<PAGE>   1


                                                                   Exhibit 10.19

                               DALTON CORPORATION,

                       K. L. DAVIDSON EMPLOYMENT AGREEMENT



         THIS AGREEMENT is executed the 8th day of September, 1998, between
Dalton Corporation, an Indiana corporation with its principal office in Warsaw,
Indiana ("Company"), and which is a wholly owned subsidiary of Neenah Foundry
Company ("Neenah"), a Wisconsin corporation with its principal offices in
Neenah, Wisconsin and K. L. Davidson ("Executive").

                                    RECITALS

         The Executive currently is employed as Chairman, President and Chief
Executive Officer of the Company, pursuant to an Employment Agreement Contract
dated April 26, 1996 (the "Prior Employment Agreement"), which amended and
restated an agreement initially executed on February 10, 1986. The Executive and
the Company are also parties to certain other agreements, including a Split
Dollar Agreement executed on April 26, 1996, but effective January 1, 1996 (the
"Split Dollar Agreement"), and an Agreement for Payment of Supplemental Benefits
executed on April 26, 1996, but effective January 1, 1996 (the "SERP Agreement"
and together with the Prior Employment Agreement and the Split Dollar Agreement,
the "Prior Agreements"). The Prior Agreements contained certain provisions
relating to payments in the event of a change in control of the Company and post
employment payments and benefits. The Executive, the Company and Neenah wish to
cancel and terminate the Prior Agreements in their entirety, subject to the
incorporation of the Split Dollar Agreement in its entirety and incorporation of
certain terms of the other Prior Agreements into this Agreement, as and to the
extent provided herein, as well as establish an employment relationship between
the Company and Executive for the future.

         All of the issued and outstanding stock of the Company has been
acquired by Neenah pursuant to a Stock Purchase Agreement dated August 7, 1998,
the closing of such transaction (the "Closing") occurring immediately prior to
the execution of this Agreement.

         The Company, and Neenah desire, due to the Executive's knowledge and
experience, to continue by contract his services as President of the Company,
and the Executive is willing to accept continued employment in such capacities
and in such other capacities as the Board of Directors or the Chairman of the
Board of Neenah shall assign, under the terms and conditions of this Employment
Agreement (the "Agreement").

         THEREFORE, in consideration of their mutual undertakings, the parties
agree as follows:

    SECTION 1. EMPLOYMENT. The Company hereby employs the Executive as
President, to render full-time services to the Company and its Subsidiaries for
the term(s) specified in Section 2 and thereafter until such services are
terminated, as herein provided. The Executive hereby accepts and agrees to such
employment. For purposes of this Agreement, "Subsidiary" shall mean any
corporation more than 50% of whose total combined voting stock of all classes is
held by the Company or by another corporation which qualifies as a Subsidiary of
the Company under this definition.


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<PAGE>   2


     SECTION 2. TERM. Subject to the provisions for termination as provided in
Section 7, the term of the Executive's employment under this Agreement shall be
one (1) year, commencing on the date of this Agreement. Such one year term shall
be renewed automatically for successive one (1) year terms thereafter, upon
mutual agreement of the Company and the Executive. Subject to the provisions for
termination as provided in Section 7, the Agreement shall continue to renew
annually (but to a date not later than the last day of the month in which the
Executive attains age sixty-five (65)), unless either the Company or the
Executive elects not to renew this Agreement by serving written notice not to
renew on the other party at least three (3) months prior to the anniversary of
the execution of this Agreement. The initial one year term and any extension or
renewal thereof, is referred to herein as the "Employment Period."

     SECTION 3. DUTIES.

         (a) During the Employment Period, the Executive agrees diligently to
perform such executive duties and administrative functions which are appropriate
to his office and as, from time to time, may be assigned to him by the Board of
Directors of the Company (the "Board") and the Chairman of the Board of Neenah,
and he further agrees to give his full business time and attention to, and his
best efforts to promote, the business and affairs of the Company. The Executive
further agrees to hold such office or offices in any Subsidiary of the Company
to which he may be elected or appointed and to perform and discharge the duties
thereof faithfully and to the best of his ability.

         (b) The Executive, subject to the direction and control of the Board,
shall have the power and authority commensurate with his executive status and
necessary to perform his duties hereunder.

     SECTION 4. COMPENSATION.

         (a) For his services hereunder, during the Employment Period, the
Company shall pay to the Executive, a salary of twenty five thousand and 00/100
Dollars ($25,000) per month, payable in accordance with the normal salary
payment practices of the Company and subject to customary withholding; and,

         (b) For each fiscal year during the Employment Period, Executive will
be eligible to receive an annual bonus based on the Company's achievement of the
Target EBITDA for each such fiscal year as set forth on the annual business plan
for that year as approved by the Board (with respect to each year, the "Business
Plan").

        (i) Once the Board has determined the percentage of EBITDA achieved for
such fiscal year as compared to the Target EBITDA for such fiscal year (the
"Achieved EBITDA Percentage"), so long as the Achieved EBITDA Percentage for
such fiscal year equals or exceeds 80%, Executive shall be entitled to receive a
bonus payment in any amount equal to the product of (x) the Bonus Multiple (as
set forth opposite the Achieved EBITDA Percentage below and as adjusted pursuant
to paragraph (ii) below), (y) 40% and (z) Executive's Base Salary for such
fiscal year. The bonus payment shall be made within thirty (30) days of the
Board's determination of the Achieved EBITDA Percentage.



           Achieved EBITDA


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<PAGE>   3
<TABLE>
<CAPTION>
             Percentage                               Bonus Multiple
             ----------                               --------------
             <S>                                      <C>
               >80%<100%                                    50%
              >100%<110%                                   100%
              >110%<120%                                   150%
                   >120%                                   200%
</TABLE>

        (ii) Each Bonus Multiple set forth above shall increase linearly as the
Achieved EBITDA Percentage increases; therefore, so long as the Achieved EBITDA
Percentage equals or exceeds 80%, in the event the actual Achieved EBITDA
Percentage falls between any of the target Achieved EBITDA Percentages set forth
above, the applicable Bonus Multiple shall be adjusted accordingly; provided,
that in no event shall the Bonus Multiple exceed 200%. For example, in the event
the actual Achieved EBITDA Percentage is 90%, the Bonus Multiple shall be 75% or
in the event the actual Achieved EBITDA Percentage is 115%, the Bonus Multiple
shall be 175%.

        (iii) Notwithstanding the foregoing, no bonus shall in any event (A)
exceed 80% of the Executive's Base Salary for the applicable fiscal year and (B)
be payable in the event that any event of default or default shall have occurred
(and shall not have been cured or waived) with respect to any material
contracts, agreements, loans or other instruments relating to any indebtedness
of Neenah or any of its Subsidiaries including the Company.

     SECTION 5. EMPLOYEE BENEFITS.

         (a) The Executive shall be entitled to participate in such life
insurance (including group life and accidental death and dismemberment
insurance), disability, health benefit and retirement plans and other employee
benefit programs as may be approved from time to time by the Company for the
benefit of its executives.

         (b) The Company shall maintain in effect a term policy or policies of
insurance on the life of the Executive in the face amount of Five Hundred
Thousand Dollars ($500,000), owned by the Executive's spouse and payable to such
beneficiary or beneficiaries as the Owner may designate from time to time.

         (c) The Executive shall be entitled to a period or periods of paid
vacation each calendar year in accordance with the Company's customary vacation
policy. It is further agreed that Executive may, subject to demands of his
employment and agreement by the Chairman of the Board of Neenah, utilize
vacation above and beyond the customary vacation.

     SECTION 6. REIMBURSEMENT OF EXPENSES. The Company shall pay to the
Executive or, to the extent paid in the first instance by him, shall reimburse
the Executive for all reasonable expenses incurred by him in connection with the
performance of his duties hereunder, including travel entertainment and similar
expenses which are consistent with Neenah's policies in effect from time to time
and subject to Neenah's requirements with respect to reporting and
documentation.

     SECTION 7. TERMINATION.

         (a) The Company shall have the right at any time to terminate the
Executive's employment upon ninety (90) days' prior notice to the Executive, and
the Executive shall have the right to terminate his employment at any time and
for any reason upon ninety (90) days' prior notice 


                                      -3-
<PAGE>   4

to the Company and to the Chairman of the Board of Neenah. The Executive's
employment shall also terminate upon his death.

         (b) Any termination of the Executive's employment by the Company or by
the Executive shall be communicated by written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the date on which employment is
anticipated to terminate.

         (c) As used herein, "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination

     SECTION 8. PAYMENTS AND OBLIGATIONS UNDER PRE-EXISTING AGREEMENTS.

         (a) The Company shall maintain split dollar insurance on the life of
the Executive pursuant to and in accordance with the Split Dollar Agreement
among the Company, the Executive and Fort Wayne National Bank, Trustee, executed
February 3, 1995, as amended and restated, as such Agreement may further be
amended from time to time, which Split Dollar Agreement is attached hereto as
Exhibit 8(a) and made a part hereof.

         (b) The Company and Executive hereby agree that the Agreement For
Payment Of Supplemental Benefits between the Company and the Executive executed
February 20, 1995, as amended and restated hereby terminated and is cancelled in
its entirety as of the date hereof and in lieu thereof, commencing on the Date
of Termination of Executive, the Company shall: (i) pay to Executive the sum of
Seven Thousand Four Hundred Sixty-Two Dollars ($7,462) per month for a period of
one hundred eighty (180) months and, in the event of his death before such one
hundred eighty (180) monthly payments are completed, shall continue such
payments to his estate until the expiration of such 180-months period; and (ii)
in addition the Company shall pay to Executive the sum of Five Thousand
Thirty-Eight Dollars ($5,038) per month during his lifetime for a maximum period
of one hundred eighty (180) months and, in the event of this death before such
one hundred eighty monthly payments are completed, shall continue such payment
to his spouse, Carolyn L. Davidson (if she survives), during her lifetime until
the earlier of her death or the expiration of such 180-months period.

     SECTION 9. COMPENSATION IN SATISFACTION OF CHANGE OF CONTROL PROVISION
OBLIGATIONS. Under the terms of the Prior Agreement, Executive is entitled to
certain payments upon the change in control of the Company. Included within
those payment entitlements is a cost of living adjustment clause and a formula
based compensation amount. In order to eliminate the necessity of calculation of
the formula bonus and to establish certainty in the sums to be paid, the Company
and Executive agree that the Prior Employment Agreement is hereby terminated and
cancelled in its entirety and the following shall be paid in lieu of the change
of control provisions of the Prior Employment Agreement:

         (a) Commencing on the first regular monthly compensation payment date
for the Company following the execution of this Agreement, the Company shall pay
to Executive the sum of Forty-Five Thousand One Hundred Forty-Seven and 58/100
Dollars ($45,147.58) per month, through and including the month of December,
2000 or a total of twenty-eight such monthly payments. In the event of the
Executive's death prior to completion of all payments pursuant to this


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<PAGE>   5

Section 9, the Company shall continue payments required hereby to Executive's
spouse, Carolyn L. Davidson (if she survives) until a total of twenty-eight (28)
such monthly payments have been made. In the event that fewer than twenty-eight
monthly payments have been made at the time of the death of Carolyn L. Davidson,
the remaining payments shall be made to a beneficiary or beneficiaries
designated in a written instrument by the Executive and filed with the Secretary
of the Company. If no such designated beneficiary survives the Executive or if
the Executive fails to designate a beneficiary, payment shall be made to the
Executive's estate. If the designated beneficiary to whom payment has commenced
should die before payments are completed, payment shall be continued to the
estate of the deceased beneficiary.

         (b) In addition to the payments required by Section 8(a) of this
Agreement, the Company shall pay to the Executive, on or before September 30,
1998, the sum of Two Hundred Twenty-Seven Thousand One Hundred Forty-Nine and
28/100 dollars ($227,149.28) in lieu of the pro rata portion of the compensation
which would be due to Executive pursuant to Section 4 of the Prior Employment
Agreement.

     SECTION 10. POST TERMINATION OBLIGATION OF COMPANY.

         (a) Upon the termination of employment of the Executive, whether by the
Company, or the Executive, the Company shall maintain (or cause to be
maintained) in full force and effect, for the continued benefit of the
Executive, until the earlier of (i) the date he attains age sixty-five (65) or
(ii) the date of his death, The Dalton Foundries, Inc. Employees Health Benefit
Plan in which the Executive was entitled to participate as provided in Section 5
of this Agreement, provided the Executive's continued participation is possible
under the general terms and conditions of such plan. In the event the
Executive's continued participation in such plan is barred, the Company shall
arrange to provide the Executive with benefits substantially similar to those
which he would otherwise have been entitled to receive under such plan.

         (b) Following any termination of the Executive's employment and in
addition to any rights of indemnification otherwise provided or available to
him, if the Executive is made or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he was an
officer or a director of the Company or served at the request of the Company as
an officer, director, employee or agent of another entity or enterprise, whether
or not for profit, the Company shall indemnify the Executive against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement reasonably incurred in connection with such action, suit or
proceeding if his actions were taken in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, he had no reasonable cause, to
believe the conduct was unlawful or had reasonable grounds to believe the
conduct was lawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the Executive did not
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, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that his conduct was
unlawful.

         (C) EXECUTIVE HEREBY ACKNOWLEDGES AND AGREES THAT (I) THE COMPANY HAS
NO OTHER OBLIGATIONS TO THE EXECUTIVE IN RESPECT TO HIS EMPLOYMENT WITH THE
COMPANY EXCEPT AS


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<PAGE>   6

PROVIDED HEREIN, (II) NO SEVERANCE COMPENSATION OF ANY KIND, NATURE OR AMOUNT
SHALL BE PAYABLE TO EXECUTIVE UPON THE TERMINATION OF THIS AGREEMENT AND HIS
EMPLOYMENT WITH THE COMPANY OTHER THAN IN ACCORDANCE WITH THIS AGREEMENT AND
(III) EXECUTIVE HEREBY WAIVES ANY CLAIM FOR ANY SEVERANCE OR OTHER COMPENSATION
IN CONNECTION THEREWITH EXCEPT AS EXPRESSLY SET FORTH IN SECTION 8 AND SECTION 9
ABOVE.

         (d) All of Executive's rights to salary, fringe benefits and bonuses
hereunder (if any) accruing after the termination of the Employment Period shall
cease upon such termination, subject to the requirements of Section 10(a) above,
provided that Executive shall continue to be entitled to payment set forth in
Section 8 and Section 9 above.

     SECTION 11.FURTHER COVENANTS OF EXECUTIVE.

         (a) For purposes of this Section 11, the term "Company" includes any
direct or indirect parent or Subsidiary of the Company.

         (B) CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
concerning the business or affairs of the Company ("Confidential Information")
are the property of the Company. Therefore, Executive agrees that he shall not
disclose to any unauthorized person or use for his own account any Confidential
Information without the prior written consent of the Board, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions to
act. Executive shall deliver to Neenah at the time of termination of Executive's
employment, or at any other time Neenah may request, all memoranda, notes,
plans, records, reports, computer tapes and software and other documents and
data (and copies thereof) relating to the Confidential Information, Work Product
(as defined below) and the business of the Company which he may them possess or
have under his control.

         (C) INVENTIONS AND PATENTS. Executive agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
actual or anticipated business, research development or existing or future
products or services and which are conceived, developed or made by Executive
while employed by the Company ("Work Product") belong to the Company. Executive
will promptly disclose such Work Product to the board and perform all actions
reasonably requested by the Board (whether during or after Executive's
employment period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments).

         (D) NONCOMPETE, NON-SOLICITATION.

        (i) Executive acknowledges that in the course of his employment with the
Company he has become familiar, and he will become familiar, with the Company's
trade secrets and with other Confidential Information and that his services have
been and will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the Employment Period and such other
time as he is employed by or otherwise receiving compensation from the Company
and for two years thereafter (the "Noncompete Period"), Executive shall not
directly or indirectly own, manage, control, participate in, consult with,
render services for, or in any manner engage in any business (including by
himself or through any other entity) competing with the


                                      -6-
<PAGE>   7

businesses of the Company as such businesses exist or are in process on the date
of the termination of Executive's employment, within any geographic area in
which the Company engages or plans on the date of the termination of Executive's
employment to engage in such businesses. Nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding stock of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.

        (ii) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (A) induce or attempt to induce any employee
of the Company to leave the employ of the Company, or any way interfere with the
relationship between any member of the Company and any employee thereof, (B)
hire any person who was an employee of the Company at the time within the
twelve-month period prior to the date of termination of Executive's employment
with the Company, or (C) induce or attempt to induce any customer, supplier,
licensee or other business relation to the Company to cease doing business with
the Company, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company.

        (iii) If, at the time of enforcement of this Section 11, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.

        (iv) In the event of a breach or a threatened breach by Executive of any
of the provisions of this Section 11, the Company, in addition and supplementary
to other rights and remedies existing in its favor, may apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security).

     SECTION 12. NOTICE. All notices, consents or demands given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered to, or mailed by prepaid registered or certified mail addressed to,
the party for whom intended, as follows, or to such other address as may be
furnished by such party in the manner provided herein:

If to the Executive:                        K. L Davidson
                                            3 EMS T 35 A Lane
                                            Leesburg, Indiana 46538

                                      -7-

<PAGE>   8



If to the Company:                          Dalton Corporation
                                            P. O. Box 230
                                            Warsaw, Indiana 46581-0230

     with copies, which shall not constitute notice to the Company, to:

                                            Neenah Foundry Company
                                            2121 Brooks Avenue
                                            Neenah, Wisconsin 54957



If to Neenah:                               Neenah Foundry Company
                                            2121 Brooks Avenue
                                            Neenah, Wisconsin 54957

     with copies, which shall not constitute notice to the Neenah, to:

                                            Kirkland & Ellis
                                            Attn: Kirk A. Radke
                                            Citicorp Center
                                            153 East 53rd Street
                                            New York, New York 10022-4675

     SECTION 13.  GOVERNING  LAW. This Agreement  shall in all respects be
governed by and construed under the laws of the State of Indiana applicable to
agreements fully to be performed in the State of Indiana.

     SECTION 14. ENTIRE AGREEMENT. This Agreement, and the exhibits and
attachments hereto, sets forth the entire understanding of the parties hereto
with respect to its subject matter, merges and supersedes all prior and
contemporaneous understandings with respect to its subject matter including
without limitation, the Prior Agreements, and may not be waived or modified, in
whole or in part, except by a writing signed by each of the parties hereto. No
waiver of any provision of this Agreement in any instance shall be deemed to be
a waiver of the same or any other provision in any other instance.

     SECTION 15. SUCCESSOR TO COMPANY. Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business or assets of the Company, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. A failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder. As used in this
Agreement, "Company" shall mean the Company as herein defined and any successor
to its business or assets.


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<PAGE>   9

     SECTION 16. ASSIGNMENT; BINDING EFFECT. This Agreement is personal to the
Executive and shall not be assigned by him. Neither shall the Executive grant a
security interest in or otherwise transfer his right or interest in any benefit
under this Agreement, nor shall any such right or interest be subject to
attachment, levy, execution or other legal or equitable process. The Company may
assign its rights under this Agreement to a parent or subsidiary corporation or
to any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) of substantially all of its business or assets. Subject to the
foregoing provisions of this Section 16, this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors,
assigns, personal representatives, heirs, legatees and beneficiaries.

     SECTION 17. PROVISIONS WHICH SURVIVE. The provisions of Section 5 and
Section 8 through Section 16 (as well as any other provision necessary for these
sections to be effective) shall survive the termination of the Executive's
employment hereunder and the termination of this Agreement for any reason.

     SECTION 18. SEVERABILITY. If any provision of this Agreement or its
application to any person or entity or in any circumstance is held to be invalid
or unenforceable to any extent or in any jurisdiction by a court of competent
jurisdiction, this Agreement shall be interpreted and enforceable as if such
provision were severed or limited, to the extent necessary to render such
provision and this Agreement enforceable, but the application of its provisions
to other persons or entities or in other circumstances and in other
jurisdictions shall not be affected.

    SECTION 19. COUNTERPARTS.  This Agreement may be executed in two (2) or 
more counterparts, each shall be an original, but all of which together shall
constitute one and the same instrument.

         EXECUTED on the date first stated above.

                                            COMPANY

                                            DALTON CORPORATION



                                            By:_________________________________



                                            Title:______________________________

                                            EXECUTIVE 
                                               _________________________________
                                                         K. L. Davidson

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<PAGE>   10




                      K. L. DAVIDSON SPLIT DOLLAR AGREEMENT
                             (AMENDED AND RESTATED)


         THIS AGREEMENT is executed the 26th day of April, 1996, effective the
1st day of January, 1996, among The Dalton Foundries, Inc., an Indiana
corporation (Company), K. L. Davidson (Executive) and Fort Wayne National Bank,
as Trustee of the Kenneth L. Davidson Irrevocable Trust dated the 6th day of
December, 1994 (Owner).
                                    RECITALS

         The Executive holds a key executive and management position with the
Company and currently is employed pursuant to an Amended and Restated Employment
Agreement executed currently herewith (Employment Agreement). The Company, the
Executive and the Owner entered into a Split Dollar Agreement executed February
3, 1995, effective the 1st day of December, 1994 (1994 Agreement) to provide
life insurance protection for the Executive's family upon his death under a
policy of life insurance insuring his life (Policy) issued by Metropolitan Life
Insurance Company (Insurer). The Policy is described in Exhibit "A" attached to
the 1994 Agreement and is incorporated as if fully set forth herein.

         The Owner is the Policy owner and possesses all incidents of ownership
in and to the Policy. Pursuant to the 1994 Agreement the Company agreed to pay
all premiums due on the Policy as an additional employment benefit to the
Executive, and the Owner collaterally assigned the Policy to the Company to
secure the repayment of Policy premiums paid by the Company, with the
understanding that the Company shall have only the right to repayment with the
Owner retaining all other Policy ownership rights.

         The parties have now agreed to amend and restate the 1994 Agreement,
upon the terms and conditions of this Amended and Restated Agreement
(Agreement).

         THEREFORE, in consideration of their mutual undertakings, the parties
agree as follows:



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<PAGE>   11



    
         1. Purchase of Policy. The Owner has purchased the Policy from the
Insurer, and the Insurer has issued the Policy. The parties shall take such
further action, if any, as may be necessary to cause the Policy to conform to
the provisions of this Agreement. The Policy shall be subject to the terms and
conditions of this Agreement and the Collateral Assignment (referred to in
Paragraph 4) filed with the Insurer.

         2. Ownership of Policy.

            (a) The Owner is and shall be the sole and absolute owner of the
          Policy. In such capacity the Owner shall have the right to designate
          the beneficiary or beneficiaries, the right to change the beneficiary
          or beneficiaries, and the right to elect settlement options under the
          Policy. In general, the Owner shall possess all incidents of ownership
          in the Policy and shall be entitled to exercise all of the rights and
          privileges available to the Owner of the Policy under the terms
          thereof, subject to the terms and conditions of this Agreement.

             (b) The Company shall have no incidents of ownership in the 
          Policy within the meaning of Section 2042 of the Internal Revenue Code
          and the regulations thereunder, shall have no right to borrow against
          the Policy nor make any type of loan against the security of the
          Policy, and shall not surrender the Policy for cancellation nor assign
          its rights in the Policy to anyone other than the Owner. The parties
          intend that the Company's sole right under this Agreement shall be the
          refund, from the proceeds of the Policy, of amounts it has paid toward
          Policy premiums. Specifically, but without limitation, the Company
          shall neither have nor attempt to exercise any right as collateral
          assignee of the Policy which could impair the Owner's right to receive
          the cash surrender value or death proceeds of the Policy in excess of
          amounts due the Company hereunder. All provisions of this Agreement
          and the collateral assignment shall be construed and enforced to carry
          out such intention.

         3. Premiums. On or before the due date of each Policy premium the 
Company shall pay the full amount of the premium to the Insurer and shall upon
written request furnish the Owner with evidence of such timely payment. The
Company shall furnish the Executive an annual statement of the Executive's
reportable income for federal and state income tax purposes arising as a result
of the insurance protection provided to the Owner as Policy beneficiary. The
premium payment period may be changed by the Company to the extent necessary to
maintain compliance of the Policy with Sections 7702 and 7702A of the Internal
Revenue Code and the regulations thereunder. Upon a failure of the Company to
pay any policy premium as required under this Agreement, the Owner shall have
the right to pay such premium. Payment by the Owner shall not relieve the
Company of its continuing obligation to pay policy premiums.

         4. Collateral Assignment. As security for the Company's right to
receive repayment of Policy premiums, the Owner has executed a collateral
assignment of the Policy, in the form prescribed by the Insurer for such
purpose, providing that the sole right of the Company thereunder is to be repaid
the amounts paid by the Company toward Policy premiums under this Agreement.
Such

                                       11
<PAGE>   12

repayment shall be made from the Policy cash surrender value (as defined in the
Policy) if this Agreement is terminated or if the Owner surrenders or cancels
the Policy, or from Policy death proceeds if the Executive dies while the Policy
and this Agreement remain in effect. In no event shall the Company have any
right to borrow against or make withdrawals from the Policy, to surrender or
cancel the Policy, or to take any other action which would impair the Owner's
rights in and to the Policy. The collateral assignment to the Company shall not
be terminated, amended or otherwise modified by the Owner while this Agreement
is in effect without the express written consent of the Company.


         5. Policy Proceeds. 

            (a) Upon the Executive's death or upon any cancellation of the
         Policy, the Company and the Owner shall cooperate to secure the prompt
         payment by the Insurer of all Policy proceeds, whether in the form of 
         the death benefit or the cash surrender value ("Proceeds").

             (b) Following the Executive's death the Company shall have the
         unqualified right to receive that portion of the Proceeds equal to the
         total amount of the Company's premium payments under this Agreement. 
         The balance of the Proceeds shall be paid to the Owner in accordance
         with applicable Policy provisions. 

             (c) Notwithstanding any other provision of this Agreement, in the
         event no death benefit is payable under the Policy upon the
         Executive's death for any reason and in lieu of such payment the
         Insurer refunds all or any part of the Policy premiums paid, the
         Company shall be entitled to such premium refund.

             (d) The Company may request or the Insurer may be required to
         provide an increase in the Policy death benefit in order to maintain
         compliance of the Policy with Sections 7702 and 7702A of the Internal
         Revenue Code and the regulations thereunder.

         6. Termination.

            (a) Following the Executive's death this Agreement shall terminate 
         upon payment of the Policy proceeds to the Company and the Owner, in
         accordance with their respective interests as provided in this
         Agreement. 

            (b) Subject to the provisions of Paragraph 8, this Agreement shall
         terminate during the Executive's lifetime upon the occurrence of: 


                (i) the termination of the Executive's employment, by the
         Company, for Cause; 

                (ii) the termination, by the Executive, of his employment 
         pursuant to Section 7(a) of the Employment Agreement prior to his
         retirement at or after age 65 (unless the Board of Directors in its 
         discretion shall approve his retirement at an earlier age); or

                (iii) the mutual, written consent of the Company and the Owner. 

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<PAGE>   13


         For purposes of this Agreement, "Cause" shall have the meaning provided
         in Section 7(b) of the Employment Agreement.

         7. Disposition of Policy on Termination During Employee's Lifetime. 

            (a) For sixty (60) days following the termination of this Agreement 
         during the Executive's lifetime as provided in Paragraph 6(b), the
         Owner shall have the option to obtain the release of the collateral
         assignment to the Company by paying to the Company an amount equal to
         the proceeds to which the Company would be entitled upon surrender of
         the Policy as permitted herein. Upon receipt of such amount, the
         Company shall release the collateral assignment of the Policy by the
         execution and delivery of an appropriate instrument of release.

             (b) If the Owner fails to exercise such option, then at the request
         of the Company the Owner shall execute such documents as required by
         the Insurer to transfer the Owner's interest in the Policy to the
         Company. Alternatively, the Company may enforce its right to be repaid
         the Policy premiums paid by it from the Policy's cash surrender value
         under the collateral assignment; provided, that in the event the
         Policy's cash surrender value exceeds the amount due the Company, any
         excess shall be paid to the Owner. Thereafter, neither the Owner nor
         the Owner's successors, assigns or beneficiaries shall have any
         further interest in the Policy, either under the terms thereof or
         under this Agreement. 

         8. Change in Control. If the Executive's employment is terminated for
any reason (other than his death) following a Change in Control of the Company,
upon such termination the Executive shall be deemed conclusively to have
attained the age of 65 and retired on the Date of Termination. In such event
this Agreement and the Company's obligation to pay Policy premiums shall
continue in full force and effect. Upon any failure to pay such premiums the
Company shall be deemed conclusively to have waived its right to reimbursement
of Policy premiums paid or to be paid, and the collateral assignment of the
Policy shall be deemed conclusively to have been released. (If requested by the
Insurer, the Company shall promptly execute and deliver an appropriate
instrument of release.) However, such release or deemed release of the
collateral assignment shall not relieve the Company of its obligation to
continue the payment of Policy premiums. For purposes of this Agreement, "Change
in Control" shall have the meaning provided in Section 7(c)(2) of the Employment
Agreement, and "Date of Termination" shall have the meaning provided in Section
7(e) of the Employment Agreement. 

         9. Insurer Not a Party. The Insurer shall not be deemed to be party to
this Agreement for any purpose nor shall it be deemed in any way responsible for
its validity. The Insurer shall not be obligated to inquire as to the
distribution or application of any monies payable or paid by it under the
Policy, and payments or other performance of its contract obligations in
accordance with the terms of the Policy shall fully discharge the Insurer from
any and all liability under the Policy. 

         10. ERISA Claims Procedures. 

             (a) In accordance with the Employee Retirement Income Security Act 
         of 1974 (ERISA), the Company is hereby designated as the named 
         fiduciary under this Agreement. The named fiduciary shall have the 
         authority and 


                                       13
<PAGE>   14

         responsibility to administer this Agreement and to make all
         determinations concerning rights to benefits under this Agreement. 


             (b) Any decision by the named fiduciary denying a claim for
         benefits by any beneficiary of this Agreement shall be stated in 
         writing and delivered or mailed to such beneficiary. Such decision 
         shall set forth the specific reasons for the denial, written in a 
         manner that may be understood without legal or actuarial counsel. In
         addition, the named fiduciary shall afford a reasonable opportunity to 
         such beneficiary for a full and fair review of the decision denying 
         such claim. 



         11. Tax Indemnity. To the extent that payments made to the Executive 
pursuant to this Agreement (or when added to payments under any other agreement
with the Company) constitute an "excess parachute payment", as such term is
defined in Section 280G(b)(1) of the Internal Revenue Code (Code), such payments
to him shall be grossed up in full for any excise tax or surtax incurred under
Section 280G of the Code, so that the amount he retains, after paying all
applicable federal income, surtaxes and excise taxes due with respect to
payments to him under this Agreement, is the same as the amount he would have
retained if Section 280G of the Code had not been applicable.

         12. Successors and Assigns. This Agreement shall be binding upon,
enforceable against, and inure to the benefit of the Company, the Owner and the
Executive, and their respective heirs, successors and assigns.

         13. Notice. All notices required or permitted to be sent to any party
shall be in writing and sent by any self-authenticating means. If to the
Company, notices shall be sent to the principal office of the Company; if to the
Owner, notices shall be sent to the principal office of the Owner; if to the
Executive, notices shall be sent to his residence as shown in the Company's
employment records. Notices shall be effective when received (or when receipt is
refused), as evidenced by the date of the return receipt or confirmation of
delivery. Any party may change its address for notice by sending a notice in the
manner required by this Paragraph 13.

         14. Governing Law. This Agreement shall in all respects be governed by 
and construed under the laws of the State of Indiana applicable to agreements
fully to be performed in the State of Indiana.

         15. Entire Agreement. This Agreement sets forth the entire 
understanding of the parties with respect to its subject matter, merges and
supersedes all prior and contemporaneous understandings with respect to its
subject matter, and may not be waived or modified, in whole or in part, except
by a writing signed by each of the parties hereto. No waiver of any provision of
this Agreement in any instance shall be deemed to be a waiver of the same or any
other provision in any other instance.

         16. Successor to Company. The Company shall require any successor 
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Executive, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. A failure of the Company to obtain such


                                       14
<PAGE>   15


agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement. In such event the Company shall be deemed conclusively to have
waived its right to reimbursement of Policy premiums paid or to be paid, and the
collateral assignment of the Policy shall thereupon be deemed conclusively to
have been released. (If requested by the Insurer, the Company shall promptly
execute and deliver an appropriate instrument of release.) However, such release
or deemed release of the collateral assignment shall not relieve the Company of
its obligation to continue the payment of Policy premiums. As used in this
Agreement, "Company" shall mean the Company as herein defined and any successor
to its business or assets. 

         17. Counterparts. This Agreement may be executed in three (3) or more 
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. 

                  
         EXECUTED on the date first stated above, effective as of January 1, 
1996.

                                    COMPANY

                           THE DALTON FOUNDRIES, INC.


                          By: ________________________
Vice President and Chief Financial Officer

                                    EXECUTIVE


                            ________________________

K. L. Davidson


                                      OWNER

                        FORT WAYNE NATIONAL BANK, TRUSTEE



                          By: ________________________



                                       15