Indebtedness outstanding on the date hereof and listed on Schedule 7.2(d) and any refinancings, refundings, renewals or extensions thereof (without any increase in the principal amount thereof or any shortening of the maturity of any principal amount thereof), provided that, any refinancing, refunding, renewal or extension of the Intercompany Loans shall be with the Borrower; (e) Guarantee Obligations by the Borrower or any of its Subsidiaries of obligations of the Borrower or any Subsidiary Guarantor; (f) (i) Indebtedness of the Borrower in respect of the Senior Subordinated Notes in an aggregate principal amount not to exceed $315,000,000 and (ii) Guarantee Obligations of any Subsidiary Guarantor in respect of such Indebtedness; provided that such Guarantee Obligations are subordinated to the obligations of such Subsidiary Guarantor under the Guarantee and Collateral Agreement to the same extent as the obligations of the Borrower in respect of the Senior Subordinated Notes are subordinated to the Obligations; (g) Indebtedness of the Borrower and its Subsidiaries in an aggregate amount not exceeding the unused L/C Commitment, in respect of trade letters of credit, standby letters of credit, surety bonds and similar facilities issued for the purpose of supporting (i) workers' compensation liabilities of the Borrower or any of the Subsidiaries as required by law, (ii) performance, payment, deposit or surety obligations of the Borrowers or any of the Subsidiaries and (iii) environmental liabilities of the Borrowers or any of the Subsidiaries as required by law; (h) Indebtedness of the Borrower and its Subsidiaries in respect of Capital Lease Obligations incurred in a sale and leaseback transaction permitted by Section 7.11; (i) Indebtedness acquired or assumed by the Borrower or any Subsidiary in connection with any Permitted Acquisition permitted under Section 7.8(j) (or an acquisition otherwise permitted by the Required Lenders), provided that, such Indebtedness existed at the time of such Permitted Acquisition and was not created in connection therewith or in contemplation thereof; (j) additional Indebtedness of the Borrower or any of its Subsidiaries which is unsecured and subordinated to the Obligations in a manner reasonably satisfactory to the Administrative Agent the proceeds of which are used to pay the consideration for any Permitted Acquisition (or an acquisition otherwise permitted by the Required Lenders), the terms and conditions of which (i) shall provide for a maturity date at least one year after the final payment is due on the Term Loans and with no scheduled amortization of 68 principal prior to such date, (ii) shall be no more restrictive than those set forth in this Agreement and (iii) shall otherwise be reasonably satisfactory to the Administrative Agent (including, without limitation, with respect to mandatory prepayments); provided that (A) after giving effect to the incurrence of any such Indebtedness, the pro forma Consolidated Leverage Ratio as of the date of such incurrence shall be less than the maximum Consolidated Leverage Ratio then in effect pursuant to Section 7.1(a) and (B) no Default or Event of Default has occurred or is continuing at the time of incurrence or would result therefrom; (k) any refinancing, refunding, renewal or extension of any Indebtedness permitted by Section 7.2(f), (i) or (j), provided that, (i) any such refinancing, refunding, renewal or extension ("Refinancing Indebtedness") (A) is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being refinanced, refunded, renewed or extended, plus the amount of any interest, premiums or penalties required to be paid thereon, plus fees and expenses associated therewith, (B) has a later or equal final maturity and a longer or equal weighted average life to maturity than the Indebtedness being refinanced, refunded, renewed or extended, and (C) if the Indebtedness being refinanced, refunded, renewed or extended is subordinated to the Obligations, such Refinancing Indebtedness is subordinated to the Obligations on terms no less favorable to the Lenders than the Indebtedness being refinanced, refunded, renewed or extended, (ii) only the obligors in respect of the Indebtedness being refinanced, refunded, renewed or extended may become obligated with respect to such Refinancing Indebtedness, and (iii) the non-economic covenants, events of default, remedies and other provisions of the Refinancing Indebtedness, when taken as a whole, shall be materially no less favorable to the Lenders than those contained in the Indebtedness being refinanced, refunded, renewed or extended; (l) Indebtedness incurred by any Foreign Subsidiary to any Person (other than a Loan Party), provided, that (i) recourse for any such Indebtedness shall only be against Foreign Subsidiaries and (ii) the aggregate amount of such Indebtedness does not exceed $7,500,000 at any one time outstanding; and (m) additional Indebtedness of the Borrower or any of its Domestic Subsidiaries in an aggregate principal amount not to exceed $10,000,000 at any one time outstanding. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its Property or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a 69 period of more than 60 days or that are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by Section 7.2(d) (and any refinancing, refunding, renewal or extension thereof permitted by such Section), provided that no such Lien is spread to cover any additional Property after the Closing Date and that the principal amount of Indebtedness secured thereby is not increased; (g) Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 7.2(c) and 7.2(h) to finance the acquisition, construction, improvement or repair of fixed or capital assets (and any refinancing, refunding, renewal or extension thereof without any increase in the principal amount thereof), provided that (i) such Liens shall be created substantially simultaneously with or promptly after the acquisition, construction, improvement or repair of such fixed or capital assets, (ii) such Liens do not at any time encumber any Property other than the Property financed by such Indebtedness and (iii) the principal amount of Indebtedness secured thereby is not increased; (h) non-exclusive licenses of Intellectual Property granted by Borrower or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of Borrower or such Subsidiary; (i) bankers' lien and rights of set-off with respect to customary depositary arrangements entered into in the ordinary course of business of Borrower and its Subsidiaries; (j) Liens securing Indebtedness permitted under Section 7.2(i), provided that, such Liens (i) are not created in contemplation of or in connection with such Person becoming a Subsidiary, (ii) do not apply to any other property of Borrower or any of its Subsidiaries and are not spread to cover any additional Property and (iii) secure only those obligations secured by such Liens on the date such Person becomes a Subsidiary (and any refinancings, refundings, renewals or extensions of such Indebtedness permitted by Section 7.2(k)); 70 (k) Liens created pursuant to the Security Documents; (l) any interest or title of a lessor or sublessor under any operating lease or true lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased, including, without limitation, in connection with Indebtedness permitted by Section 7.2(c); (m) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (n) judgment Liens in respect of judgments that do not constitute an Event of Default; (o) Liens on goods the purchase price of which is financed by a documentary letter of credit or bankers' acceptances issued for the account of the Borrower or any of its Subsidiaries where such Lien secures the obligations of the Borrower or such Subsidiary in respect of such letter of credit or bankers' acceptances; (p) Liens on assets that are the subject of any sale and leaseback transaction permitted by Section 7.11; (q) Liens against Collateral in favor of PBGC in connection with any Plan which are junior to the Liens created pursuant to the Security Documents; provided that an intercreditor agreement satisfactory to the Administrative Agent shall be in effect with respect to such Collateral; and (r) Liens not otherwise permitted by this Section 7.3 so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair market value (determined, in the case of each such Lien, as of the date such Lien is incurred) of the assets subject thereto exceeds (as to the Borrower and all of its Subsidiaries) $5,000,000 at any one time. 7.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its Property or business, except that: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any Wholly Owned Subsidiary Guarantor (provided that (i) the Wholly Owned Subsidiary Guarantor shall be the continuing or surviving corporation or (ii) simultaneously with such transaction, the continuing or surviving corporation shall become a Wholly Owned Subsidiary Guarantor and the Borrower shall comply with Section 6.10 in connection therewith); (b) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor; (c) the Merger; and 71 (d) Dispositions permitted by Section 7.5. 7.5 Limitation on Disposition of Property. Dispose of any of its Property or business (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except: (a) the Disposition of Property that is obsolete or worn out property in the ordinary course of business; (b) (i) the sale of inventory in the ordinary course of business and the sale of Cash Equivalents from time to time and (ii) transfers or other Dispositions of cash and Cash Equivalents in the ordinary course of business in connection with transactions not otherwise prohibited by this Agreement; (c) Dispositions permitted by Section 7.4(a) or (b); (d) the sale or issuance of (i) any Subsidiary's Capital Stock to the Borrower or any Subsidiary Guarantor, (ii) any Foreign Subsidiary's Capital Stock to any other Foreign Subsidiary, the Capital Stock of which is subject to a perfected security interest pursuant to Section 6.10(d), (iii) the Borrower's Capital Stock to Holdings or (iv) Holdings' Capital Stock to the Parent; (e) Dispositions, by means of trade-in, of equipment owned by it and used or previously used in the ordinary course of its business, so long as such equipment is replaced, substantially concurrently, by like-kind equipment in an effort to upgrade Borrower's or any of Borrower's Subsidiaries' facilities; (f) Dispositions of leasehold interests that are no longer used or useful in the business of the Borrower or its Subsidiaries; (g) Dispositions of assets (i) to the Borrower or any Subsidiary Guarantor, (ii) by any Foreign Subsidiary to any other Foreign Subsidiary or (iii) to the extent permitted by Section 7.5(j), by the Borrower or any Subsidiary Guarantor to any Foreign Subsidiary; (h) Investments permitted by Section 7.8; (i) sale and leaseback transactions permitted by Section 7.11; (j) the Disposition of other assets (other than inventory or Cash Equivalents), including any Dispositions pursuant to Section 7.5(g)(iii), having a combined fair market value not to exceed $15,000,000 in the aggregate for any fiscal year of the Borrower, provided that, the sum of (x) the aggregate fair market value of assets conveyed to Foreign Subsidiaries pursuant to Section 7.5(g)(iii) plus (y) the aggregate amount of Investments (valued at cost) made by the Borrower and its Subsidiaries in Foreign Subsidiaries pursuant to Section 7.8(p) shall not exceed $10,000,000 at any one time outstanding; and 72 (k) any Recovery Event, provided, that the requirements of Section 2.12(c) are complied with in connection therewith. 7.6 Limitation on Restricted Payments. Declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of Holdings, the Borrower or any Subsidiary or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Holdings, the Borrower or any Subsidiary or make any loan or advance or other payment to Holdings, or enter into any derivatives or other transaction with any financial institution, commodities or stock exchange or clearinghouse (a "Derivatives Counterparty") obligating Holdings, the Borrower or any Subsidiary to make payments to such Derivatives Counterparty as a result of any change in market value of any such Capital Stock (collectively, "Restricted Payments"), except that: (a) any Subsidiary may make Restricted Payments to the Borrower or any Subsidiary Guarantor or, in the case of a Foreign Subsidiary, such Foreign Subsidiary may make Restricted Payments to any other Foreign Subsidiary, the Capital Stock of which is subject to a perfected Security interest pursuant to Section 6.10(d); (b) Holdings may make Restricted Payments in the form of common stock of Holdings; (c) the Borrower may pay dividends to Holdings to permit Holdings to pay a dividend to the Parent in an aggregate amount equal to the amounts due and payable under the Defeasance Costs Tax Note; (d) so long as no Default or Event of Default shall have occurred and be continuing, the Borrower may pay dividends to Holdings, and Holdings may pay dividends to the Parent in an aggregate amount not exceeding the aggregate amount of Excess Cash Flow each fiscal year of the Borrower commencing with the fiscal year ending December 31, 2005 not required to be applied pursuant to Section 2.12(d), provided that, immediately prior to and after giving effect to such Restricted Payments, the Consolidated Leverage Ratio on the date of such Restricted Payment is less than 5.5 to 1.00; (e) so long as no Default or Event of Default shall have occurred and be continuing, the Borrower may pay dividends to Holdings, and Holdings may pay dividends to the Parent, to permit the Parent to purchase the Parent's common stock or common stock options from present or former officers or employees of Holdings, the Borrower or any Subsidiary upon the death, disability or termination of employment of such officer or employee, provided, that the aggregate amount of payments under this paragraph (e) subsequent to the date hereof (net of any proceeds received by Holdings and contributed to the Borrower subsequent to the date hereof in connection with resales of any common stock or common stock options so purchased) shall not exceed $5,000,000 in any fiscal year and, provided further that, the amount available to make 73 Restricted Payments in any fiscal year of the Borrower shall be increased by the excess, if any, of (i) $5,000,000 over (ii) the amount used to make Restricted Payments pursuant to this Section 7.6(e) in the immediately preceding two fiscal years; (f) so long as no Default or Event of Default has occurred under Section 8(a), the Borrower may pay dividends to Holdings, and Holdings may pay dividends to the Parent, to permit the Parent to pay management and advisory fees and expenses expressly permitted by Section 7.10; (g) the Borrower may pay dividends or make other payments to Holdings, and Holdings may pay dividends or make other payments to the Parent, to permit the Parent to (i) pay customary corporate overhead expenses incurred in the ordinary course of business, (ii) pay any taxes which are due and payable by the Parent, Holdings, the Borrower and its Subsidiaries as part of a consolidated group and (iii) pay filing fees in connection with the initial public offering of the Parent's common stock; and (h) the Borrower may pay, or may pay dividends to Holdings to permit Holdings to pay, or Holdings may pay, or pay dividends to the Parent to permit the Parent to pay, payments required to be made pursuant to the Acquisition Agreement. 7.7 Limitation on Capital Expenditures. (a) Make or commit to make any Capital Expenditure (excluding (i) any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations, (ii) Development Participation Costs, (iii) after the Borrower has elected to capitalize Program Investments on its balance sheet, Program Investments, (iv) expenditures constituting the purchase price for acquisitions permitted under Section 7.8(j) and (v) Capital Expenditures permitted by Section 7.7(c)), except for expenditures in the ordinary course of business in an aggregate amount for any fiscal year not exceeding $25,000,000; provided that (i) any such amount permitted by this Section 7.7 if not so expended in the fiscal year for which it is permitted may be carried over for expenditure in the next following fiscal year, and (ii) Capital Expenditures made pursuant to this Section 7.7(a) during any fiscal year shall be deemed made, first, in respect of amounts permitted for such fiscal year as provided above and, second, in respect of amounts carried over from the prior fiscal year pursuant to clause (i) above; (b) make or commit to make any Development Participation Costs except for Developmental Participation Costs in an aggregate amount for the Borrower and its Subsidiaries not exceeding $20,000,000 in each fiscal year; provided that (i) any such amount permitted by this paragraph (b) if not so expended in the fiscal year for which it is permitted may be carried over for expenditure on Developmental Participation Costs in the next following fiscal year and (ii) Capital Expenditures made pursuant to this Section 7.7(b) during any fiscal year shall be deemed made, first, in respect of amounts permitted for such fiscal year as provided above and, second, in respect of amounts carried over from the prior fiscal year pursuant to clause (i) above; or (c) Capital Expenditures made with the proceeds of any Reinvestment Deferred Amount. 74 7.8 Limitation on Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting all or a material part of an ongoing business from, or make any other investment in, any other Person (all of the foregoing, "Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) Investments arising in connection with the incurrence of Indebtedness permitted by Section 7.2(b) and (e); (d) loans and advances to employees of Holdings, the Borrower or any Subsidiaries of the Borrower in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses) in an aggregate amount for Holdings, the Borrower and Subsidiaries of the Borrower not to exceed $2,000,000 at any one time outstanding; (e) the Acquisition; (f) Capital Expenditures (including any Program Investments) to the extent permitted by Section 7.7; (g) Investments in assets useful in the Borrower's business made by the Borrower or any of its Subsidiaries with the proceeds of any Reinvestment Deferred Amount; (h) loans and advances in the ordinary course of business to customers, suppliers, franchises and licensees of the Borrower and its Subsidiaries in an aggregate principal amount not to exceed $3,000,000 at any one time outstanding; (i) Investments (other than those relating to the incurrence of Indebtedness permitted by Section 7.8(c)) by Holdings, the Borrower or any of its Subsidiaries in the Borrower or any Person that, prior to such Investment, is a Subsidiary Guarantor; (j) Permitted Acquisitions; (k) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (l) Investments consisting of prepayments and other credits to supplies made in the ordinary course of business; (m) loans and advances to officers or other employees of Holdings or its Subsidiaries in connection with such officers' or employees' acquisition of equity interests of Holdings; 75 (n) Investments consisting of obligations under any Hedge Agreement incurred in the normal course of business and not for speculative purposes; (o) Investments consisting of non-cash consideration issued to the Borrower and its Subsidiaries by the purchaser of assets in connection with a sale of such assets permitted by Section 7.5, provided that, (x) any such debt Investment in excess of $500,000 is evidenced by a promissory note pledged to the Administrative Agent for the ratable benefit of the Secured Parties pursuant to the Guarantee and Collateral Agreement and (y) the aggregate amount of such Investments made by Loan Parties to Subsidiaries that are not Loan Parties shall not exceed $3,000,000 at any one time outstanding, (p) intercompany Investments by the Borrower and its Subsidiaries in Foreign Subsidiaries in an aggregate amount (valued at cost), provided that, the sum of (x) the aggregate fair market value of assets conveyed to Foreign Subsidiaries pursuant to Section 7.5(g)(iii) plus (y) the aggregate amount of Investments (valued at cost) made by the Borrower and its Subsidiaries in Foreign Subsidiaries pursuant to Section 7.8(p) shall not exceed $10,000,000 at any one time outstanding; and (q) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower and its Subsidiaries (other than Investments in Foreign Subsidiaries) so long as the aggregate amount of Investments pursuant to this paragraph (q) (determined without regard to any write-downs or write-offs of such Investments) does not exceed an amount equal to the sum of $5,000,000 plus the aggregate amount of cash capital contributions made by the Permitted Investors in Holdings, provided that, with respect to any such capital contribution (i) immediately prior to and after giving effect to such capital contribution and the use of proceeds thereof, no Default or Event of Default shall have occurred and be continuing and (ii) after giving effect to such capital contribution and the use of proceeds thereof, the Administrative Agent shall have received satisfactory evidence, together with supporting calculations reasonably acceptable to the Administrative Agent, that the Borrower would be in pro forma compliance with the financial covenants in Section 7.1. 7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of, or otherwise voluntarily or optionally defease, the Senior Subordinated Notes, or segregate funds for any such payment, prepayment, repurchase, redemption or defeasance, or enter into any derivative or other transaction with any Derivatives Counterparty obligating Holdings, the Borrower or any Subsidiary to make payments to such Derivatives Counterparty as a result of any change in market value of the Senior Subordinated Notes (other than any refinancings, refundings, renewals or extensions thereof permitted by Section 7.2(k)), (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Subordinated Notes (other than any such amendment, modification, waiver or other change which (i) would extend the maturity or reduce the amount of any payment of principal thereof, reduce the rate or extend the date for payment of interest thereon or relax any covenant or other restriction applicable to Holdings, the Borrower or any of its Subsidiaries and (ii) does not involve the payment of a consent fee), (c) designate any Indebtedness (other than the Obligations) as "Designated Senior Indebtedness" for the purposes 76 of the Senior Subordinated Note Indenture or (d) amend its certificate of incorporation in any manner determined by the Administrative Agent to be adverse to the Lenders. 7.10 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than Holdings, the Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of Holdings, the Borrower or such Subsidiary, as the case may be, and (c) upon fair and reasonable terms no less favorable to Holdings, the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate, except for (i) reasonably and customary fees paid to, and customary indemnification of, members of the board of directors (or similar governing body) of Holdings and its Subsidiaries, (ii) compensation arrangements (including customary indemnification arrangements for officers, employees, and consultants of Holdings and its Subsidiaries) entered into in the ordinary course of business, (iii) any transaction among the Borrower and its Subsidiaries, (iv) capital contributions, (v) Restricted Payments permitted by Section 7.6 and (vi) Investments permitted by Sections 7.8(d) and (m). Notwithstanding the foregoing, so long as no Default or Event of Default under Section 8(a) has occurred and is continuing, Holdings, the Borrower and its Subsidiaries may pay fees and expenses pursuant to the Management Agreement. 7.11 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by Holdings, the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by Holdings, the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of Holdings, the Borrower or such Subsidiary, except that the Borrower or any of its Subsidiaries may enter into a sale and leaseback transaction if (i) the aggregate amount of Indebtedness incurred equal to the Attributable Debt relating to such sale and leaseback transaction does not exceed $30,000,000 during the term of this Agreement, (ii) the Net Cash Proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors if in excess of $5,000,000) of the Property that is the subject of such sale and leaseback transaction and (iii) Net Cash Proceeds received by the Borrower or any of its Subsidiaries as result of such sale and leaseback transaction are reinvested or applied to prepay the Loans in accordance with Section 2.12(c). 7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower's method of determining fiscal quarters. 7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of Holdings, the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its Property or revenues, whether now owned or hereafter acquired, to secure the Obligations or, in the case of any guarantor, its obligations under the Guarantee and Collateral Agreement, other than (a) this Agreement and the other Loan Documents, (b) the Senior Subordinated Note Indenture (and any refinancings, refundings, renewals or extensions thereof permitted by 77 Section 7.2(k)), (c) any agreements governing any purchase money Liens or Capital Lease Obligations (or refinancings thereof) otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (d) pursuant to customary non-assignment or no-subletting clauses in leases, licenses or contracts entered into in the ordinary course of business, which restrict only the assignment of such lease, license or contract, as applicable, (e) with respect to specific Property to be sold pursuant to an executed agreement in connection with Dispositions permitted by Section 7.5, restrictions covering such specific Property and (f) pursuant to the terms of any Lien permitted by Section 7.3 solely to the extent that such restrictions apply to the assets subject to such Lien. 7.14 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary, (b) make Investments in the Borrower or any other Subsidiary or (c) transfer any of its assets to the Borrower or any other Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents, (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, (iii) restrictions in the Senior Subordinated Note Indenture (and any refinancings, refundings, renewals or extensions thereof permitted by Section 7.2(k)), (iv) restrictions arising by reason of customary non-assignment or no-subletting clauses in leases or other contracts entered into in the ordinary course of business, (v) purchase money obligations or Capital Lease Obligations permitted by Section 7.2(c) (or refinancings thereof that impose no more restrictive restrictions) for property acquired, improved, repaired or constructed in the ordinary course of business that impose restrictions of the nature described in clause (iv) above solely on the property so acquired, improved repaired or constructed, and (vi) Liens on assets permitted by Section 7.3 solely to the extent such restrictions apply to assets subject to such Lien. 7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement (after giving effect to the Acquisition) or that are reasonably related thereto. 7.16 Limitation on Amendments to Acquisition Documentation. (a) Amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and conditions of the indemnities and licenses furnished to the Borrower or any of its Subsidiaries pursuant to the Acquisition Documentation such that after giving effect thereto such indemnities or licenses shall be materially less favorable to the interests of the Loan Parties or the Lenders with respect thereto or (b) otherwise amend, supplement or otherwise modify the terms and conditions of the Acquisition Documentation except to the extent that any such amendment, supplement or modification could not reasonably be expected to have a Material Adverse Effect. 7.17 Limitation on Amendments to Other Documents. (a) Amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and conditions of the Management Agreement or Tax Sharing Agreement in any manner that would (x) increase, in any material respect, the amounts payable by the Borrower thereunder or (y) with respect to the 78 Management Agreement, require the management fees and expenses to be payable to any Person other than Aurora Management Partners LLC or any Affiliate thereof, (b) otherwise amend, supplement or otherwise modify the terms and conditions of the Management Agreement or Tax Sharing Agreement except to the extent that any such amendment, supplement or modification could not reasonably be expected to have a Material Adverse Effect or (c) amend, supplement or modify the Stock Purchase Agreement, the Borrower Preferred Stock or the Holdings Preferred Stock to provide for the payment of any dividend or other distribution with respect to any such Preferred Stock or the redemption of such Preferred Stock, optional or mandatory, prior to the date that is one year after the final payment is due on the Term Loans. 7.18 Limitation on Activities of Holdings. In the case of Holdings, notwithstanding anything to the contrary in this Agreement or any other Loan Document, (a) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of the Borrower, (b) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (i) nonconsensual obligations imposed by operation of law, (ii) pursuant to the Loan Documents to which it is a party and (iii) obligations with respect to its Capital Stock, or (c) own, lease, manage or otherwise operate any properties or assets (including cash and Cash Equivalents (other than cash received in connection with dividends made by the Borrower in accordance with Section 7.6 pending application in the manner contemplated by said Section or cash received as common equity from the Parent to be contributed to the Borrower promptly after Holdings' receipt thereof) other than the ownership of shares of Capital Stock of the Borrower. SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) the Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof or thereof; or (b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made or furnished; or (c) any Loan Party shall default in the observance or performance of any agreement contained in clause (i) of Section 6.4(a) (with respect to Holdings and the Borrower only), Section 6.7(a) or Section 7, or in Section 5.6 of the Guarantee and Collateral Agreement; or (d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as 79 provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date on which a Principal Officer of the Borrower or any of its Subsidiaries first learns of such default, and (ii) the date on which written notice thereof shall have been made to the Borrower by the Administrative Agent or any Lender; or (e) Holdings, the Borrower or any of its Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness beyond the grace period, if any, provided in the instrument or agreement under which such Indebtedness was created (including, without limitation, any Guarantee Obligation, but excluding the Loans and Reimbursement Obligations) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist (other than any due on sale provision), the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $7,500,000; or (f) (i) Holdings, the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, the Borrower or any of its Subsidiaries shall take any action in 80 furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall be reasonably likely to incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (h) one or more judgments or decrees shall be entered against Holdings, the Borrower or any of its Subsidiaries involving for Holdings, the Borrower and its Subsidiaries taken as a whole a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $7,500,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (i) any of the Security Documents shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.15), to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby or any Loan Party or any Affiliate of any Loan Party shall so assert; or (j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.15), to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or (k) any Change of Control shall occur; or (l) the Senior Subordinated Notes or the guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the Guarantee and Collateral Agreement, as the case may 81 be, as provided in the Senior Subordinated Note Indenture, or any Loan Party or any Affiliate of any Loan Party shall so assert; or (m) the Parent shall default in making any payment required to be paid by the Defeasance Costs Tax Note; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Revolving Credit Commitments to be terminated forthwith, whereupon the Revolving Credit Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. In the case of all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired face amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). SECTION 9. THE AGENTS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agents as the agents of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth 82 herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. Each Lender authorizes and directs the Administrative Agent to execute and deliver the Guarantee and Collateral Agreement. 9.2 Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. 9.4 Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Loan Parties), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless such Note shall have been transferred in accordance with Section 10.6 and all actions required by such Section in connection with such transfer shall have been taken. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement), 83 and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent shall have received notice from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent shall receive such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 9.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by Holdings or the Borrower and without limiting the obligation of Holdings or the Borrower to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), for, and to save each Agent 84 harmless from and against, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from, hold equity interests in and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity. 9.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 8(a) or Section 8(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, 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 holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. The Syndication Agent may, at any time, by notice to the Lenders and the Administrative Agent, resign as Syndication Agent hereunder, whereupon the duties, rights, obligations and responsibilities of the Syndication Agent hereunder shall automatically be assumed by, and inure to the benefit of, the Administrative Agent, without any further act by the Syndication Agent, the Administrative Agent or any Lender. After any retiring Agent's resignation as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. 85 9.10 Authorization to Release Liens and Guarantees. The Administrative Agent is hereby irrevocably authorized by each of the Lenders to effect any release of Liens or guarantee obligations contemplated by Section 10.15. 9.11 The Arrangers; the Syndication Agent; the Co-Documentation Agents. None of the Arrangers, the Syndication Agent or the Co-Documentation Agents, in their respective capacities as such, shall have any duties or responsibilities, nor shall either such Person incur any liability, under this Agreement and the other Loan Documents. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. (a) Neither this Agreement or any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or (with the written consent of the Required Lenders) the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (x) enter into written amendments, supplements or modifications hereto and to the other Loan Documents (including amendments and restatements hereof or thereof) for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (y) waive, on such terms and conditions as may be specified in the instrument of waiver, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall: (i) forgive or reduce the principal amount or extend the final scheduled date of maturity of any Loan or Reimbursement Obligation, extend the scheduled date of any amortization payment in respect of any Term Loan, reduce the stated rate of any interest or fee payable under this Agreement (except (x) in connection with the waiver of applicability of any post-default increase in interest rates (which waiver shall be effective with the consent of the Majority Facility Lenders of each adversely affected Facility) and (y) that any amendment or modification of defined terms used in the financial covenants in this Agreement shall not constitute a reduction in the rate of interest or fees for purposes of this clause (i)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Commitment of any Lender, in each case without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section or reduce any percentage specified in the definition of Required Lenders or Required Prepayment Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of the Guarantors from their guarantee obligations under the Guarantee and Collateral Agreement, in each case without the consent of all the Lenders; 86 (iii) amend, modify or waive any condition precedent to any extension of credit under the Revolving Credit Facility set forth in Section 5.2 (including, without limitation, the waiver of an existing Default or Event of Default required to be waived in order for such extension of credit to be made) without the consent of the Majority Revolving Credit Facility Lenders; (iv) reduce the percentage specified in the definition of Majority Facility Lenders with respect to any Facility without the consent of all of the Lenders under such Facility; (v) amend, modify or waive any provision of Section 9, or any other provision affecting the rights, duties or obligations of any Agent, without the consent of any Agent directly affected thereby; (vi) amend, modify or waive any provision of Section 2.6 or 2.7 without the consent of the Swing Line Lender; (vii) amend, modify or waive any provision of Section 2.12 without the consent of the Required Prepayment Lenders; (viii) amend, modify or waive any provision of Section 2.18 without the consent of each Lender directly affected thereby; (ix) amend, modify or waive any provision of Section 3 without the consent of each Issuing Lender affected thereby; or (x) impose restrictions on assignments and participations that are more restrictive than, or additional to, those set forth in Section 10.6 without the consent of each Lender directly affected thereby. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Agents shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a written instrument signed by the parties required to sign pursuant to the foregoing provisions of this Section; provided, that delivery of an executed signature page of any such instrument by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof. (b) For the avoidance of doubt, this Agreement and any other Loan Document may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and each Loan Party to each relevant Loan Document (x) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof (collectively, the "Additional Extensions of Credit") to share ratably in the benefits of this 87 Agreement and the other Loan Documents with the Term Loans and Revolving Extensions of Credit and the accrued interest and fees in respect thereof and (y) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders, Required Prepayment Lenders and Majority Revolving Facility Lenders; provided, however, that no such amendment shall permit the Additional Extensions of Credit to share ratably with or with preference to the Loans in the application of mandatory prepayments without the consent of the Required Prepayment Lenders. (c) In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Borrower and the Lenders providing the relevant Replacement Term Loans (as defined below) to permit the refinancing or modification of all outstanding Term Loans ("Refinanced Term Loans") with a replacement term loan tranche hereunder ("Replacement Term Loans"), provided that (i) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans plus the amount of any fees and expenses incurred by the Borrower in connection with such refinancing, (ii) the Applicable Margin for such Replacement Term Loans shall not be higher than the Applicable Margin for such Refinanced Term Loans, (iii) the weighted average life to maturity of such Replacement Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term Loans at the time of such refinancing and (iv) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term Loans in effect immediately prior to such refinancing. (d) The Borrower shall be permitted to replace any Lender in connection with any proposed amendment, modification, supplement or waiver with respect to any of the provisions of the Loan Documents as contemplated in this Section 10.1 where such amendment, modification, supplement or waiver requires the consent of either (i) 100% of the Lenders, and the consent of the holders of more than 66-2/3% of the aggregate amount of the Term Loans and the then outstanding Total Revolving Credit Commitments then in effect (or, if the Revolving Credit Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding) is obtained or (ii) all affected Lenders under any Facility, and the consent of the holders of more than 66-2/3% of the aggregate amount of Loans or Commitments, as applicable, under the relevant Facility is obtained, and such Lender fails to consent to such proposed action; provided that (A) such replacement or removal does not conflict with any Requirement of Law, (B) the Borrower shall be liable to such replaced Lender under Section 2.21 (as though Section 2.21 were applicable) if any Eurodollar Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period or maturity date relating thereto, (C) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement and shall have consented to the proposed amendment, (D) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.6 (provided that the Borrower shall be obligated to pay the registration and processing fee referred to therein), (E) the Borrower shall pay all additional amounts (if any) required pursuant to Section 2.19 or 2.20, as the case may be, in respect of any period prior to the date on which such replacement shall be consummated, and (F) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the 88 Administrative Agent or any other Lender shall have against the replaced Lender. The Borrower shall replace any such non-consenting Lender within 120 days of such Lender's failure to consent to the proposed action. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, certified or registered, postage prepaid, or, in the case of telecopy notice, when received, addressed (a) in the case of Holdings, the Borrower and the Agents, as follows and (b) in the case of the Lenders, as set forth in an administrative questionnaire delivered to the Administrative Agent or on Schedule I to the Lender Addendum to which such Lender is a party or, in the case of a Lender which becomes a party to this Agreement pursuant to an Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case of any party, to such other address as such party may hereafter notify to the other parties hereto: Holdings: K&F Intermediate Holdco, Inc. c/o Aurora Capital Group 10877 Wilshire Boulevard Suite 2100 Los Angeles, California 90024 Attention: Richard K. Roeder Telecopy: (310) 824-2791 Telephone: (310) 282-5822 The Borrower K&F Acquisition, Inc. (prior to the Merger): c/o Aurora Capital Group 10877 Wilshire Boulevard Suite 2100 Los Angeles, California 90024 Attention: Richard K. Roeder Telecopy: (310) 824-2791 Telephone: (310) 282-5822 The Borrower K&F Industries, Inc. (after the Merger): 600 Third Avenue 27th Floor New York, New York 10016 Attention: Chief Financial Officer Telecopy: (212) 297-0900 Telephone: (212) 867-1182 89 In the case of Holdings and the Borrower, with Aurora Capital Group a copy to: 10877 Wilshire Boulevard Suite 2100 Los Angeles, California 90024 Attention: Richard K. Roeder Telecopy: (310) 824-2791 Telephone: (310) 282-5822 The Syndication Agent: J.P. Morgan Securities Inc. 270 Park Avenue New York, New York 10017 Attention: Matthew Masse Telecopy: (212) 270-5100 Telephone: (212) 270-5432 The Administrative Agent: Lehman Commercial Paper Inc. 745 Seventh Avenue 16(th) Floor New York, New York 10019 Attention: Brian McNany Telecopy: (212) 526-6643 Telephone: (212) 526-6590 Issuing Lender: As notified by such Issuing Lender to the Administrative Agent and the Borrower provided that any notice, request or demand to or upon any Agent, any Issuing Lender or any Lender shall not be effective until received. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 90 10.4 Survival of Representations and Warranties. All representations and warranties made herein, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder. 10.5 Payment of Expenses. The Borrower agrees (a) to pay or reimburse the Agents and the Arrangers for all their reasonable out-of-pocket costs and expenses incurred in connection with the syndication and administration of the Facilities (other than fees payable to syndicate members) and the development, preparation, execution and delivery of, and any amendment, supplement, modification or waiver to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements and other charges of counsel to the Administrative Agent and the Arrangers and the charges of Intralinks, (b) to pay or reimburse each Lender, the Agents and the Arrangers for all their costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any other documents prepared in connection herewith or therewith, including, without limitation, the fees, disbursements and other charges of counsel (including, without duplication, the allocated fees and disbursements and other charges of in-house counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, or reimburse each Lender and the Administrative Agent for, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify or reimburse each Lender, the Agents, the Arrangers, their respective affiliates, and their respective officers, directors, trustees, employees, advisors, agents and controlling persons (each, an "Indemnitee") for, and hold each Indemnitee harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by an Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto or thereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds thereof (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Materials of Environmental Concern on or from any property owned, occupied or operated by the Borrower or any of its Subsidiaries, or any liability under Environmental Law arising from or relating to the Business or the Business Properties or this Agreement or the other Loan Documents, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by any third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto (all the foregoing 91 in this clause (d), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities resulted from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable decision of a court of competent jurisdiction. No Indemnitee shall be liable for any damages arising from the use by unauthorized persons of Information or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by such persons or for any special, indirect, consequential or punitive damages in connection with the Facilities. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee that relate to the subject matter of this Agreement or any other Loan Document . All amounts due under this Section shall be payable not later than 30 days after written demand therefor. Statements payable by the Borrower pursuant to this Section shall be submitted to Kenneth M. Schwartz (Telephone No. (212) 297-0900) (Fax No. (212) 867-1182) (with a copy to Richard K. Roeder (Telephone No. (310) 282-5822) (Fax No. (310) 824-2791), at the address of the Borrower set forth in Section 10.2, or to such other Person or address as may be hereafter designated by the Borrower in a notice to the Administrative Agent. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of Holdings, the Borrower, the Lenders, the Agents, all future holders of the Loans and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agents and each Lender. (b) Any Lender may, without the consent of the Borrower or any Agent, in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a "Participant") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 10.1. The Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted 92 by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as if such Participant were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.19, 2.20 and 2.21 with respect to its participation in the Commitments and the Loans outstanding from time to time as if such Participant were a Lender; provided that, in the case of Section 2.20, such Participant shall have complied with the requirements of said Section, and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender (an "Assignor") may, in accordance with applicable law and upon written notice to the Administrative Agent, at any time and from time to time assign to any Lender or any affiliate, Related Fund or Control Investment Affiliate thereof or, with the written consent of the Borrower, the Administrative Agent and, in the case of any assignment of Revolving Credit Commitments, the written consent of the Issuing Lender and the Swing Line Lender (which, in each case, shall not be unreasonably withheld or delayed), to an additional bank, financial institution or other entity (an "Assignee") all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance executed by such Assignee and such Assignor (and, where the consent of the Borrower, the Administrative Agent, the Issuing Lender or the Swing Line Lender is required pursuant to the foregoing provisions, by the Borrower and such other Persons) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that, no such assignment to an Assignee (other than any Lender or any affiliate or Related Fund thereof) shall be in an aggregate principal amount of less than $5,000,000, with respect to an assignment of Revolving Credit Loans, and $1,000,000, with respect to an assignment of Term Loans and, after giving effect thereto, the Assignor shall have Commitments and Loans aggregating at least $5,000,000, with respect to an assignment of Revolving Credit Loans, and $1,000,000, with respect to an assignment of Term Loans (in each case, other than in the case of an assignment of all of a Lender's interests under this Agreement), unless otherwise agreed by the Borrower and the Administrative Agent. Any such assignment need not be ratable as among the Facilities. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with Commitments and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto, except as to Section 2.19, 2.20 and 10.5 in respect of the period prior to such effective date). Notwithstanding any provision of this Section, the consent of the Borrower shall not be required for any assignment that occurs at any time when any Event of Default shall have occurred and be continuing, provided that, after the occurrence and during the continuation of an Event of Default, the Borrower may identify, by written notice to the Administrative Agent (and the Administrative Agent shall promptly notify the Lenders), up to two banks, financial 93 institutions or other entities who shall not be permitted to be an Assignee hereunder during the continuation of such Event of Default. For purposes of the minimum assignment or hold amounts set forth in this paragraph, multiple assignments to or by two or more Related Funds shall be aggregated. (d) The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, each Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing such Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance; thereupon one or more new Notes in the same aggregate principal amount shall be issued to the designated Assignee, and the old Notes shall be returned by the Administrative Agent to the Borrower marked "canceled". The Register shall be available for inspection by the Borrower or any Lender (with respect to any entry relating to such Lender's Loans) at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee (and, in any case where the consent of any other Person is required by Section 10.6(c), by each such other Person) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (treating multiple, simultaneous assignments by or to two or more Related Funds as a single assignment) (except that no such registration and processing fee shall be payable (y) in connection with an assignment by or to a Lehman Entity or (z) in the case of an Assignee which is already a Lender or is an affiliate or Related Fund of a Lender or a Person under common management with a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the Revolving Credit Note and/or applicable Term Notes, as the case may be, of the assigning Lender) a new Revolving Credit Note and/or applicable Term Notes, as the case may be, to the order of such Assignee in an amount equal to the Revolving Credit Commitment and/or applicable Term Loans, as the case may be, assumed or acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a Revolving Credit Commitment and/or Term Loans, as the case may be, upon request, a new Revolving Credit Note and/or Term Notes, as the case may be, to the order of the Assignor in an amount equal to the Revolving Credit Commitment and/or applicable Term Loans, as the case may be, retained by it hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the form of the Note or Notes replaced thereby. 94 (f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests in Loans and Notes, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (g) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. In addition, notwithstanding anything to the contrary in this Section 10.6(g), any SPC may (A) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender, or with the prior written consent of the Borrower and the Administrative Agent (which consent shall not be unreasonably withheld) to any financial institutions providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans, and (B) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC; provided that non-public information with respect to the Borrower may be disclosed only with the Borrower's consent which will not be unreasonably withheld. This paragraph (g) may not be amended without the written consent of any SPC with Loans outstanding at the time of such proposed amendment. 10.7 Adjustments; Set-off. (a) Except to the extent that this Agreement provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Obligations, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Obligations, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the 95 excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to Holdings or the Borrower, any such notice being expressly waived by Holdings and the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by Holdings or the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of Holdings or the Borrower, as the case may be. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement or of a Lender Addendum by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of Holdings, the Borrower, the Agents, the Arrangers and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by Holdings, the Borrower, the Arrangers, any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 Submission To Jurisdiction; Waivers. Each of Holdings and the Borrower hereby irrevocably and unconditionally: 96 (a) submits for itself and its Property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to Holdings or the Borrower, as the case may be at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 10.13 Acknowledgments. Each of Holdings and the Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Arrangers, any Agent nor any Lender has any fiduciary relationship with or duty to Holdings or the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Arrangers, the Agents and the Lenders, on one hand, and Holdings and the Borrower, on the other hand, in connection herewith or therewith is solely that of creditor and debtor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Arrangers, the Agents and the Lenders or among Holdings, the Borrower and the Lenders. 10.14 Confidentiality. Each of the Agents and the Lenders agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as non-public or confidential; provided that nothing herein shall prevent any Agent or any Lender from disclosing any such information (a) to the Arrangers, any Agent, any other Lender or any affiliate of any thereof, (b) to any Participant or Assignee (each, a "Transferee") or prospective Transferee that agrees to comply 97 with the provisions of this Section or substantially equivalent provisions, (c) to any of its employees, directors, agents, attorneys, accountants and other professional advisors, (d) to any financial institution that is a direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty expressly agrees to be bound by the provisions of this Section or confidentiality provisions similar to the provisions of this Section), (e) upon the request or demand of any Governmental Authority having jurisdiction over it, (f) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (g) in connection with any litigation or similar proceeding, (h) that has been publicly disclosed other than in breach of this Section, (i) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender or (j) in connection with the exercise of any remedy hereunder or under any other Loan Document. 10.15 Release of Collateral and Guarantee Obligations. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon request of the Borrower in connection with any Disposition of Property permitted by the Loan Documents, or made with the prior written consent of the Required Lenders, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is a party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in any Collateral being Disposed of in such Disposition, and to release any guarantee obligations under any Loan Document of any Person being Disposed of in such Disposition, to the extent necessary to permit consummation of such Disposition in accordance with the Loan Documents. (b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when all Obligations (other than obligations in respect of any Specified Hedge Agreement) have been paid in full, all Commitments have terminated or expired and no Letter of Credit shall be outstanding, upon request of the Borrower, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is a party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in all Collateral, and to release all guarantee obligations under any Loan Document, whether or not on the date of such release there may be outstanding Obligations in respect of Specified Hedge Agreements. Any such release of guarantee obligations shall be deemed subject to the provision that such guarantee obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made. 98 10.16 Accounting Changes. In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Change as if such Accounting Change had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Change had not occurred. "Accounting Change" refers to any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC. 10.17 Delivery of Lender Addenda. Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the Borrower and the Administrative Agent. 10.18 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. K&F INTERMEDIATE HOLDCO, INC. By: /s/ Richard K. Roeder ----------------------------------------------- Name: Richard K. Roeder Title: Vice President and Secretary K&F ACQUISITION, INC. By: /s/ Richard K. Roeder ----------------------------------------------- Name: Richard K. Roeder Title: Vice President and Secretary LEHMAN BROTHERS INC., as Arranger By: /s/ Jeffrey Abt ----------------------------------------------- Name: Jeffrey Abt Title: Senior Vice President J.P. MORGAN SECURITIES INC., as Arranger and Syndication Agent By: /s/ John C. Riordan ----------------------------------------------- Name: John C. Riordan Title: Vice President GOLDMAN SACHS CREDIT PARTNERS L.P., as Co-Documentation Agent By: /s/ William W. Archer ----------------------------------------------- Name: William W. Archer Title: Managing Director CITIGROUP GLOBAL MARKETS INC., as Co-Documentation Agent By: /s/ Stephen R. Sellhausen ----------------------------------------------- Name: Stephen R. Sellhausen Title: Managing Director LEHMAN COMMERCIAL PAPER INC., as Administrative Agent By: /s/ Jeffrey Abt ----------------------------------------------- Name: Jeffrey Abt Title: Senior Vice President The undersigned hereby acknowledges and agrees that, upon the effectiveness of the Merger, it will succeed by operation of law to all of the rights and obligations of the Borrower set forth herein and that all references herein to the "Borrower" shall thereupon be deemed to be references to the undersigned, as the surviving entity of the Merger. K&F INDUSTRIES, INC. By: /s/ Kenneth M. Schwartz --------------------------------------- Name: Kenneth M. Schwartz Title: President and CEO EX-99.1 6 y69010exv99w1.txt PRESS RELEASE Exhibit 99.1 PRESS RELEASE Source: K & F Industries, Inc. AURORA CAPITAL GROUP AND K & F INDUSTRIES ANNOUNCE CLOSING OF SALE NEW YORK, Nov. 18 /PRNewswire/ -- Aurora Capital Group and K & F Industries, Inc. announced today the closing of the previously announced purchase of K & F to an affiliate of Aurora for a purchase price of approximately $1.06 billion in cash. Gerald L. Parsky, chairman of Aurora Capital Group, said, "This is a very exciting transaction for Aurora. K & F is a perfect fit for our investment objectives -- it is a stand-out company in its market, with real growth potential and a superb, energetic management team. Adding our resources to K & F's proven operating ability, results, we believe, in a formula for success." K & F chairman Bernard L. Schwartz said, "K & F's management, armed with the support and commitment of Aurora, is very enthusiastic about the company's prospects for growth and expansion in the aerospace industry. This, clearly, is a win-win transaction for all parties." K & F Industries, Inc. is one of the world's leading manufacturers of aircraft wheels, brakes and anti-skid systems for commercial, general aviation and military aircraft. K & F also is the leading worldwide manufacturer of aircraft fuel tanks, as well as a producer of aircraft iceguards, inflatable oil booms and other products made from coated fabrics for commercial and military applications. Aurora Capital Group is a Los Angeles-based investment firm formed in 1991 that acquires and builds companies in partnership with operating management. Aurora is committed to investing its capital in middle market companies with unique, defensible market positions. K & F was jointly owned by Bernard L. Schwartz and Lehman Brothers Merchant Banking. Lehman Brothers Inc. and Stephens Financial Group served as financial advisors to K & F in connection with the acquisition. This release contains statements that are forward-looking in nature which express the beliefs and expectations of management. Such statements are based on current plans, estimates and expectations and involve a number of known and unknown risks, uncertainties and other factors that could cause the Company's future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward- looking statements. These factors and additional information are discussed in the Company's filings with the Securities and Exchange Commission and statements in this release should be evaluated in light of these important factors. Although the Company's statements are based upon reasonable assumptions, it cannot guarantee future results. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, unless required by applicable law. Contacts: Jeanette Clonan for K & F Industries (212) 697-1105 Gerald L. Parsky Aurora Capital Group (310) 551-0101 -----END PRIVACY-ENHANCED MESSAGE-----