Document:

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                                                                    EXHIBIT 10.7

                                                                  EXECUTION COPY

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                       REPUBLIC ENGINEERED PRODUCTS, INC.

                                   $21,000,000

                      10% Senior Notes due August 31, 2009

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

                             NOTE PURCHASE AGREEMENT

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

                             Dated December 19, 2003

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                                                              Page
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<S>                                                                                                                  <C>
1.       AUTHORIZATION OF NOTES...................................................................................     1

2.       SALE AND PURCHASE OF NOTES...............................................................................     1

3.       CLOSING..................................................................................................     2

4.       CONDITIONS TO CLOSING....................................................................................     2
     4.1.    Representations and Warranties.......................................................................     2
     4.2.    Performance; No Default..............................................................................     2
     4.3.    Certificates.........................................................................................     2
     4.4.    Corporate or Other Action............................................................................     3
     4.5.    Opinions of Counsel..................................................................................     3
     4.6.    Purchase Permitted By Applicable Law, etc............................................................     3
     4.7.    Sale of Other Notes..................................................................................     3
     4.8.    Payment of Special Counsel Fees......................................................................     3
     4.9.    Changes in Corporate Structure.......................................................................     4
     4.10.   Note Documents.......................................................................................     4
     4.11.   Final Sale Order.....................................................................................     4
     4.12.   Completion of Asset Purchase.........................................................................     4
     4.13.   Perfection Certificate and Lien Search Results.......................................................     4
     4.14.   Certificates of Insurance............................................................................     4
     4.15.   Title Insurance......................................................................................     5
     4.16.   Perfection of Security Interest......................................................................     5
     4.17.   Disclosure of Indebtedness...........................................................................     5
     4.18.   Proceedings and Documents............................................................................     5

5.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................     5
     5.1.    Organization; Power and Authority....................................................................     5
     5.2.    Authorization, etc...................................................................................     6
     5.3.    Organization and Ownership of Shares of Subsidiaries; Affiliates.....................................     6
     5.4.    Compliance with Laws, Other Instruments, etc.........................................................     6
     5.5.    Governmental Authorizations, etc.....................................................................     7
     5.6.    Private Offering by the Company......................................................................     7
     5.7.    Use of Proceeds; Margin Regulations..................................................................     7
     5.8.    Foreign Assets Control Regulations, etc..............................................................     7
     5.9.    Status under Certain Statutes........................................................................     8

6.       REPRESENTATIONS OF THE PURCHASER.........................................................................     8
     6.1.    Purchase for Investment..............................................................................     8

7.       INFORMATION AS TO COMPANY................................................................................     8
     7.1.    Financial and Business Information...................................................................     8
     7.2.    Compliance Certificate...............................................................................    10
     7.3.    Inspection...........................................................................................    11
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                                TABLE OF CONTENTS

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<CAPTION>
Section                                                                                                              Page
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<S>                                                                                                                  <C>
8.       PREPAYMENT OF THE NOTES.................................................................................    11
     8.1.    Required Prepayments................................................................................    11
     8.2.    Optional Prepayments................................................................................    12
     8.3.    Allocation of Partial Prepayments...................................................................    12
     8.4.    Maturity; Surrender, etc............................................................................    12
     8.5.    Purchase of Notes...................................................................................    12

9.       OTHER COVENANTS.........................................................................................    12
     9.1.    Corporate Existence.................................................................................    12
     9.2.    Payment of Taxes and Other Claims...................................................................    13
     9.3.    Maintenance of Properties, Insurance, and Books and Records; Compliance with Law;
             Inspection Rights...................................................................................    13
     9.4.    Further Assurance to the Collateral Agent...........................................................    14
     9.5.    Limitation on Additional Indebtedness and Certain Preferred Stock...................................    14
     9.6.    Limitation on Sale-Leaseback Transactions...........................................................    17
     9.7.    Limitation on Liens.................................................................................    17
     9.8.    Limitation on Restricted Payments...................................................................    18
     9.9.    Disposition of Proceeds of Asset Sales..............................................................    21
     9.10.   Limitation on Transactions with Affiliates..........................................................    22
     9.11.   Change of Control...................................................................................    23
     9.12.   Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries.......................    25
     9.13.   Impairment of Security Interest.....................................................................    26
     9.14.   Waiver of Stay, Extension or Usury Laws.............................................................    26
     9.15.   Additional Subsidiary Guarantors....................................................................    26

10.      SUCCESSORS..............................................................................................    27
     10.1.   When Company May Merge, Etc.........................................................................    27
     10.2.   Successor Entity Substituted........................................................................    28

11.      GUARANTY................................................................................................    28
     11.1.   Unconditional Guaranty..............................................................................    28
     11.2.   Severability........................................................................................    29
     11.3.   Release of a Guarantor..............................................................................    29
     11.4.   Limitation of Guarantor's Liability.................................................................    29
     11.5.   Guarantors May Consolidate, etc., on Certain Terms..................................................    29
     11.6.   Contribution........................................................................................    30
     11.7.   Waiver of Subrogation...............................................................................    30
     11.8.   Execution of Guaranty...............................................................................    31
     11.9.   Waiver of Stay, Extension or Usury Laws.............................................................    31
     11.10.  Parent Guarantor....................................................................................    31

12.      COLLATERAL SECURITY.....................................................................................    31

13.      EVENTS OF DEFAULT.......................................................................................    31
</TABLE>

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                                TABLE OF CONTENTS

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Section                                                                                                             Page
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<S>                                                                                                                 <C>
14.      REMEDIES ON DEFAULT, ETC................................................................................    33
     14.1.   Acceleration........................................................................................    33
     14.2.   Other Remedies......................................................................................    34
     14.3.   Rescission..........................................................................................    35
     14.4.   No Waivers or Election of Remedies, Expenses, etc...................................................    35

15.      REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...........................................................    35
     15.1.   Registration of Notes...............................................................................    35
     15.2.   Transfer and Exchange of Notes......................................................................    35
     15.3.   Replacement of Notes................................................................................    36

16.      PAYMENTS ON NOTES.......................................................................................    36
     16.1.   Payment.............................................................................................    36
     16.2.   Place of Payment....................................................................................    36

17.      THE COLLATERAL AGENT....................................................................................    37
     17.1.   Authorization.......................................................................................    37
     17.2.   Employees and Agents................................................................................    38
     17.3.   No Liability........................................................................................    38
     17.4.   No Representations..................................................................................    38
     17.5.   Holders of Notes....................................................................................    38
     17.6.   Indemnity...........................................................................................    38
     17.7.   Collateral Agent as Holder..........................................................................    39
     17.8.   Resignation.........................................................................................    39
     17.9.   Notification of Defaults and Events of Default......................................................    39
     17.10.  Duties in the Case of Enforcement...................................................................    39

18.      EXPENSES, ETC...........................................................................................    40
     18.1.   Transaction Expenses................................................................................    40
     18.2.   Survival............................................................................................    40

19.      SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............................................    40

20.      AMENDMENT AND WAIVER....................................................................................    41
     20.1.   Requirements........................................................................................    41
     20.2.   Solicitation of Holders of Notes....................................................................    41
     20.3.   Binding Effect, etc.................................................................................    41
     20.4.   Notes held by Company, etc..........................................................................    42

21.      NOTICES.................................................................................................    42

22.      REPRODUCTION OF DOCUMENTS...............................................................................    42

23.      CONFIDENTIAL INFORMATION................................................................................    43

24.      SUBSTITUTION OF PURCHASER...............................................................................    44
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                                TABLE OF CONTENTS

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Section                                                                                                              Page
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25.      MISCELLANEOUS...........................................................................................    44
     25.1.   Successors and Assigns..............................................................................    44
     25.2.   Payments Due on Non-Business Days...................................................................    44
     25.3.   Severability........................................................................................    44
     25.4.   Construction .......................................................................................    44
     25.5    Counterparts .......................................................................................    45
     25.6    Governing Law ......................................................................................    45
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                          TABLE OF CONTENTS (CONT'D.)

<TABLE>
<S>                                 <C>
SCHEDULE A                   -      INFORMATION RELATING TO PURCHASERS

SCHEDULE B                   -      DEFINED TERMS

SCHEDULE 5.3                 -      Subsidiaries of the Company and
                                      Ownership of Subsidiary Stock

EXHIBIT 1                    -      Form of 10% Senior Note due August 31, 2009

EXHIBIT 4.5                  -      Form of Opinion of Special Counsel for the Company

EXHIBIT 9.15(a)              -      Form of Joinder Agreement
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                       REPUBLIC ENGINEERED PRODUCTS, INC.

                              3770 Embassy Parkway

                                Akron, Ohio 44333

                      10% Senior Notes due August 31, 2009

                                                               December 19, 2003

TO EACH OF THE PURCHASERS LISTED IN
         THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

      Each of Republic Engineered Products, Inc., a Delaware corporation (the
"COMPANY"), as Issuer, PAV Republic, Inc., a Delaware corporation, PAV Railroad,
Inc., a Delaware corporation, and PAV Machine, LLC, a Delaware limited liability
company, as Guarantors (each individually, a "GUARANTOR" and collectively, the
"GUARANTORS") agrees with you as follows:

1. AUTHORIZATION OF NOTES.

      The Company will authorize the issue and sale of $21,000,000 aggregate
principal amount of its 10% Senior Notes due August 31, 2009 (the "NOTES", such
term to include any such notes issued in substitution therefor pursuant to
Section 15 of this Agreement). The Notes shall be substantially in the form set
out in Exhibit 1, with such changes therefrom, if any, as may be approved in
accordance with Section 20 herein below. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement; references to "you" or "yours" shall refer to each individual
Purchaser (as defined below) hereunder.

2. SALE AND PURCHASE OF NOTES.

      Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each of the parties set forth on Schedule A hereto (each a
"PURCHASER" and collectively the "PURCHASERS") and each Purchaser will purchase
from the Company, at the Closing provided for in Section 3, Notes in the
principal amount specified opposite the name of such Purchaser set forth on
Schedule A at the purchase price of 100% of the principal amount thereof, which
are being delivered to the Purchasers for no additional consideration from the
Purchasers as a portion of the purchase price set forth in the Asset Purchase
Agreement. The obligations of each Purchaser hereunder are several and not joint
obligations and no Purchaser shall have any liability to any Person for the
performance or non-performance by any other Purchaser hereunder.

<PAGE>

3. CLOSING.

      The sale and purchase of the Notes to be purchased by you and the other
Purchasers shall occur at the offices of Kirkland & Ellis LLP, 153 East 53rd
Street, New York, New York 100022, at a closing (the "CLOSING") on December 19,
2003 or on such other Business Day thereafter on or prior to December 22, 2003
as may be agreed upon by the Company and you and the other Purchasers. At the
Closing the Company will deliver to you the Notes to be purchased by you in the
form of a single Note (or such greater number of Notes in denominations of at
least $100,000 as you may request) dated the date of the Closing and registered
in your name (or in the name of your nominee) as part of the consideration for
the acquisition contemplated by the Asset Purchase Agreement. If at the Closing
the Company shall fail to tender such Notes to you as provided above in this
Section 3, or any of the conditions specified in Section 4 shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement, without thereby waiving any rights you
may have by reason of such failure or such nonfulfillment.

4. CONDITIONS TO CLOSING.

      Your obligation to purchase the Notes to be sold to you at the Closing is
subject to the fulfillment to your satisfaction, prior to or at the Closing, of
the following conditions:

      4.1. REPRESENTATIONS AND WARRANTIES.

      The representations and warranties of the Company and the Guarantors in
this Agreement shall be correct when made and at the time of the Closing.

      4.2. PERFORMANCE; NO DEFAULT.

      The Company and each of the Guarantors shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by such Person prior to or at the Closing and after
giving effect to the issue and sale of the Notes no Default or Event of Default
shall have occurred and be continuing. Except for the transactions contemplated
by the Asset Purchase Agreement, neither the Company nor any Subsidiary shall
have entered into any transaction since its date of incorporation or formation,
as applicable, that would have been prohibited by Sections 9 and 10 hereof had
such Sections applied since such date.

      4.3. CERTIFICATES.

            (a) Officer's Certificate. The Company and each of the Guarantors
      shall have delivered to the Collateral Agent an Officer's Certificate,
      dated the date of the Closing, certifying that (a) the conditions
      specified in Sections 4.1, 4.2 and 4.10 have been fulfilled, (b) such
      Person's charter or other incorporation or organizational documents and
      by-laws or other governing documents attached thereto are true and
      complete as in effect on such date of certification, (c) as to the
      resolutions attached thereto and other corporate proceedings relating to
      the authorization, execution and delivery of the Note Documents to which
      it is a party, and (d) giving the name and bearing the specimen.

                                       2

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            (b) signature of each individual who shall be authorized to sign, in
      the name and on behalf of such Person (i) each of the Note Documents to
      which such Person is a party, and (ii) to give notices and take other
      action on behalf of such Person under the Note Documents.

            (c) Other Certificates. The Company and each of the Guarantors shall
      have delivered to the Collateral Agent a certificate from the Secretary of
      State, or other appropriate authority of the jurisdiction of such Person's
      incorporation or organization, evidencing its good standing in such
      jurisdiction and in each other jurisdiction in which failure to so qualify
      could reasonably be expected to have a Material Adverse Effect.

      4.4. CORPORATE OR OTHER ACTION.

      All corporate action necessary for the valid execution, delivery and
performance by the Company and each Guarantor of this Agreement and the other
Note Documents to which such Person is a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Collateral Agent and
to the Collateral Agent's Special Counsel shall have been delivered to the
Collateral Agent.

      4.5. OPINIONS OF COUNSEL.

      You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing from (a) Kirkland & Ellis LLP, counsel for
the Company, and any other local counsel to the Company, covering the matters
set forth in Exhibit 4.5 and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request
(and the Company hereby instructs its counsel to deliver such opinion to you).

      4.6. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

      On the date of the Closing your purchase of Notes shall (i) be permitted
by the laws and regulations of each jurisdiction to which you are subject, (ii)
not violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.

      4.7. SALE OF OTHER NOTES.

      Contemporaneously with the Closing the Company shall sell to the other
Purchasers and other Purchasers shall accept the Notes to be purchased by them
at the Closing as specified in Schedule A.

      4.8. PAYMENT OF SPECIAL COUNSEL FEES.

      Without limiting the provisions of Section 16.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of the
Collateral Agent's Special Counsel

                                       3

<PAGE>

referred to in Section 4.4 to the extent reflected in a statement of the
Collateral Agent's Special Counsel rendered to the Company at least one Business
Day prior to the Closing.

      4.9. CHANGES IN CORPORATE STRUCTURE.

      Other than as set forth in the Asset Purchase Agreement and except as
specified in Schedule 4.10, neither the Company nor any Guarantor shall have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation or shall have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of such Person's
incorporation or formation, as applicable.

      4.10. NOTE DOCUMENTS.

      Each of the Note Documents shall have been duly executed and delivered by
the respective parties thereto, shall be in full force and effect and shall be
in form and substance satisfactory to you and the Collateral Agent's Special
Counsel.

      4.11. FINAL SALE ORDER.

      The Administrative Agent and the Collateral Agent shall have received a
copy of a signed order of the United States Bankruptcy Court (the "BANKRUPTCY
COURT") for the Northern District of Ohio, approving and authorizing the
completion of the Section 363 Asset Sale (as amended prior to the Closing, the
"SALE ORDER") which Sale Order shall not be subject to any stay and shall
provide for the payment of the Purchase Price (as defined in the Asset Purchase
Agreement).

      4.12. COMPLETION OF ASSET PURCHASE.

      The Administrative Agent and the Collateral Agent shall have received
evidence satisfactory to the Administrative Agent hat the transactions
contemplated by the Acquisition Documents shall have occurred pursuant to and in
accordance with the terms of the Acquisition Documents without any material
waiver or modification with respect thereto and that the Parent Guarantor, the
Company, and their respective Subsidiaries own all of the assets described in
the Asset Purchase Agreement.

      4.13. PERFECTION CERTIFICATE AND LIEN SEARCH RESULTS.

      The Collateral Agent shall have received from the Company a completed
fully executed Perfection Certificate and the results of lien searches with
respect to the Collateral indicating no Liens other than Liens permitted by
Section 9.7.

      4.14. CERTIFICATES OF INSURANCE.

      The Collateral Agent shall have received (a) a certificate of insurance
from an independent insurance broker dated as of the date of the Closing,
identifying insurers, types of insurance, insurance limits, and policy terms and
otherwise describing insurance obtained in accordance with the provisions of
Section 9.3(b) and (b) certified copies of all policies evidencing such
insurance.

                                       4

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      4.15. TITLE INSURANCE.

      The Collateral Agent shall have received a Title Policy covering the
Mortgaged Property (or commitments to issue such policies, with all conditions
of issuance of the Title Policy deleted by an authorized agent of the Title
Insurance Company) together with proof of payment of all fees and premiums for
such policies, from the Title Insurance Company and in amounts reasonably
satisfactory to the Collateral Agent, insuring the interest of the Collateral
Agent, each of the holders of a Note as mortgagee under the Mortgage.

      4.16. PERFECTION OF SECURITY INTEREST.

      All filings, assignments, and deposits of documents or instruments have
been made and all other actions have been taken that are necessary or advisable,
under applicable law, to establish and perfect the Collateral Agent's security
interest in the Collateral.

      4.17. DISCLOSURE OF INDEBTEDNESS.

      The Company shall have delivered a complete and correct list of all
outstanding Indebtedness of the Company and its Subsidiaries involving a
principal amount in excess of $100,000 as of the date of Closing.

      4.18. PROCEEDINGS AND DOCUMENTS.

      All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and the Collateral Agent's
Special Counsel, and you and the Collateral Agent's Special Counsel shall have
received all such counterpart originals or certified or other copies of such
documents as you or they may reasonably request.

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

      The Company (and, where applicable, each Guarantor) represents and
warrants to you as of the date hereof and as of the Closing that:

      5.1. ORGANIZATION; POWER AND AUTHORITY.

      Each of the Company and the Guarantors is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each of the Company and the
Guarantors has the corporate power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver the Note Documents to
which it is a party and to perform the provisions hereof and thereof.

                                       5

<PAGE>

      5.2. AUTHORIZATION, ETC.

      Each of the Note Documents have been duly authorized by all necessary
corporate action on the part of each of the Company and the Guarantors, and this
Agreement constitutes, and upon execution and delivery thereof each Note will
constitute, a legal, valid and binding obligation of such Person enforceable
against such Person in accordance with its terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

      5.3. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.

            (a) Schedule 5.3 contains (except as noted therein) complete and
      correct lists (i) of the Parent Guarantor's and the Company's
      Subsidiaries, showing, as to each Subsidiary, the correct name thereof,
      the jurisdiction of its organization, and the percentage of shares of each
      class of its Capital Stock outstanding owned by the Parent Guarantor, the
      Company and each other Subsidiary, (ii) of the Company's Affiliates, other
      than Subsidiaries, and (iii) of the Company's directors and senior
      officers.

            (b) All of the outstanding shares of Capital Stock of each
      Subsidiary shown in Schedule 5.3 as being owned by the Parent Guarantor or
      the Company and their respective Subsidiaries have been validly issued,
      are fully paid and nonassessable and are owned by the Parent Guarantor,
      the Company or another Subsidiary free and clear of any Lien (except as
      otherwise disclosed in Schedule 5.3).

            (c) Each Subsidiary identified in Schedule 5.3 is a corporation or
      other legal entity duly organized, validly existing and in good standing
      under the laws of its jurisdiction of organization, and is duly qualified
      as a foreign corporation or other legal entity and is in good standing in
      each jurisdiction in which such qualification is required by law, other
      than those jurisdictions as to which the failure to be so qualified or in
      good standing could not, individually or in the aggregate, reasonably be
      expected to have a Material Adverse Effect. Each such Subsidiary has the
      corporate or other power and authority to own or hold under lease the
      properties it purports to own or hold under lease and to transact the
      business it transacts and proposes to transact.

            (d) No Subsidiary is a party to, or otherwise subject to any legal
      restriction or any agreement (other than this Agreement, the agreements
      listed on Schedule 5.3 and customary limitations imposed by corporate law
      statutes) restricting the ability of such Subsidiary to pay dividends out
      of profits or make any other similar distributions of profits to the
      Parent Guarantor, the Company or any of their respective Subsidiaries that
      owns outstanding shares of Capital Stock of such Subsidiary.

      5.4. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

      The execution, delivery and performance by each of the Company and the
Guarantors of the Note Documents to which it is a party will not (i) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of such

                                       6

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Person under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which such Person is bound or by which such Person or any of their
respective properties may be bound or affected, (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the such Person or (iii) violate any provision of any statute or other rule
or regulation of any Governmental Authority applicable to such Person.

      5.5. GOVERNMENTAL AUTHORIZATIONS, ETC.

      No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company and the Guarantors of the Note
Documents.

      5.6. PRIVATE OFFERING BY THE COMPANY.

      Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
person other than you and the other Purchasers, each of which has been offered
the Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of Section 5 of
the Securities Act.

      5.7. USE OF PROCEEDS; MARGIN REGULATIONS.

      No part of the proceeds from the sale of the Notes hereunder will be used,
directly or indirectly, for the purpose of buying or carrying any margin stock
within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve the Company in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock
does not constitute more than 5% of the value of the consolidated assets of the
Company and its Subsidiaries and the Company does not have any present intention
that margin stock will constitute more than 5% of the value of such assets. As
used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR
CARRYING" shall have the meanings assigned to them in said Regulation G.

      5.8. FOREIGN ASSETS CONTROL REGULATIONS, ETC.

      Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.

                                       7

<PAGE>

      5.9. STATUS UNDER CERTAIN STATUTES.

      Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal
Power Act, as amended.

6. REPRESENTATIONS OF THE PURCHASER.

      6.1. PURCHASE FOR INVESTMENT.

      You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.

7. INFORMATION AS TO COMPANY.

      7.1. FINANCIAL AND BUSINESS INFORMATION.

      The Company shall deliver to each holder of a Note (except to the extent
that such holder shall specifically request otherwise in a written notice to the
Company):

            (a) Quarterly Statements -- within 45 days after the end of each
      quarterly fiscal period in each fiscal year of the Company (other than the
      last quarterly fiscal period of each such fiscal year), duplicate copies
      of,

                  (i) a consolidated balance sheet of the Company and its
            Subsidiaries as at the end of such quarter, and

                  (ii) consolidated statements of income, changes in
            shareholders' equity and cash flows of the Company and its
            Subsidiaries, for such quarter and (in the case of the second and
            third quarters) for the portion of the fiscal year ending with such
            quarter

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form l0-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a);

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<PAGE>

            (b) Annual Statement -- within 120 days after the end of each fiscal
      year of the Company, duplicate copies of,

                  (i) a consolidated balance sheet of the Company and its
            Subsidiaries, as at the end of such year, and

                  (ii) consolidated statements of income, changes in
            shareholders' equity and cash flows of the Company and its
            Subsidiaries, for such year,

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by a certification thereon of independent certified public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances,
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission, together with the
accountant's certificate described in above, shall be deemed to satisfy the
requirements of this Section 7.1 (b);

            (c) SEC and Other Reports -- promptly upon their becoming available,
      one copy of (i) each financial statement, report, notice or proxy
      statement sent by the Company or any Subsidiary to public securities
      holders generally, and (ii) each regular or periodic report, each
      registration statement (without exhibits except as expressly requested by
      such holder), and each prospectus and all amendments thereto filed by the
      Company or any Subsidiary with the Securities and Exchange Commission and
      of all press releases and other statements made available generally by the
      Company or any Subsidiary to the public concerning developments that are
      Material;

            (d) Notice of Default or Event of Default -- promptly, and in any
      event within five days after a Responsible Officer becoming aware of the
      existence of any Default or Event of Default or that any Person has given
      any notice or taken any action with respect to a claimed default hereunder
      or that any Person has given any notice or taken any action with respect
      to a claimed default of the type referred to in Section 13(h), a written
      notice specifying the nature and period of existence thereof and what
      action the Company is taking or proposes to take with respect thereto;

            (e) ERISA Matters -- promptly, and in any event within five days
      after a Responsible Officer becoming aware of any of the following, a
      written notice setting forth the nature thereof and the action, if any,
      that the Company or an ERISA Affiliate proposes to take with respect
      thereto:

                                       9

<PAGE>

                  (i) with respect to any Plan, any reportable event, as defined
            in section 4043(b) of ERISA and the regulations thereunder, for
            which notice thereof has not been waived pursuant to such
            regulations as in effect on the date hereof; or

                  (ii) the taking by the PBGC of steps to institute, or the
            threatening by the PBGC of the institution of, proceedings under
            section 4042 of ERISA for the termination of, or the appointment of
            a trustee to administer, any Plan, or the receipt by the Company or
            any ERISA Affiliate of a notice from a Multiemployer Plan that such
            action has been taken by the PBGC with respect to such Multiemployer
            Plan; or

                  (iii) any event, transaction or condition that could result in
            the incurrence of any liability by the Company or any ERISA
            Affiliate pursuant to Title I or IV of ERISA or the penalty or
            excise tax provisions of the Code relating to employee benefit
            plans, or in the imposition of any Lien on any of the rights,
            properties or assets of the Company or any ERISA Affiliate pursuant
            to Title I or N of ERISA or such penalty or excise tax provisions,
            if such liability or Lien, taken together with any other such
            liabilities or Liens then existing, could reasonably be expected to
            have a Material Adverse Effect;

            (f) Notices from Governmental Authority -- promptly, and in any
      event within 30 days of receipt thereof, copies of any notice to the
      Company or any Subsidiary from any Federal or state Governmental Authority
      relating to any order, ruling, statute or other law or regulation that
      could reasonably be expected to have a Material Adverse Effect; and

            (g) Requested Information -- with reasonable promptness, such other
      data and information relating to the business, operations, affairs,
      financial condition, assets or properties of the Company or any of its
      Subsidiaries or relating to the ability of the Company to perform its
      obligations hereunder and under the Notes as from time to time may be
      reasonably requested by the Collateral Agent.

      7.2. COMPLIANCE CERTIFICATE.

      Each set of financial statements delivered to a holder of a Note pursuant
to Section 7.1(a) or Section 7.1 (b) hereof shall be accompanied by an Officer's
Certificate stating that a review of the activities of the Company during the
preceding fiscal year or preceding fiscal quarter, as the case may be, has been
made under the supervision of the signing Officers with a view to determining
whether the Company and each of the Guarantors has kept, observed, performed and
fulfilled its respective obligations under the Note Documents, and further
stating that, to the best knowledge of each Officer signing such certificate,
the Company has kept, observed, performed and fulfilled each and every covenant
contained in the Note Documents and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred and be continuing, describing
all such Defaults or Events of Default of which such Officers may have
knowledge, their status and what action the Company is taking or propose to take
with respect thereto), and that to the best of his knowledge no event has
occurred and remains in existence by reason of which payments on

                                       10

<PAGE>
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred a description of the event and what action the
Company has taken or proposes to take with respect thereto.

      7.3. INSPECTION.

      The Company shall permit the representatives of the Collateral Agent and
such other Person as shall be designated by the holders of at least 25% in
aggregate principal amount of the outstanding Notes:

            (a) No Default -- if no Default or Event of Default then exists, at
      the expense of such holders and upon reasonable prior notice to the
      Company, to visit the principal executive office of the Company, to
      discuss the affairs, finances and accounts of the Company and its
      Subsidiaries with the Company's officers, and (with the consent of the
      Company, which consent will not be unreasonably withheld) its independent
      public accountants, and (with the consent of the Company, which consent
      will not be unreasonably withheld) to visit the other offices and
      properties of the Company and each Subsidiary, all at such reasonable
      times and as often as may be reasonably requested in writing; and

            (b) Default -- if a Default or Event of Default then exists, at the
      expense of the Company to visit and inspect any of the offices or
      properties of the Company or any Subsidiary, to examine all their
      respective books of account, records, reports and other papers, to make
      copies and extracts therefrom, and to discuss their respective affairs,
      finances and accounts with their respective officers and independent
      public accountants (and by this provision the Company authorizes said
      accountants to discuss the affairs, finances and accounts of the Company
      and its Subsidiaries), all at such times and as often as may reasonably be
      requested and subject to the provisions of Section 23 hereof.

8. PREPAYMENT OF THE NOTES.

      8.1. REQUIRED PREPAYMENTS.

            (a) Amortization -- On December 31, 2003 and on the last day of each
      calendar quarter thereafter to and including June 30, 2009, the Company
      will prepay 0.25% of the original principal amount (or such lesser
      principal amount as shall then be outstanding) of the Notes at par and
      without payment of any premium, provided that upon any partial prepayment
      of the Notes pursuant to Sections 8.2 or 9.9 or purchase of the Notes
      permitted by Section 8.5 the principal amount of each required prepayment
      of the Notes becoming due under this Section 8.1(a) on and after the date
      of such prepayment or purchase shall be reduced in the same proportion as
      the aggregate unpaid principal amount of the Notes is reduced as a result
      of such prepayment or purchase.

            (b) Application of Insurance Proceeds -- All amounts representing
      the Insurance Proceeds shall be subject to the security interest of the
      Collateral Agent for the benefit of the holders of the Notes and shall be
      applied immediately upon receipt by the Company to prepay the Notes, which
      prepayments shall also cover the Net Cash Proceeds of Asset Sales, to
      reduce in inverse order of maturity the scheduled amounts payable

                                       11

<PAGE>

      quarterly above in respect of the principal amount (or such lesser
      principal amount as shall then be outstanding) of the Notes.

      8.2. OPTIONAL PREPAYMENTS.

      The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes, in an amount not less
than 10% of the aggregate principal amount of the Notes then outstanding in the
case of a partial prepayment to be applied pro rata to the remaining scheduled
amounts payable quarterly pursuant to Section 8.1(a) and at maturity, at 100% of
the principal amount so prepaid plus accrued interest on the amount so prepaid.
The Company will give each holder of a Note written notice of each optional
prepayment under this Section 8.2 not less than 10 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date, the aggregate principal amount of the Notes to be prepaid on such
date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.3), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid.

      8.3. ALLOCATION OF PARTIAL PREPAYMENTS.

      In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.

      8.4. MATURITY; SURRENDER, ETC.

      In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.

      8.5. PURCHASE OF NOTES.

      The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the other Note Documents. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.

9. OTHER COVENANTS.

      9.1. CORPORATE EXISTENCE.

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<PAGE>

      Subject to Sections 9.9, 9.10 and 10, the Company shall do or cause to be
done, at its own cost and expense, all things necessary to and will cause each
of its Restricted Subsidiaries to, preserve and keep in full force and effect
the corporate, limited liability company or partnership existence and rights
(charter and statutory), licenses and/or franchises of the Company and each of
its Restricted Subsidiaries; provided, however, that subject to Section 12 and
the terms of any Security Document, neither the Company nor any of its
Restricted Subsidiaries shall be required to preserve any such rights, licenses
or franchises if the Board of Directors of the Company shall reasonably
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Restricted Subsidiaries, taken as a whole,
and the loss thereof is not adverse in any material respect to the holders of
the Notes; and provided, further, that this covenant shall not prohibit the
combination of any Restricted Subsidiary with the Company or with any other
Restricted Subsidiary.

      9.2. PAYMENT OF TAXES AND OTHER CLAIMS.

      The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon its or its Restricted Subsidiaries'
income, profits or property and (b) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien upon its property;
provided, however, that, subject to the terms of the applicable Security
Documents, the Company shall not be required to pay or discharge or cause to be
paid or discharged any such tax, assessment, charge or claim (i) whose amount,
applicability or validity is being contested in good faith by appropriate
negotiations or proceedings and for which adequate reserves (in the good faith
judgment of the Board of Directors of the Company) have been made or (ii) where
the failure to so pay would not have a Material Adverse Effect.

      9.3. MAINTENANCE OF PROPERTIES, INSURANCE, AND BOOKS AND RECORDS;
COMPLIANCE WITH LAW; INSPECTION RIGHTS.

            (a) Subject to, and in compliance with, Sections 9.9 and 10 and the
      provisions of each applicable Security Document, the Company shall, and
      shall cause each of its Restricted Subsidiaries to, at all times cause all
      properties used or useful in the conduct of its business to be maintained
      and kept in good condition, repair and working order (reasonable wear and
      tear and casualty excepted) and supplied with all necessary equipment, and
      shall cause to be made all necessary repairs, renewals, replacements,
      betterments and improvements thereto. The Company or any Restricted
      Subsidiary may close or shutdown any Specified Facility with the approval
      of the Board of Directors of the Company, provided that the Company shall
      notify the Collateral Agent in writing of such closure or shutdown at
      least 30 days in advance of the date on which such closure or shutdown is
      to be effected.

            (b) The Company and each of its Restricted Subsidiaries shall
      maintain insurance subject to the provisions of each applicable Security
      Document in such amounts and covering such risks as are usually and
      customarily carried with respect to similar facilities according to their
      respective locations.

                                       13

<PAGE>

            (c) The Company shall, and shall cause each of its Restricted
      Subsidiaries to, keep proper books of record and account, in which full
      and correct entries shall be made of all financial transactions and the
      assets and business of the Company and each Restricted Subsidiary of the
      Company, in accordance with GAAP.

            (d) The Company shall and shall cause each of its Restricted
      Subsidiaries to comply with all statutes, laws, ordinances, or government
      rules and regulations to which it is subject, noncompliance with which
      would materially adversely affect the business, earnings, properties,
      assets or condition (financial or otherwise) of the Company and its
      Restricted Subsidiaries, taken as a whole.

            (e) Upon the written request of the Collateral Agent delivered by
      the Collateral Agent to the Company a reasonable period of time in advance
      of any proposed inspection, the Company will, at reasonable times during
      ordinary business hours, permit the Collateral Agent by its
      representatives to inspect the books and records of the Company and of
      each of its Subsidiaries and the plants and properties of the Company and
      of each of its Subsidiaries constituting Collateral. As a condition to any
      such inspection, the Collateral Agent shall agree to comply, and cause its
      representatives to comply, with all occupational health and safety rules
      and regulations governing the operation of the facilities of the Company
      and its Subsidiaries.

      9.4. FURTHER ASSURANCE TO THE COLLATERAL AGENT.

      The Company shall, upon request of the Collateral Agent, execute and
deliver such further instruments and do such further acts as may reasonably be
necessary or proper to carry out more effectively the provisions of this
Agreement and any Security Document.

      9.5. LIMITATION ON ADDITIONAL INDEBTEDNESS AND CERTAIN PREFERRED STOCK.

            (a) The Company will not (A) incur any Indebtedness (including any
      Acquired Indebtedness) or (B) permit any of the Restricted Subsidiaries to
      incur any Indebtedness (including Acquired Indebtedness) or issue any
      Preferred Stock; provided that the Company and the Restricted Subsidiaries
      will be permitted to incur Indebtedness (including Acquired Indebtedness)
      if, immediately after giving pro forma effect to the incurrence thereof,
      the Consolidated Fixed Charge Coverage Ratio of the Company would be
      greater than or equal to 2.50 to 1.

            (b) The provisions of Section 9.5(a) shall not apply to the
      incurrence of any of the following items of Indebtedness.

                  (i) Indebtedness under the Notes, the Guaranty and this
            Agreement;

                  (ii) Indebtedness of the Company and the Restricted
            Subsidiaries outstanding on the Issue Date (including the New Senior
            Secured Notes);

                  (iii) Indebtedness of the Company and the Restricted
            Subsidiaries under the New Credit Facility; provided that the
            aggregate principal amount of (x) all Indebtedness of the Company
            and the Restricted Subsidiaries outstanding

                                       14

<PAGE>

            under the New Credit Facility and (y) all outstanding Indebtedness
            of the Company or the Restricted Subsidiaries (including but not
            limited to Sale-Leasebacks and securitizations) secured by working
            capital of the Company or the Restricted Subsidiaries, inventory of
            the Company or the Restricted Subsidiaries, accounts receivable of
            the Company or the Restricted Subsidiaries and a junior Lien on the
            Canton Cast Roll Facility, in the aggregate does not exceed
            $375,000,000, at any time;

                  (iv) Indebtedness of a Restricted Subsidiary owed to and held
            by the Company or another Restricted Subsidiary, in each case which
            is not subordinated in right of payment to any Indebtedness of such
            Restricted Subsidiary, except that (i) any transfer of such
            Indebtedness by the Company or a Restricted Subsidiary (other than
            to the Company or to a Restricted Subsidiary) and (ii) the sale,
            transfer or other disposition by the Company or any Restricted
            Subsidiary of Capital Stock of or the occurrence of any other event
            which results in any Restricted Subsidiary which is owed
            Indebtedness of another Restricted Subsidiary ceasing to be a
            Restricted Subsidiary shall, in each such event, be deemed an
            incurrence of Indebtedness subject to the other provisions of this
            Section 9.5;

                  (v) Indebtedness of the Company owed to and held by a
            Restricted Subsidiary; provided that if such Indebtedness is owed to
            and held by a Restricted Subsidiary that is not a Subsidiary
            Guarantor, it shall be unsecured and subordinated in right of
            payment to the payment and performance of the Company's obligations
            under this Agreement and the other Note Documents; provided,
            further, in any such case, that (x) any transfer of such
            Indebtedness by a Restricted Subsidiary (other than to another
            Restricted Subsidiary) and (y) the sale, transfer or other
            disposition by the Company or any Restricted Subsidiary of Capital
            Stock or the occurrence of any other event which results in any
            Restricted Subsidiary which holds Indebtedness of the Company
            ceasing to be a Restricted Subsidiary shall, in each such event, be
            deemed an incurrence of Indebtedness subject to the other provisions
            of this Section 9.5;

                  (vi) Interest Rate Protection Obligations of the Company or a
            Restricted Subsidiary relating to Indebtedness of the Company or a
            Restricted Subsidiary; provided that (x) any Indebtedness to which
            any such Interest Rate Protection Obligations relate is otherwise
            permitted to be incurred under this Section 9.5 and (y) the notional
            principal amount of any such Interest Rate Protection Obligations at
            the time of incurrence does not exceed the principal amount of the
            Indebtedness to which such Interest Rate Protection Obligations
            relate;

                  (vii) Indebtedness of the Company or any of the Restricted
            Subsidiaries under (x) Currency Agreements relating to Indebtedness
            or other obligations of the Company or any of the Restricted
            Subsidiaries entered into to hedge actual currency exposure or (y)
            commodities hedging agreements entered into to hedge actual
            commodity price exposure;

                                       15

<PAGE>

                  (viii) Indebtedness of the Company or any of the Restricted
            Subsidiaries (including Indebtedness represented by letters of
            credit for the account of the Company or a Restricted Subsidiary) in
            respect of financing workers' compensation, health, disability or
            other employee benefits, social security payments, property,
            casualty or liability insurance or other claims, payment obligations
            in connection with self-insurance or similar requirements in the
            ordinary course of business;

                  (ix) Indebtedness of the Company or any of the Restricted
            Subsidiaries representing obligations in respect of performance
            bonds, bid bonds, appeal bonds, surety bonds, completion guaranties
            and similar obligations and trade-related letters of credit, in each
            case provided in the ordinary course of business, including those
            incurred to secure health, safety and environmental obligations in
            the ordinary course of business, and any extension, renewal or
            refinancing thereof to the extent not provided to secure the
            repayment of other Indebtedness and to the extent that the amount of
            "Refinancing Indebtedness" is not greater than the amount of
            Indebtedness being refinanced;

                  (x) Indebtedness of the Company or any of the Restricted
            Subsidiaries arising from agreements of the Company or a Restricted
            Subsidiary providing for indemnification, adjustment of purchase
            price, earnouts or similar obligations, in each case, incurred or
            assumed in connection with the disposition of any business, assets
            or a Restricted Subsidiary, other than guaranties of Indebtedness
            incurred by any Person acquiring all or any portion of such
            business, assets or Restricted Subsidiary for the purpose of
            financing such acquisition;

                  (xi) Indebtedness of the Company or any of the Restricted
            Subsidiaries extinguished within five Business Days of incurrence
            arising from the honoring by a bank or other financial institution
            of a check, draft or similar instrument inadvertently (except in the
            case of daylight overdrafts) drawn against insufficient funds;

                  (xii) Government Assisted Indebtedness (Ohio), provided that
            the documentation for such Government Assisted Indebtedness (Ohio)
            incorporates the requirements for such Government Assisted
            Indebtedness (Ohio) set forth in this Agreement;

                  (xiii) in addition to the Indebtedness described in clauses
            (i) through (xii) above or clauses (xiv) below, Indebtedness of the
            Company or any of the Restricted Subsidiaries (including
            Indebtedness of the Company or any of the Restricted Subsidiaries
            which is secured by purchase money liens on personal property or
            fixtures or which constitutes Capitalized Lease Obligations in an
            aggregate principal amount not to exceed $25.0 million at any time
            outstanding), in an aggregate principal amount not to exceed $50.0
            million at any time outstanding;

                  (xiv) Intentionally omitted;

                                       16

<PAGE>

                  (xv) "Refinancing Indebtedness" of Indebtedness permitted
            under any of clauses (i) through (xii) above.

            (c) For purposes of determining compliance with this Section 9.5, in
      the event that an item of Indebtedness meets the criteria of more than one
      of the categories of permitted Indebtedness described in clauses (i)
      through (xv) of paragraph (b) above or is entitled to be incurred pursuant
      to paragraph (a) above, the Company shall, in its sole discretion,
      classify or reclassify such item of Indebtedness in any manner that
      complies with this Section 9.5 and such item of Indebtedness will be
      treated as having been incurred pursuant to only one of clauses (i)
      through (xv) of paragraph (b) or pursuant to paragraph (a) above. Accrual
      of interest, the accretion of accreted value and the payment of interest
      in the form of additional Indebtedness will not be deemed to be an
      incurrence of Indebtedness for purposes of this Section 9.5.

      9.6. LIMITATION ON SALE-LEASEBACK TRANSACTIONS.

      The Company will not, and will not permit any of the Restricted
Subsidiaries to, enter into any Sale-Leaseback Transaction or securitization
transaction with respect to any property or assets of the Company or any
Restricted Subsidiary constituting Collateral. Notwithstanding the foregoing,
the Company and the Restricted Subsidiaries may enter into Sale-Leaseback
Transactions with respect to property or assets not constituting Collateral;
provided that (a) the Attributable Value of such Sale-Leaseback Transaction
shall be deemed to be Indebtedness of the Company or such Restricted Subsidiary,
as the case may be, and (b) such Sale-Leaseback Transaction shall be in
compliance with Section 9.7.

      9.7. LIMITATION ON LIENS.

      The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, affirm or permit
or suffer to exist or remain in effect any Liens:

            (a) upon any item of Collateral other than Permitted Collateral
      Liens; and

            (b) upon any other properties or assets of the Company or of any of
      the Restricted Subsidiaries, whether owned on the Issue Date or acquired
      after the Issue Date, not constituting Collateral, except (i) Liens
      existing on the Issue Date to the extent and in the manner such Liens are
      in effect on the Issue Date (including Liens securing the New Senior
      Secured Notes) and (ii) Permitted Liens.

      Notwithstanding the foregoing sentence of this Section 9.7, the Company
will be permitted to incur and suffer to exist purchase money Liens to finance
the acquisition or construction of personal property or fixtures of the Company
or any Restricted Subsidiary free of the Liens securing the Notes under the
Security Documents for so long as the related Indebtedness (and refinancings
thereof) shall be outstanding, notwithstanding any contrary provision of the
Security Documents or this Agreement; provided that (i) the aggregate principal
amount of all related purchase money Indebtedness (and refinancings thereof)
contemplated by this sentence shall not exceed $25.0 million at any time
outstanding and shall be incurred in compliance with the requirements of Section
9.5(b)(xiii), (ii) the related Indebtedness shall not

                                       17

<PAGE>

be secured by any property or assets of the Company or any of its Subsidiaries
other than the property or assets so acquired or constructed and which do not
constitute Collateral, and (iii) each such purchase money Lien shall either (x)
exist at the time of acquisition or construction or (y) be created within 180
days of such acquisition or construction.

      9.8. LIMITATION ON RESTRICTED PAYMENTS.

            (a) The Company will not, and will not permit any of the Restricted
      Subsidiaries to, directly or indirectly do any of the following (such
      payments or Investments described in the following clauses (i), (ii),
      (iii) and (iv) are collectively referred to as "RESTRICTED PAYMENTS");

                  (i) declare or pay any dividend or make any other distribution
            or payment on or in respect of Capital Stock of the Company or any
            payment made to the direct or indirect holders (in their capacities
            as such) of Capital Stock of the Company (other than dividends or
            distributions payable solely in Capital Stock of the Company (other
            than Disqualified Capital Stock) or in options, warrants or other
            rights to purchase Capital Stock of the Company (other than
            Disqualified Capital Stock));

                  (ii) purchase, redeem, defease or otherwise acquire or retire
            for value any Capital Stock of the Company (other than any such
            Capital Stock owned by a Restricted Subsidiary);

                  (iii) make any principal payment on, or purchase, defease,
            repurchase, redeem or otherwise acquire or retire for value, in each
            case, prior to any scheduled maturity, scheduled repayment,
            scheduled sinking fund payment or other Stated Maturity, any
            Subordinated Indebtedness (other than (A) the payment, redemption,
            repurchase, defeasance, acquisition or retirement of Subordinated
            Indebtedness in anticipation of satisfying a sinking fund
            obligation, principal installment or final maturity, in any case due
            within one year of the date of such payment, redemption, repurchase,
            defeasance, acquisition or retirement and (B) any such Subordinated
            Indebtedness payable to the Company or a Restricted Subsidiary); or

                  (iv) make any Investment (other than any Permitted Investment)
            in any Person;

unless, at the time of and after giving effect to the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, shall be
the Fair Market Value on the date of such Restricted Payment of the asset(s)
proposed to be transferred by the Company or such Restricted Subsidiary, as the
case may be, pursuant to such Restricted Payment) each of the following
conditions is satisfied:

                        (A) no Default or Event of Default shall have occurred
                  and be continuing; and

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<PAGE>

                        (B) such Restricted Payment, together with the aggregate
                  amount of all Restricted Payments made by the Company and its
                  Restricted Subsidiaries from and after the Issue Date would
                  not exceed the sum of, without duplication, (1) 50% of the
                  Consolidated Net Income of the Company for the period (taken
                  as one accounting period) from the beginning of the first
                  fiscal quarter commencing after the Issue Date and ending on
                  the last day of the fiscal quarter of the Company immediately
                  preceding the date of such proposed Restricted Payment (or, if
                  such aggregate cumulative Consolidated Net Income of the
                  Company for such period shall be a deficit, minus 100% of such
                  deficit) plus (2) 100% of the aggregate Net Cash Proceeds and
                  the Fair Market Value of property other than cash received by
                  the Company (x) from the issuance or sale of Capital Stock
                  (excluding Disqualified Capital Stock, but including Capital
                  Stock issued upon the conversion of convertible Indebtedness
                  or from the exercise of options, warrants or rights to
                  purchase Capital Stock (other than Disqualified Capital Stock
                  of the Company after the Issue Date, (y) as a capital
                  contribution in respect of Capital Stock (other than
                  Disqualified Capital Stock) of the Company after the Issue
                  Date, in each case to or from any Person (other than to or
                  from a Restricted Subsidiary), or (z) from Asset Sales of
                  Collateral plus (3) 100% of the aggregate Net Cash Proceeds
                  and the Fair Market Value of property (other than property
                  constituting Investments that would be Restricted Payments or
                  property which constitutes Collateral) that are received upon
                  the sale, liquidation or other disposition or other return of
                  capital for cash in respect of any Investment constituting a
                  Restricted Payment made after the Issue Date to the extent
                  included in the calculation of this clause (B), less the cost
                  of the disposition of such Investment.

      For purposes of the preceding clause (B)(2), upon the issuance of Capital
Stock either from the conversion of convertible Indebtedness or in exchange for
outstanding Indebtedness or upon the exercise of options, warrants or rights,
the amount counted as Net Cash Proceeds received will be the cash amount
received by the Company at the original issuance of the Indebtedness that is so
converted or exchanged or from the issuance of options, warrants or rights, as
the case may be, plus the incremental amount of cash received by the Company, if
any, upon the conversion, exchange or exercise thereof, in each case when so
received.

            (b) None of the provisions of paragraph (a) above will prohibit:

                  (i) the payment of any dividend within 60 days after the date
            of its declaration, if at the date of declaration such payment would
            have complied with the provisions of this Agreement;

                  (ii) the redemption, repurchase or other acquisition or
            retirement of any shares of any class of Capital Stock of the
            Company or any Restricted Subsidiary in exchange for, or out of the
            Net Cash Proceeds of, (x) a substantially concurrent issue and sale
            of other shares of Capital Stock (other than Disqualified Capital
            Stock) of the Company to any Person (other than to a Subsidiary of
            the

                                       19

<PAGE>

            Company) or (y) a capital contribution in respect of Capital Stock
            (other than Disqualified Capital Stock) of the Company; provided
            that the amount of any such Net Cash Proceeds that are utilized for
            any such redemption, repurchase or other acquisition or retirement
            shall be excluded from clause (B) of paragraph (a) above;

                  (iii) any redemption, repurchase or other acquisition or
            retirement of (1) Subordinated Indebtedness in exchange for, or out
            of the Net Cash Proceeds of (x) a substantially concurrent issue and
            sale of Capital Stock (other than Disqualified Capital Stock) of the
            Company to any Person (other than to a Subsidiary of the Company) or
            (y) a capital contribution to the Company; provided that the amount
            of any such Net Cash Proceeds that are utilized for any such
            redemption, repurchase or other acquisition or retirement shall be
            excluded from clause (B) of paragraph (a) above; or (2) Indebtedness
            of the Company issued to any Person (other than a Subsidiary of the
            Company), so long as such Indebtedness is Subordinated Indebtedness
            which (x) has no scheduled principal payments earlier than the 91st
            day after the final maturity date of the Notes and (y) is
            subordinated to the Notes in the same manner and at least to the
            same extent as the Subordinated Indebtedness so purchased,
            exchanged, redeemed, acquired or retired;

                  (iv) Investments made out of the Net Cash Proceeds of a
            substantially concurrent issue and sale of shares of Capital Stock
            (other than Disqualified Capital Stock) of the Company to any Person
            (other than to a Subsidiary of the Company); provided that the
            amount of any such Net Cash Proceeds shall be excluded from clause
            (B) of paragraph (a) above;

                  (v) payments to allow Parent Guarantor to pay its operating
            and administrative expenses, including, without limitation,
            directors fees, legal and audit expenses, SEC compliance expenses
            and its corporate franchise and its consolidated combined or unitary
            federal, state, local and other taxes relating to the business of
            the Company and the Restricted Subsidiaries;

                  (vi) payments made by the Company to permit the purchase or
            redemption of its Capital Stock (including related stock
            appreciation rights or similar securities) held by present or former
            officers, employees or consultants of the Company or any of its
            Subsidiaries or by any employee pension benefit plan or management
            equity or stock option plan or agreement upon such Person's death,
            disability, retirement or termination of employment or under the
            terms of any such employee pension benefit plan or any other
            agreement under which such Capital Stock or related rights were
            issued; provided that the aggregate amount of such purchases or
            redemptions that may be made under this clause (vi) shall not exceed
            $3.0 million per year (the "BASE AMOUNT"); provided that, to the
            extent that not all of the Base Amount is utilized in any year, the
            unused portion of such Base Amount may be carried forward to and be
            deemed part of the Base Amount only for the immediately subsequent
            year and not any succeeding year;

                                       20

<PAGE>

                  (vii) Intentionally Omitted;

                  (viii) the declaration and payment of dividends or
            distributions to holders of any class or series of Disqualified
            Capital Stock issued or incurred in compliance with Section 9.5;

                  (ix) repurchases of Capital Stock deemed to occur upon
            exercise of stock options if such Capital Stock represents a portion
            of the exercise price of such options; and

                  (x) the exchange of an Investment constituting a Restricted
            Payment which was included in clause (B) of paragraph (a) above for
            another Investment which would constitute a Restricted Payment of
            approximately equal or greater Fair Market Value.

      In computing the amount of Restricted Payments previously made for
purposes of clause (B) of paragraph (a) above, Restricted Payments made under
clauses (i), (iv), (v), (vi), (viii), and, without duplication to the extent
deducted in arriving at Consolidated Net Income, clauses (ii), (iii), (vii),
(ix) and (x) of this paragraph (b) shall not be so included.

      9.9. DISPOSITION OF PROCEEDS OF ASSET SALES.

            (a) The Company will not, and will not permit any of the Restricted
      Subsidiaries to, consummate an Asset Sale of Collateral unless (i) such
      Asset Sale of Collateral is for Fair Market Value, (ii) in the case of an
      Asset Sale involving Collateral valued at $2.0 million or more such Fair
      Market Value is evidenced by a certificate of an Independent Appraiser or
      an Independent Financial Advisor (as applicable), (iii) 100% of the
      proceeds of such Asset Sale of Collateral consist of cash and/or Cash
      Equivalents, (iv) such Asset Sale of Collateral shall be in compliance
      with the applicable provisions of Sections 12, and (v) the Company shall
      pay all of the Net Cash Proceeds of such Asset Sale of Collateral
      immediately after receipt thereof as to the Collateral Agent and applied
      in accordance with subsection (c) below.

            (b) The Company will not, and will not permit any of the Restricted
      Subsidiaries to consummate an Asset Sale of property or assets not
      constituting Collateral unless such Asset Sale is for Fair Market Value
      and the Net Cash Proceeds of such Asset Sale ("NON-COLLATERAL PROCEEDS")
      shall be applied to satisfy all mandatory repayment obligations arising by
      reason of such Asset Sale under the terms of any instrument (or related
      security agreement) governing any Indebtedness which is secured by the
      assets which are subject to such Asset Sale and, subject to the next
      sentence, the balance of such Non-Collateral Proceeds shall be immediately
      paid to the Collateral Agent and applied in accordance with subsection (c)
      below. Non-Collateral Proceeds received by the Company or a Restricted
      Subsidiary in connection with any Asset Sale shall be required to be paid
      to the Collateral Agent to the extent that such Non-Collateral Proceeds
      are not applied, within 365 days of receipt thereof, to repay Indebtedness
      under the New Credit Facility, to make Capital Expenditures, or to acquire
      tangible assets.

                                       21

<PAGE>

            (c) Whenever Net Cash Proceeds from an Asset Sale of Collateral are
      received by the Company or any Restricted Subsidiary, the Company shall
      deposit, or cause to be deposited, an amount equal to such Net Cash
      Proceeds with the Collateral Agent and such Net Cash Proceeds shall be set
      aside by the Collateral Agent pending application to the prepayment of the
      Notes in accordance with Section 8.1. At the direction of the Company, the
      Collateral Agent shall invest such Net Cash Proceeds in Cash Equivalents.
      The interest and dividends accrued and earned or paid on such investment
      of Net Cash Proceeds from an Asset Sale of Collateral and such Net Cash
      Proceeds shall be proceeds subject to the lien of the Collateral Agent and
      the Security Documents and used to prepay the Notes in accordance with
      Section 8.1.

      9.10. LIMITATION ON TRANSACTIONS WITH AFFILIATES.

      The Company shall not, and shall not permit, cause or suffer any of the
Restricted Subsidiaries to, conduct any business or enter into any transaction
or series of transactions with or for the benefit of any of their respective
Affiliates (each an "AFFILIATE TRANSACTION"), unless (a) such transaction or
series of related transactions is on terms reasonably believed to be no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
those which could have been obtained in a comparable transaction at such time
with an unrelated Person, and (b) with respect to a transaction or series of
related transactions involving aggregate payments or Fair Market Value equal to
or greater than $10.0 million, the Company shall have delivered (i) an Officers'
Certificate to each holder of any Note certifying that such transaction or
series of related transactions complies with the preceding clause (a) and (ii) a
written opinion from an Independent Financial Advisor qualified to pass upon the
required matters stating that the terms of such transaction or series of
transactions are fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.

      Notwithstanding the foregoing, this Section 9.10 will not restrict the
Company or the Restricted Subsidiaries from: (a) making Restricted Payments
permitted under Section 9.8; (b) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Board of Directors of the Company; (c) transactions among the Company and
Restricted Subsidiaries and transactions among Restricted Subsidiaries of the
Company otherwise permitted by this Agreement; (d) the making of loans and
advances and the payment of fees and indemnities to directors, officers and
employees of the Company and the Restricted Subsidiaries in the ordinary course
of business; (e) transactions pursuant to agreements in existence on the Issue
Date or any amendment thereto (so long as any such amendment is not
disadvantageous to the holders of the Notes in any material respect); (f) any
employment agreements entered into by the Company or any of the Restricted
Subsidiaries in the ordinary course of business; (g) any sale of Capital Stock
(other than Disqualified Capital Stock) of the Company; (h) so long as no
Default has occurred and is continuing, the payment of management fees to the
Permitted Holders or their Affiliates not to exceed $2.0 million in the
aggregate in any calendar year; (i) transactions pursuant to the New Credit
Facility; (j) transactions with customers, clients, suppliers, or purchasers or
sellers of goods or services, in each case in the ordinary course of business
and otherwise in compliance with the terms of this Agreement; and (k) fees and
expenses incurred in connection with the consummation of the Transactions.

                                       22

<PAGE>

      9.11. CHANGE OF CONTROL.

      Upon the occurrence of a Change of Control (the date of such occurrence
being the "CHANGE OF CONTROL DATE"), the Company shall notify the holders of the
Notes, in the manner prescribed below, of such occurrence and shall make an
offer to purchase (the "CHANGE OF CONTROL OFFER") on a Business Day (the "CHANGE
OF CONTROL PAYMENT DATE") that is not later than 60 days following the Change of
Control Date, all Notes then outstanding at a purchase price equal to 100% of
the aggregate principal amount thereof plus accrued and unpaid interest thereon
to the Change of Control Payment Date.

      Notice of a Change of Control Offer shall be mailed by the Company to the
holders of the Notes not less than 30 days nor more than 60 days before the
Change of Control Payment Date. The Change of Control Offer shall remain open
from the time of mailing for at least 20 Business Days and until 5:00 p.m., New
York City time, on the Business Day preceding the Change of Control Payment
Date. The notice, which shall govern the terms of the Change of Control Offer,
shall include such disclosures as are required by law and shall state:

            (a) that a Change of Control Offer is being made pursuant to this
      Section 9.11 and that all Notes validly tendered and not properly
      withdrawn will be accepted for payment;

            (b) the purchase price (including the amount of accrued interest, if
      any) for each Note and the Change of Control Payment Date;

            (c) that any Note not tendered for payment will continue to accrue
      interest in accordance with the terms thereof;

            (d) that, unless the Company defaults on making the payment, any
      Note accepted for payment pursuant to the Change of Control Offer shall
      cease to accrue interest after the Change of Control Payment Date;

            (e) that holders of Notes electing to have Notes purchased pursuant
      to a Change of Control Offer (the "ELECTING HOLDERS") will be required to
      surrender their Notes to the Company at the address specified in the
      notice prior to 5:00 p.m., New York City time, on the Business Day
      preceding the Change of Control Payment Date and must complete any form
      letter of transmittal proposed by the Company;

            (f) that Electing Holders will be entitled to withdraw their
      election if the Company receives, not later than 5:00 p.m., New York City
      time, on the Business Day preceding the Change of Control Payment Date, a
      tested telex, facsimile transmission or letter setting forth the name of
      such holder of a Note, the principal amount of Notes delivered for
      purchase, the Notes certificate number (if any) and a statement that such
      holder is withdrawing his election to have such Notes purchased;

            (g) that holders whose Notes are purchased only in part will be
      issued Notes equal in principal amount to the unpurchased portion of the
      Notes surrendered;

                                       23

<PAGE>

            (h) the instructions that Electing Holders must follow in order to
      tender their Notes; and

            (i) the summary of the circumstances and relevant facts regarding
      such Change of Control.

      On the Change of Control Payment Date, the Company shall (i) accept for
payment Notes or portions thereof validly tendered and not properly withdrawn
pursuant to the Change of Control Offer, (ii) deposit with each Electing Holder
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered and accepted and (iii) deliver to each of the Electing Holders so
accepted together with an Officers' Certificate setting forth such Electing
Holder's Notes or portions thereof tendered to and accepted for payment by the
Company. Any Notes not so accepted shall be promptly mailed or delivered by the
Company to the holder thereof.

      Notwithstanding the foregoing, the Company shall not be required to make a
Change of Control Offer following a Change of Control if; with the prior consent
of the Company, a third party makes the Change of Control Offer in the manner,
at the times and otherwise in compliance with the requirements applicable to a
Change of Control Offer made by the Company and purchases all Notes validly
tendered and not properly withdrawn under such Change of Control Offer.
Alternatively, the Company may assign to any Person (the "ASSIGNEE") their
rights pursuant to the foregoing paragraph as they may relate to all or any
portion of the Notes tendered in a Change of Control Offer. To the extent of any
such assignment, the Company's obligations under this Section 9.11 to purchase
Notes shall be discharged if the Assignee shall (i) purchase such Notes or
portions thereof validly tendered and not properly withdrawn pursuant to the
Change of Control Offer as to which the assignment is made and (ii) deposit with
each Electing Holder money sufficient to pay the purchase price of all Notes or
portions thereof so tendered in connection with the assignment, whereupon the
Assignee shall be entitled to have delivered to it or to its nominee the Notes
so purchased. Upon completion of any Change of Control Offer in connection with
which an assignment is made, the Company shall deliver to each Electing Holder
an Officers' Certificate setting forth such Electing Holder's Notes or portions
thereof tendered and accepted for payment pursuant to the Change of Control
Offer. No assignment made pursuant to this paragraph shall relieve the Company
of their obligations under the foregoing paragraph in the event that the
Assignee shall fail to deposit with each Electing Holder money sufficient to pay
the purchase price in respect of Notes or portions thereof as to which an
assignment has been made pursuant to this paragraph. Nothing herein shall imply
or create any liability by the Assignee to any Holder should the Assignee fail
to make such deposit and purchase the assigned Notes nor shall any Assignee have
any liability in respect of the Change of Control Offer.

      A Change of Control Offer may be made in advance of a Change of Control,
and conditioned upon such Change of Control to the extent a definitive agreement
is in place for the Change of Control at the time of making of the Change of
Control Offer. Notes repurchased by the Company pursuant to a Change of Control
Offer will have the status of Notes issued but not outstanding or will be
retired and cancelled, at the option of the Company. Notes purchased by a third
party upon assignment or otherwise will have the status of Notes issued and
outstanding and shall continue to accrue interest.

                                       24

<PAGE>

      If the Company is required to make a Change of Control Offer, the Company
will comply with all applicable tender offer laws and regulations, including, to
the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and
any other applicable securities laws and regulations and any applicable
requirements of any securities exchange on which the Notes are listed and shall
not be deemed to have breached their obligations under this Section 9.11 or any
other provision of this Agreement by virtue thereof.

      9.12. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.

      The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any
other distributions on or in respect of its Capital Stock or any other interest
or participation in, or measured by, its profits, (b) pay any Indebtedness owed
to the Company or any other Restricted Subsidiary, (C) make loans or advances
to, or any investment in, the Company or any other Restricted Subsidiary, or (d)
sell, lease or transfer any of its properties or assets to the Company or any
other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) this Agreement, the New Credit Facility and
the Security Documents, (ii) any restrictions existing under or contemplated by
agreements in effect on the Issue Date (including the New Senior Secured Notes),
(iii) with respect to a Restricted Subsidiary of the Company that is not a
Restricted Subsidiary of the Company on the Issue Date, in existence at the time
such Person becomes a Restricted Subsidiary of such Company (but not created in
contemplation of such Person becoming a Restricted Subsidiary), (iv) applicable
law or any applicable rule, regulation or order, (v) customary restrictions
arising from Liens permitted under Section 9.7 to the extent related to the
assets subject to such Liens, (vi) restrictions on cash or other deposits
imposed by customers under contracts entered into in the ordinary course of
business, (vii) customary provisions contained in leases and other agreements
entered into in the ordinary course of business, (viii) any restrictions
existing under any agreement that refinances or replaces an agreement containing
a restriction permitted by clauses (i), (ii) and (iii) above; provided that the
terms and conditions of any such restrictions under this clause (viii) are not
materially less favorable to the holders of Notes than those under or pursuant
to the agreement being replaced or the agreement evidencing the Indebtedness
refinanced, (ix) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of the Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred 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, so acquired: provided, that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of this
Agreement to be incurred, (x) purchase money obligations for property acquired
in the ordinary course of business that impose restrictions of the nature
described in clause (ix) above on the property so acquired, (xi) any agreement
for the sale of a Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale, (xii) Refinancing Indebtedness; provided
that the restrictions contained in the agreements governing such Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (xiii) secured
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
Section 9.5 that limits the right of the debtor to dispose of the assets
securing such Indebtedness, (xiv)

                                       25

<PAGE>

provisions with respect to the disposition or distribution of assets or property
in joint venture agreements and other similar agreements entered into in the
ordinary course of business and (xv) Indebtedness incurred pursuant to clauses
(xii) and (xiii) of Section 9.5 (b).

      9.13. IMPAIRMENT OF SECURITY INTEREST.

      The Company shall not, and shall not permit any of its Subsidiaries to,
take or knowingly or negligently omit to take any action which action or
omission might or would have the result of impairing the security interest in
favor of the Collateral Agent with respect to any Property then constituting
Collateral, and the Company shall not grant to any Person any interest
whatsoever in such Collateral other than Liens permitted by this Agreement and
the Security Documents.

      9.14. WAIVER OF STAY, EXTENSION OR USURY LAWS.

      The Company covenants (to the extent permitted by law) that neither it nor
its Subsidiaries will at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
that may affect the covenants or the performance of this Agreement; and (to the
extent permitted by law) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Collateral Agent, but
will suffer and permit the execution of every such power as though no such law
had been enacted.

      9.15. ADDITIONAL SUBSIDIARY GUARANTORS.

            (a) If the Company or any of its Restricted Subsidiaries shall
      acquire or create another domestic Subsidiary after the date of this
      Agreement, then such newly acquired or created Subsidiary shall become a
      Subsidiary Guarantor hereunder by executing a joinder agreement
      substantially in the form of Exhibit 9.15(a) hereto (each a "JOINDER
      AGREEMENT") and delivering an Opinion of Counsel, in form and substance
      satisfactory to the Collateral Agent and the Required Holders.

            (b) If a Restricted Subsidiary that is not then a Subsidiary
      Guarantor guarantees any Indebtedness incurred under the New Credit
      Facility then that Restricted Subsidiary must become a Subsidiary
      Guarantor and execute a joinder agreement and an Opinion of Counsel to the
      Collateral Agent and the Required Holders, each in form and substance
      satisfactory to the Collateral Agent and the Required Holders.
      Notwithstanding the foregoing, any Guaranty of a Restricted Subsidiary
      that was incurred pursuant to this Section 9.15(b) shall provide by its
      terms that it shall be automatically and unconditionally released upon the
      release or discharge of the guaranty which resulted in the creation of
      such Restricted Subsidiary's Guaranty, except a discharge or release by,
      or as a result of payment under, such guaranty.

                                       26

<PAGE>

10. SUCCESSORS.

      10.1. WHEN COMPANY MAY MERGE, ETC.

      The Company will not, in any transaction or series of transactions, merge
or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety to, any Person or Persons, and the Company will not permit any of the
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company and the Restricted Subsidiaries, taken as a whole, to any other Person
or Persons, unless at the time of and after giving effect thereto:

            (a) either (i) if the transaction or series of transactions is a
      merger or consolidation, the Company shall be the surviving Person of such
      merger or consolidation, or (ii) the Person formed by any such
      consolidation or into which the Company or such Restricted Subsidiary is
      merged or to which the properties and assets of the Company and/or any
      Restricted Subsidiary, as the case may be, are transferred (any such
      surviving Person or transferee Person being a "SURVIVING ENTITY") shall be
      a corporation or limited liability company organized and existing under
      the laws of the United States of America, any state thereof or the
      District of Columbia and shall expressly assume by a joinder agreement
      executed and delivered to the Collateral Agent in form reasonably
      satisfactory to the Collateral Agent, all the obligations of the Company
      under the Note Documents, and in each case, each of the Note Documents
      shall remain in full force and effect;

            (b) immediately before and immediately after giving effect to such
      transaction or series of transactions on a pro forma basis (including,
      without limitation, any Indebtedness incurred or anticipated to be
      incurred in connection with or in respect of such transaction or series of
      transactions), no Default shall have occurred and be continuing;

            (c) each Subsidiary Guarantor (other than a Guarantor whose Guaranty
      is to be released in accordance with the terms of this Agreement), unless
      it is the other party to the transaction, shall, to the extent permitted
      by applicable law, have by joinder agreement confirmed that after
      consummation of such transaction its Guaranty shall apply, as such
      Guaranty applied on the date it was granted, to the obligations of the
      Company under the Notes, to the obligations of the Company or such Person,
      as the case may be, under this Agreement and the other Note Documents; and

            (d) the Company or the Surviving Entity shall have delivered to the
      Collateral Agent an Officers' Certificate and an Opinion of Counsel
      stating that such consolidation, merger, conveyance, transfer or lease
      and, if a joinder agreement is required in connection with such
      transaction or series of transactions, such joinder agreement comply with
      this Section 10.1, and that all conditions precedent in this Agreement
      relating to the transaction or series of transactions have been satisfied.

                                       27

<PAGE>

      10.2. SUCCESSOR ENTITY SUBSTITUTED.

      Upon any consolidation, or merger or any transfer of all or substantially
all of the assets of the Company in accordance with Section 10.1 in which the
Company is not the continuing Person, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement and the
other Note Documents with the same effect as if such surviving entity had been
named as such, provided, however, that in the case of any transfer of all or
substantially all of the assets of the Company, the predecessor Company shall
not be relieved from the obligation to pay principal of and interest on the
Notes except where all of the Company's assets are sold in a transaction that
meets the requirements of Section 10.1 hereof.

11. GUARANTY.

      11.1. UNCONDITIONAL GUARANTY.

      Each Guarantor hereby unconditionally, jointly and severally, guarantees,
to each holder of a Note authenticated and delivered by the Company and to such
holder and its successors and assigns, (i) the prompt payment and performance of
the Obligations when due, subject to any applicable grace period, whether at
maturity, by acceleration or otherwise, and (ii) in case of any extension of
time of payment or renewal of any Notes or of any other Obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration or otherwise, subject, however, in the case of
clauses (i) and (ii) above, to the limitations set forth in Section 11.4. Each
Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Agreement, the absence of any action to enforce the same, any waiver or consent
by any holder of the Notes 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. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that this Guaranty will not be discharged except by complete performance of the
Obligations contained in the Notes, this Agreement and in this Guaranty. If any
holder of a Note or the Collateral Agent is required by any court or otherwise
to return to the Company, any Guarantor, or any custodian, trustee, liquidator
or other similar official acting in relation to the Company or any Guarantor,
any amount paid by the Company or any Guarantor to the Collateral Agent or such
holder of a Note, this Guaranty, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor further agrees that, as
between each Guarantor, on the one hand, and the holders of the Notes and the
Collateral Agent, on the other hand, to the extent permitted by applicable law,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Section 14 for the purposes of this Guaranty, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration of
such Obligations as provided in Section 14, such Obligations

                                       28

<PAGE>

(whether or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of this Guaranty.

      11.2. SEVERABILITY.

      In case any provision of this Guaranty 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.

      11.3. RELEASE OF A GUARANTOR.

      If no Default or Event of Default exists or would exist under this
Agreement, concurrently with any sale or disposition of any Subsidiary Guarantor
by merger, sale of all or substantially all of its assets, liquidation or
otherwise which is in compliance with the terms of this Agreement (other than a
transaction subject to the provisions described under Section 10.2), such
Subsidiary Guarantor and each Subsidiary of such Guarantor that is also a
Subsidiary Guarantor will automatically and unconditionally be released from all
obligations under its Guaranty and any Collateral relating thereto, and Liens of
this Agreement and the Security Documents thereon, shall concurrently be
automatically and unconditionally released. A sale of assets or Capital Stock of
a Subsidiary Guarantor may constitute an Asset Sale subject to Section 9.9.

      The Collateral Agent shall execute and deliver an appropriate instrument
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 11.3. Any Guarantor not so released remains liable for the
full amount of principal of and interest on the Notes as provided in this
Section 11.

      11.4. LIMITATION OF GUARANTOR'S LIABILITY.

      Each Guarantor and by its acceptance hereof each Holder hereby confirms
that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guaranty not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal, state or
foreign law. To effectuate the foregoing intention, the Holders and such
Guarantor hereby irrevocably agree that the obligations of such Guarantor under
the Guaranty shall be limited to the maximum amount as will, after giving effect
to all other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guaranty or pursuant to Section 11.6, result in the obligations of such
Guarantor under the Guaranty not constituting such fraudulent transfer or
conveyance.

      11.5. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.

            (a) Nothing contained in the Agreement or in any of the Notes shall
      prevent any consolidation or merger of a Guarantor with or into the
      Company or another Guarantor or shall prevent any sale of assets or
      conveyance of the property of a Guarantor as an entirety or substantially
      as an entirety, to the Company or another

                                       29

<PAGE>

      Guarantor. Upon any such consolidation, merger, sale or conveyance, the
      Guaranty given by such Guarantor shall no longer have any force or effect.

            (b) Except in the case in which a Subsidiary Guarantor's Guaranty is
      subject to release as provided under Section 11.3, each Guarantor will
      not, and the Company will not cause or permit any Subsidiary Guarantor to,
      consolidate with or merge with or into any Person other than the Company
      or any other Guarantor unless: (i) the entity formed by or surviving any
      such consolidation or merger (if other than the Guarantor) or to which
      such sale, lease, conveyance or other disposition shall have been made is
      an entity organized and existing under the laws of the United States or
      any State thereof or the District of Columbia or, in the case of any
      Subsidiary Guarantor organized under the laws of Canada or a political
      subdivision thereof, the laws of Canada or a political subdivision
      thereof; (ii) such entity assumes by joinder agreement all of the
      obligations of the Guarantor on the Guaranty; and (iii) immediately after
      giving effect to such transaction, no Default or Event of Default shall
      have occurred and be continuing. Any merger or consolidation of a
      Guarantor with and into the Company (with the Company being the surviving
      entity) or another Guarantor need only comply with clauses (b) and (d) of
      Section 10.1.

      11.6. CONTRIBUTION.

            (a) In order to provide for just and equitable contribution among
      the Guarantors, the Guarantors agree, inter se, that in the event any
      payment or distribution is made by any Guarantor (a "FUNDING GUARANTOR")
      under the Guaranty, such Funding Guarantor shall be entitled to a
      contribution from all other Guarantors in a pro rata amount based on the
      Adjusted Net Assets of each Guarantor (including the Funding Guarantor)
      for all payments, damages and expenses incurred by that Funding Guarantor
      in discharging the Company's obligations with respect to the Notes or any
      other Guarantor's obligations with respect to the Guaranty.

      11.7. WAIVER OF SUBROGATION.

      Until all Obligations are paid in full, each Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
the Company that arise from the existence, payment, performance or enforcement
of such Guarantor's obligations under the Guaranty and this Agreement,
including, without limitation, any right of subrogation, reimbursement,
exoneration, indemnification, and any right to participate in any claim or
remedy of any holder of a Note against the Company, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from the Company,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to any Guarantor in violation of the preceding sentence and
the Notes shall not have been paid in full, such amount shall have been deemed
to have been paid to such Guarantor for the benefit of, and held in trust for
the benefit of, the holders of the Notes, and shall forthwith be paid to the
Collateral Agent for the benefit of such holders to be credited and applied upon
the Notes, whether matured or unmatured, in accordance with the terms of this
Agreement. Each Guarantor acknowledges that it will receive direct and indirect
benefits from

                                       30

<PAGE>

the financing arrangements contemplated by this Agreement and that the waiver
set forth in this Section 11.7 is knowingly made in contemplation of such
benefits.

      11.8. EXECUTION OF GUARANTY.

      Each Guarantor hereby agrees that its Guaranty set forth in this Section
11 shall remain in full force and effect notwithstanding the fact that no
Guaranty is endorsed on the Notes.

      11.9. WAIVER OF STAY, EXTENSION OR USURY LAWS.

      Each Guarantor covenants (to the extent permitted by law) that it will not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive such Guarantor from performing its Guaranty as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of the Agreement; and (to the
extent permitted by law) each such Guarantor hereby expressly waives all benefit
or advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Collateral Agent, but
will suffer and permit the execution of every such power as though no such law
had been enacted.

      11.10. PARENT GUARANTOR.

      Notwithstanding anything in this Section 11 or elsewhere in this Agreement
or in the Notes to the contrary, the liability of the Parent Guarantor under the
Guaranty hereunder and the obligations with respect thereto is limited to the
Capital Stock of the Company owned by the Parent Guarantor and no recourse shall
be had to any other assets or property of the Parent Guarantor.

12. COLLATERAL SECURITY.

      The Company covenants that so long as any of the Notes are outstanding the
Notes shall be secured by a perfected first priority security interest (subject
only to Permitted Collateral Liens entitled to priority under applicable law) in
certain assets, whether now owned or hereafter acquired, of the Company and its
Subsidiaries pursuant to the terms of the Security Documents including (a) the
real estate and fixtures related to the Canton Cast Roll Facility and any
related properties, rights and assets the subject of the Mortgage and the
Security Agreement (the "MORTGAGED PROPERTY"), and (b) fifty percent (50%) of
any proceeds greater than Five Million U.S. Dollars ($5,000,000) but less than
Twenty-Five Million Dollars ($25,000,000) received by the Sellers or the Company
after December 5, 2003 for business interruption insurance coverage relating to
the loss events experienced by the Sellers at the Company's Lorain plant in
January, June and August of 2003; provided that such security interests in
business interruption insurance proceeds shall in no event exceed Ten Million
U.S. Dollars ($10,000,000) in the aggregate (the "INSURANCE PROCEEDS").

13. EVENTS OF DEFAULT.

      An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:

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<PAGE>

            (a) the Company defaults in the payment of any principal on any Note
      when the same becomes due and payable, whether at maturity or at a date
      fixed for prepayment or by declaration or otherwise; or

            (b) the Company defaults in the payment of any interest on any Note
      when it becomes due and payable and continuance of such default for a
      period of thirty (30) days after the same becomes due and payable; or

            (c) the Company defaults in performance of or compliance with its
      obligations under Section 10 continued for 30 days after notice, or the
      failure by the Company to comply for 30 days after notice with any of its
      obligations under Section 9.11; or

            (d) the Company defaults in the performance of or compliance with
      any term contained herein (other than those referred to in paragraphs (a),
      (b) and (c) of this Section 13) and such default is not remedied within 60
      days after the earlier of (i) a Responsible Officer obtaining actual
      knowledge of such default and (ii) the Company receiving written notice of
      such default from the Collateral Agent or the Company and the Collateral
      Agent receiving notice of such default from the holders of at least 25% in
      aggregate principal amount of the outstanding Notes (any such written
      notice to be identified as a "notice of default" and to refer specifically
      to this paragraph (e) of Section 13); or

            (e) the Company defaults in the performance of or compliance with
      any term contained in any Security Document, which default or
      non-compliance shall continue unremedied for 45 days after written notice
      to the Company by the Collateral Agent or to the Company and the
      Collateral Agent by the holders of at least 25% in aggregate principal
      amount of the outstanding Notes unless the remedy or cure of such default
      requires work to be performed, acts to be done or conditions to be removed
      within such 45 day period, or if such remedy or cure is prevented by
      causes outside of the control or responsibility of the Company, in which
      case no "Event of Default" shall be deemed to exist as long as the Company
      shall have commenced cure within such 45-day period and shall diligently
      prosecute the same to completion, but in no event longer than 90 days
      thereafter; or

            (f) any representation or warranty made in writing by or on behalf
      of the Company or by any officer of the Company in this Agreement or in
      any writing furnished in connection with the transactions contemplated
      hereby proves to have been false or incorrect in any material respect on
      the date as of which made; or

            (g) the Company or any Subsidiary either (i) default or defaults in
      the payment of any principal or interest under one or more agreements,
      instruments, mortgages, bonds, debentures, guaranties or other evidences
      of Indebtedness (a "DEBT INSTRUMENT") under which the Company or one or
      more Restricted Subsidiaries or the Company and one or more Restricted
      Subsidiaries then have outstanding Indebtedness in excess of $10.0
      million, individually or in the aggregate, within five days after the date
      such payment was due and after the expiration of any applicable grace
      period, or (ii) any

                                       32

<PAGE>

      other default or defaults under one or more Debt Instruments under which
      the Company or one or more Restricted Subsidiaries or the Company and one
      or more Restricted Subsidiaries then have outstanding Indebtedness in
      excess of $10.0 million, individually or in the aggregate, and in the case
      of this clause (ii) either (x) such Indebtedness is already due and
      payable in full or (y) such default or defaults have resulted in the
      acceleration of such Indebtedness prior to its express maturity; or

            (h) the Company or any Subsidiary (i) is generally not paying, or
      admits in writing its inability to pay, its debts as they become due, (ii)
      files, or consents by answer or otherwise to the filing against it of, a
      petition for relief or reorganization or arrangement or any other petition
      in bankruptcy, for liquidation or to take advantage of any bankruptcy,
      insolvency, reorganization, moratorium or other similar law of any
      jurisdiction, (iii) makes an assignment for the benefit of its creditors,
      (iv) consents to the appointment of a custodian, receiver, trustee or
      other officer with similar powers with respect to it or with respect to
      any substantial part of its property, (v) is adjudicated as insolvent or
      to be liquidated, or (vi) takes corporate action for the purpose of any of
      the foregoing; or

            (i) a court or governmental authority of competent jurisdiction
      enters an order appointing, without consent by the Company or any of its
      Subsidiaries, a custodian, receiver, trustee or other officer with similar
      powers with respect to it or with respect to any substantial part of its
      property, or constituting an order for relief or approving a petition for
      relief or reorganization or any other petition in bankruptcy or for
      liquidation or to take advantage of any bankruptcy or insolvency law of
      any jurisdiction, or ordering the dissolution, winding-up or liquidation
      of the Company or any of its Subsidiaries, or any such petition shall be
      filed against the Company or any of its Subsidiaries and such petition
      shall not be dismissed within 60 days; or

            (j) a final judgment or judgments for the payment of money
      aggregating in excess of $10,000,000 are rendered against one or more of
      the Company and its Subsidiaries and which judgments are not, within 60
      days after entry thereof, bonded, discharged or stayed pending appeal, or
      are not discharged within 60 days after the expiration of such stay; or

            (k) except as contemplated by their terms, any of the Security
      Documents or the Guaranty ceases to be in full force and effect or any of
      the Security Documents or the Guaranty ceases to give the Collateral Agent
      in any material respect the Liens, rights, powers and privileges purported
      to be created thereby;

14. REMEDIES ON DEFAULT, ETC.

      14.1. ACCELERATION.

            (a) If an Event of Default with respect to the Company described in
      paragraph (h) or (i) of Section 13 (other than an Event of Default
      described in clause (i) of paragraph (i) or described in clause (vi) of
      paragraph (h) by virtue of the fact that such

                                       33

<PAGE>

      clause encompasses clause (i) of paragraph (h)) has occurred, all the
      Notes then outstanding shall automatically become immediately due and
      payable.

            (b) If any other Event of Default has occurred and is continuing,
      any holder or holders of more than 25% in principal amount of the Notes at
      the time outstanding may at any time at its or their option, by notice or
      notices to the Company, declare all the Notes then outstanding to be
      immediately due and payable.

            (c) If any Event of Default described in paragraph (a) or (b) of
      Section 13 has occurred and is continuing, any holder or holders of Notes
      at the time outstanding affected by such Event of Default may at any time,
      at its or their option, by notice or notices to the Company, declare all
      the Notes held by it or them to be immediately due and payable.

      Upon any Notes becoming due and payable under this Section 14.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus all accrued and unpaid interest (to
the full extent permitted by applicable law), shall all be immediately due and
payable, in each and every case without presentment, demand, protest or further
notice, all of which are hereby waived.

      14.2. OTHER REMEDIES.

      In case anyone or more of the Events of Default shall have occurred and be
continuing, and irrespective of whether any Notes have become or have been
declared due and payable under Section 14.1, (a) the holder of any Note, if owed
any amount with respect to such Note or other Obligations, may, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of such holder of such
Note, and (b) the Collateral Agent may in its sole discretion, and shall if
requested by the Required Holders, on behalf of the Required Holders, may
proceed to protect and enforce its rights by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Note Purchase Agreement and the other
Note Documents or any instrument pursuant to which the Obligations to the
holders of the Notes are evidenced, including the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such. No remedy herein conferred upon any holder of
a Note or the Collateral Agent is intended to be exclusive of any other remedy
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or any other provision of law.

      All rights of action and claims under this Agreement and the other Note
Documents may be enforced by the Collateral Agent even if the Collateral Agent
does not possess any of the Notes or does not produce any of them in the
proceeding. A delay or omission by the Collateral Agent or any holder of a 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.

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<PAGE>

      Each holder, by accepting a Note, acknowledges that the exercise of
remedies by the Collateral Agent with respect to the Collateral is subject to
the terms and conditions of this Agreement and the Security Documents and the
proceeds received upon realization of this Agreement and the Collateral shall be
applied by the Collateral Agent in accordance with the Security Documents.

      14.3. RESCISSION.

      At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 14.1, the Required Holders, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of, on
any Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal, and (to the extent
permitted by applicable law) any overdue interest in respect of the Notes, at
the Default Rate, (b) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 20, and (c) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this Section 14.3 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.

      14.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

      No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 18, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 14, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.

15. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

      15.1. REGISTRATION OF NOTES.

      The Company shall keep at its principal executive office a register (the
"REGISTER") for the registration and registration of transfers of Notes. The
name and address of each holder of one or more Notes, each transfer thereof and
the name and address of each transferee of one or more Notes shall be registered
in the Register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the Company shall not
be affected by any notice or knowledge to the contrary. The Company shall give
to any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.

      15.2. TRANSFER AND EXCHANGE OF NOTES.

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<PAGE>

      Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.1.

      15.3. REPLACEMENT OF NOTES.

      Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and

            (a) in the case of loss, theft or destruction, of indemnity
      reasonably satisfactory to it (provided that if the holder of such Note
      is, or is a nominee for, an original Purchaser or another holder of a Note
      with a minimum net worth of at least $100,000,000, such Person's own
      unsecured agreement of indemnity shall be deemed to be satisfactory), or

            (b) in the case of mutilation, upon surrender and cancellation
      thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.

16. PAYMENTS ON NOTES.

      16.1. PAYMENT.

      Payments of principal, and interest becoming due and payable on the Notes
shall be made in lawful money of the United States of America in accordance with
Section 16.2.

      16.2. PLACE OF PAYMENT.

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<PAGE>

      So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 16.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
and interest by wire transfer to the account designated by you below your name
on Schedule A, or by such other method or at such other address as you shall
have from time to time specified to the Company in writing for such purpose,
without the presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Note, you
shall surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 16.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
16.2. The Company will afford the benefits of this Section 16.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 16.2.

17. THE COLLATERAL AGENT.

      17.1. AUTHORIZATION.

      (a) The Collateral Agent is authorized to take such action on behalf of
each of the holders of Notes and to exercise all such powers as are hereunder
and under any of the other Note Documents and any related documents delegated to
the Collateral Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Collateral Agent.

      (b) The relationship between the Collateral Agent and each of the holders
of Notes is that of an independent contractor. The use of the term "Collateral
Agent" is for convenience only and is used to describe, as a form of convention,
the independent contractual relationship between the Collateral Agent and each
of the holders of Notes. Nothing contained in this Agreement nor the other Note
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Collateral Agent and any of the holders of Notes.

      (c) As an independent contractor empowered by the holders of Notes to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Note Documents, the Collateral Agent is
nevertheless a "representative" of the holders of Notes, as that term is defined
in Article 1 of the Uniform Commercial Code, for purposes of actions for the
benefit of the holders of Notes and the Collateral Agent with respect to all
collateral security and guaranties contemplated by the Note Documents. Such
actions include the designation of the Collateral Agent as "secured party",
"mortgagee" or the like on all financing statements and other documents and
instruments, whether recorded or otherwise, relating to the attachment,
perfection, priority or enforcement of any security interests, mortgages or
deeds of trust in collateral security intended to secure the payment or
performance of any of the Obligations, all for the benefit of the holders of
Notes and the Collateral Agent.

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<PAGE>

      17.2. EMPLOYEES AND AGENTS. The Collateral Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Agreement and the other Note Documents. The
Collateral Agent may utilize the services of such Persons as the Collateral
Agent in its sole discretion may reasonably determine, and all reasonable fees
and expenses of any such Persons shall be paid by the Company.

      17.3. NO LIABILITY. Neither the Collateral Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Note Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that the Collateral
Agent or such other Person, as the case may be, may be liable for losses due to
its willful misconduct or gross negligence.

      17.4. NO REPRESENTATIONS. The Collateral Agent shall not be responsible
for the execution or validity or enforceability of this Agreement, the Notes,
any of the other Note Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made herein or in any of
the other Note Documents or in any certificate or instrument hereafter furnished
to it by or on behalf of the Company or any of its Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Notes or to
inspect any of the properties, books or records of the Company or any of its
Subsidiaries. The Collateral Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by the Company or any holder
of any of the Notes shall have been duly authorized or is true, accurate and
complete. The Collateral Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the holders of Notes, with respect to the creditworthiness or
financial conditions of the Company or any of its Subsidiaries. Each holder of a
Note acknowledges that it has, independently and without reliance upon the
Collateral Agent or any other holder of a Note, and based upon such information
and documents as it has deemed appropriate, made its own analysis and decision
to enter into this Agreement.

      17.5. HOLDERS OF NOTES. The Collateral Agent may deem and treat the payee
of any Note as the absolute owner or purchaser thereof for all purposes hereof
until it shall have been furnished in writing with a different name by such
payee or by a subsequent holder, assignee or transferee.

      17.6. INDEMNITY. The holders of Notes ratably agree hereby to indemnify
and hold harmless the Collateral Agent from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Collateral Agent has not been
reimbursed by the Company as required by Section 18.1 hereunder), and
liabilities of every nature and character arising out of or related to this

                                       38

<PAGE>

Agreement, the Notes, or any of the other Note Documents or the transactions
contemplated or evidenced hereby or thereby, or the Collateral Agent's actions
taken hereunder or thereunder without limiting the Company's and Guarantors'
indemnity obligations, except to the extent that any of the same shall be
directly caused by the Collateral Agent's willful misconduct or gross
negligence.

      17.7. COLLATERAL AGENT AS HOLDER. In its individual capacity, Fleet
Capital Corporation shall have the same obligations and the same rights, powers
and privileges in respect to its Note as the holder of any of Notes, as it would
have were it not also the Collateral Agent.

      17.8. RESIGNATION. The Collateral Agent may resign at any time by giving
sixty (60) days' prior written notice thereof to the holders of the Notes and
the Company. Upon any such resignation, the Required Holders shall have the
right to appoint a successor Collateral Agent. Unless a Default or Event of
Default shall have occurred and be continuing, such successor Collateral Agent
shall be reasonably acceptable to the Company. If no successor Collateral Agent
shall have been so appointed by the Required Holders and shall have accepted
such appointment within thirty (30) days after the retiring Collateral Agent's
giving of notice of resignation, then the retiring Collateral Agent may, on
behalf of the Holders of Notes, appoint a successor Collateral Agent. Upon the
acceptance of any appointment as Collateral Agent hereunder by a successor
Collateral Agent, such successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall be discharged from its
duties and obligations hereunder. After any retiring Collateral Agent's
resignation, the provisions of this Agreement and the other Note Documents shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Collateral Agent.

      17.9. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each holder of a
Note hereby agrees that, upon learning of the existence of a Default or an Event
of Default, it shall promptly notify the Collateral Agent thereof. The
Collateral Agent hereby agrees that, upon learning of the existence of a Default
or an Event of Default, it shall promptly notify the holders of Notes the
thereof. The Collateral Agent hereby agrees that upon receipt of any notice
under this Section 17.9 it shall promptly notify the other holders of Notes of
the existence of such Default or Event of Default, and upon the receipt of
notice of the existence of a Default or Event of Default from the Required
Holders shall notify the Company of the existence of such Default or Event of
Default.

      17.10. DUTIES IN THE CASE OF ENFORCEMENT. In case one or more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Collateral Agent shall, if (a) so
requested by the Required Holders and (b) the holders of Notes have provided to
the Collateral Agent such additional indemnities and assurances against expenses
and liabilities as the Collateral Agent may reasonably request, proceed to
enforce the provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in respect
of such Collateral. The Required Holders may direct the Collateral Agent in
writing as to the method and the extent of any such sale or other disposition,
the holders of Notes hereby agreeing to indemnify and hold the Collateral Agent
harmless from all liabilities incurred in respect of all actions taken or
omitted in

                                       39

<PAGE>

accordance with such directions, provided that the Collateral Agent need not
comply with any such direction to the extent that the Collateral Agent
reasonably believes the Collateral Agent's compliance with such direction to be
unlawful or commercially unreasonable in any applicable jurisdiction.

18. EXPENSES, ETC.

      18.1. TRANSACTION EXPENSES.

      Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
the Collateral Agent's Special Counsel and, if reasonably required, local or
other counsel) incurred by you and each other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the other Note Documents
(whether or not such amendment, waiver or consent becomes effective), including,
without limitation: (a) the costs and expenses incurred in enforcing or
defending (or determining whether or how to enforce or defend) any rights under
this Agreement or the other Note Documents or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the other Note Documents, or by reason of being a holder of
any Note, and (b) the costs and expenses, including reasonable attorney's and
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Notes. The
Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).

      18.2. SURVIVAL.

      The obligations of the Company under this Section 18 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.

19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

      All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the other Note Documents, the
purchase or transfer by you of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any subsequent holder of
a Note, regardless of any investigation made at any time by or on behalf of you
or any other holder of a Note. All statements contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the Company under
this Agreement. Subject to the preceding sentence, this Agreement and the other
Note Documents embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.

                                       40

<PAGE>

20. AMENDMENT AND WAIVER.

      20.1. REQUIREMENTS.

      This Agreement and the other Note Documents may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Sections 1, 2, 3, 4, 5, 6 or 24 hereof, or any defined term
(as it is used therein), will be effective as to you unless consented to by you
in writing, and (b) no such amendment or waiver may, without the written consent
of the holder of each Note at the time outstanding affected thereby, (i) subject
to the provisions of Section 14 relating to acceleration or rescission, change
the amount or time of any prepayment or payment of principal of, or reduce the
rate or change the time of payment or method of computation of interest on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, (iii)
amend any of Sections 8, 13(a), 13(b), 14, 20 or 23, or (iv) release a
substantial portion of the Collateral (other than in respect of Asset Sales
permitted by Section 9.9).

      20.2. SOLICITATION OF HOLDERS OF NOTES.

            (a) Solicitation. The Company will provide each holder of the Notes
      (irrespective of the amount of Notes then owned by it) with sufficient
      information, sufficiently far in advance of the date a decision is
      required, to enable such holder to make an informed and considered
      decision with respect to any proposed amendment, waiver or consent in
      respect of any of the provisions hereof or of the Notes. The Company will
      deliver executed or true and correct copies of each amendment, waiver or
      consent effected pursuant to the provisions of this Section 20 to each
      holder of outstanding Notes promptly following the date on which it is
      executed and delivered by, or receives the consent or approval of, the
      requisite holders of Notes.

            (b) Payment. The Company will not directly or indirectly pay or
      cause to be paid any remuneration, whether by way of supplemental or
      additional interest, fee or otherwise, or grant any security, to any
      holder of a Note as consideration for or as an inducement to the entering
      into by any holder of a Note or any waiver or amendment of any of the
      terms and provisions hereof unless such remuneration is concurrently paid,
      or security is concurrently granted, on the same terms, ratably to each
      holder of a Note then outstanding even if such holder did not consent to
      such waiver or amendment.

      20.3. BINDING EFFECT, ETC.

      Any amendment or waiver consented to as provided in this Section 20
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any

                                       41

<PAGE>

rights of any holder of such Note. As used herein, the term "THIS AGREEMENT" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.

      20.4. NOTES HELD BY COMPANY, ETC.

      Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

21. NOTICES.

      All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:

                  (i) if to you or your nominee, to you or it at the address
            specified for such communications in Schedule A, or at such other
            address as you or it shall have specified to the Company in writing,

                  (ii) if to any other holder of any Note, to such holder at
            such address as such other holder shall have specified to the
            Company in writing, or

                  (iii) if to the Company, to the Company at its address set
            forth at the beginning hereof to the attention of Chief Executive
            Officer, or at such other address as the Company shall have
            specified to the holder of each Note in writing.

Notices under this Section 21 will be deemed given only when actually received.

22. REPRODUCTION OF DOCUMENTS.

      This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 22
shall not prohibit the Company or any other holder of a Note from contesting any
such reproduction to the same extent that it could

                                       42

<PAGE>

contest the original, or from introducing evidence to demonstrate the inaccuracy
of any such reproduction.

23. CONFIDENTIAL INFORMATION.

      For the purposes of this Section 23, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 23, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
23), (v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 23), (vi) any federal
or state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and' is continuing,
to the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 23 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 23.
Notwithstanding anything herein to the contrary, the Collateral Agent and each
holder of a Note may disclose to any and all Persons, without limitation of any
kind, any information with respect to the "tax treatment" and "tax structure"
(in each case, within the meaning of Treasury Regulation Section 1.6011-4) of
the transactions contemplated hereby and

                                       43

<PAGE>

all materials of any kind (including opinions or other tax analyses) that are
provided to the Collateral Agent or such holder of a Note relating to such tax
treatment and tax structure.

24. SUBSTITUTION OF PURCHASER.

      You shall have the right to substitute anyone of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 24), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
24), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.

25. MISCELLANEOUS.

      25.1. SUCCESSORS AND ASSIGNS.

      All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.

      25.2. PAYMENTS DUE ON NON-BUSINESS DAYS.

      Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or interest on any Note that is due on a date other
than a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.

      25.3. 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 (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

      25.4. CONSTRUCTION.

      Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with anyone covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by

                                       44

<PAGE>

any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.

      25.5. COUNTERPARTS.

      This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
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.

      25.6. GOVERNING LAW.

      This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

                                    * * * * *

                                       45

<PAGE>

      If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement among you, the
Company, the Guarantors, and the Collateral Agent.

Signature pages to Note Purchase Agreement

<PAGE>

                                       Very truly yours,

                                       REPUBLIC ENGINEERED PRODUCTS, INC.,
                                       the Company

                                       By  /s/ Joseph F. Lapinsky
                                           -------------------------------------
                                       Name: Joseph F. Lapinsky
                                       Title: Chief Executive Officer

                                       PAV REPUBLIC, INC., as Parent
                                       Guarantor

                                       By  /s/ P.F. Schweinfurth
                                           -------------------------------------
                                       Name: Peter F. Schweinfurth
                                       Title: President

                                       PAV MACHINE, LLC, as Subsidiary
                                       Guarantor

                                       By  /s/ Joseph F. Lapinsky
                                           -------------------------------------
                                       Name: Joseph F. Lapinsky
                                       Title: Chief Executive Officer

                                       PAV RAILROAD, INC., as Subsidiary
                                       Guarantor

                                       By  /s/ Joseph F. Lapinsky
                                           -------------------------------------
                                       Name: Joseph F. Lapinsky
                                       Title: Chief Executive Officer

Signature pages to Note Purchase Agreement

<PAGE>

The foregoing is hereby agreed to as of the date thereof.

THE PURCHASERS:

FLEET CAPITAL CORPORATION,
individually and as Collateral Agent

By:  /s/ T.J. Broderick
   ------------------------------------
     Name: Timothy J. Broderick
     Title: Senior Vice President

Signature pages to Note Purchase Agreement

<PAGE>

BANK OF AMERICA, N.A.

By:  /s/ Donald A. Mastro
   --------------------------------------------------
     Name: Donald A. Mastro
     Title: Vice President

Signature pages to Note Purchase Agreement

<PAGE>

JP MORGAN CHASE BANK

By: /s/ Kimberly L. Turner
   --------------------------------------------------
    Name: Kimberly L. Turner
    Title: Vice President

Signature pages to Note Purchase Agreement

<PAGE>

WELLS FARGO FOOTHILL, INC.

By:   /s/ Lan Wong
   --------------------------------------------------
      Name: Lan Wong
      Title: Vice-President

Signature pages to Note Purchase Agreement

<PAGE>

GE CAPITAL CFE, INC.

By:    /s/ W. Jerome McDermott
   --------------------------------------------------
       Name: W. Jerome McDermott
       Title: Duly Authorized Signature

Signature pages to Note Purchase Agreement

<PAGE>

CONGRESS FINANCIAL CORPORATION (CENTRAL)

By:    /s/ Anthony Vizgirda
   --------------------------------------------------
       Name: Anthony Vizgirda
       Title: First Vice President

Signature pages to Note Purchase Agreement

<PAGE>

THE CIT GROUP/BUSINESS CREDIT, INC.

By:    /s/ George Louis McKinley
   --------------------------------------------------
       Name:  George Louis McKinley
       Title: Vice President

Signature pages to Note Purchase Agreement

<PAGE>

LASALLE BUSINESS CREDIT, LLC

By:    /s/ Stephen A. Caffrey
   --------------------------------------------------
       Name: Stephen A. Caffrey
       Title: Vice President

Signature pages to Note Purchase Agreement

<PAGE>

GUARANTY BUSINESS CREDIT
CORPORATION

By:    /s/ Michael D. Haddad
   --------------------------------------------------
       Name: Michael D. Haddad
       Title: President and CEO

Signature pages to Note Purchase Agreement

<PAGE>

ORIX FINANCIAL SERVICES, INC.

By:    /s/ J. Paul Hicks
   --------------------------------------------------
       Name: J. Paul Hicks
       Title: First Vice President

Signature pages to Note Purchase Agreement

<PAGE>

SUNROCK CAPITAL CORP.

By:    /s/ John Erwin
   --------------------------------------------------
       Name: John Erwin
       Title: E.V.P.

Signature pages to Note Purchase Agreement

<PAGE>

UNION BANK OF CALIFORNIA, N.A.

By:    /s/ Cecilia M. Valente
   --------------------------------------------------
       Name: Cecilia M. Valente
       Title: Senior Vice President

Signature pages to Note Purchase Agreement

<PAGE>

GMAC COMMERCIAL FINANCE LLC

By:    /s/ Daniel J. Manella
   --------------------------------------------------
       Name: Daniel J. Manella
       Title: S.V.P.

Signature pages to Note Purchase Agreement

<PAGE>

CONTRATRIAN FUNDS, LLC

By: CONTRATRIAN CAPITAL MANAGEMENT, LLC,
ITS MANAGER

By:   /s/ Micahel J. Restifo
   --------------------------------------------------
      Name: Michael J. Restifo
      Title: CFO/Member

Signature pages to Note Purchase Agreement

<PAGE>

                                                                      SCHEDULE A

                       INFORMATION RELATING TO PURCHASERS

              To be attached by Collateral Agent's Special Counsel.

<PAGE>

                                                                      SCHEDULE B

                                  DEFINED TERMS

            As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such terms:

            "ACQUISITION DOCUMENTS" means the Asset Purchase Agreement and all
agreements, and documents required to be entered into and delivered pursuant
thereto.

            "ADJUSTED NET ASSETS" means, at any date, the lesser of the amount
by which (x) the fair value of the property of such Guarantor exceeds the total
amount of liabilities, including, without limitation, contingent liabilities
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date), but excluding liabilities under the Guaranty, of such
Guarantor at such date and (y) the present fair saleable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Subsidiary under the Guaranty), excluding
debt in respect of the Guaranty of such Guarantor, as they become absolute and
matured.

            "ADMINISTRATIVE AGENT" has the meaning set forth in the Existing
Credit Facility and the DIP Facility.

            "AFFILIATE" means, at any time, and with respect to any Person, (a)
any other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company;

            "AFFILIATE TRANSACTION" is defined in Section 9.10.

            "ASSET ACQUISITION" means (a) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock, by the Company or any of the Restricted
Subsidiaries in any other Person, in either case pursuant to which such Person
shall become a Restricted Subsidiary of the Company or shall be merged with or
into the Company or any of the Restricted Subsidiaries or (b) any acquisition by
the Company or any of the Restricted Subsidiaries of the assets of any Person
which constitute substantially all of an operating `unit or business of such
Person.

                                  Schedule B-1

<PAGE>

            "ASSET PURCHASE AGREEMENT" is that certain Amended and Restated
Asset Purchase Agreement, dated as of December 19, 2003, by and among the
Company and the Sellers.

            "ASSET SALE" means (i) any direct or indirect sale, conveyance,
transfer, lease or other disposition of property or assets (including by way of
a sale and leaseback or securitization) of the Company or any Restricted
Subsidiary (each referred to in this definition as a "disposition") or (ii) the
direct or indirect issuance or sale of Capital Stock of any Restricted
Subsidiary, in each case, other than: (a) a disposition of Cash Equivalents,
Investment Grade Securities, or obsolete, worn out or surplus equipment in the
ordinary course of business; (b) the disposition of all or substantially all of
the assets of the Company in a manner permitted pursuant to the provisions
described in Section 10; (c) any Restricted Payment that is permitted to be
made, and is made, under Section 9.8; (d) any disposition or series of related
dispositions of property or assets not constituting Collateral with an aggregate
Fair Market Value of less than $1.0 million; (e) any disposition of property or
assets (including an issuance of Capital Stock) by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Restricted
Subsidiary; (f) any financing transaction with respect to the Canton Cast Roll
Facility and any other property not constituting Collateral built or acquired by
the Company or any Restricted Subsidiary after the Issue Date, including,
without limitation, sale-leasebacks and asset securitizations made in compliance
with Section 9.6; (g) any disposition of inventory and work-in-process in the
ordinary course of business; (h) issuances of Capital Stock (other than
Disqualified Stock) as directors' qualifying shares or as investments by foreign
nationals mandated by applicable law; and (i) the incurrence of any Permitted
Lien. For the avoidance of doubt, the definition of Asset Sale does not include
any sale and leaseback of Collateral or any securitization of Collateral, both
of which are prohibited by Section 9.6 of this Agreement.

            "ACQUIRED INDEBTEDNESS" means (i) Indebtedness of any Person
existing at the time such Person is or became a Restricted Subsidiary or is
assumed in an Asset Acquisition by the Company excluding Indebtedness incurred
in connection with, or in anticipation of, such Person becoming a Restricted
Subsidiary or such Asset Acquisition and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by the Company or any Restricted Subsidiary.

            "ATTRIBUTABLE VALUE" means as to any particular lease under which
any Person is at the time liable other than a Capitalized Lease Obligation, and
at any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the case
of any lease which is terminable by the lessee upon the payment of a penalty,
such net amount shall also include the amount of such penalty, but no rent shall
be considered as required to be paid under such lease subsequent to the first
date upon which it may be so terminated. "Attributable Value" means, as to a
Capitalized Lease Obligation under which any Person is at the time liable and at

                                  Schedule B-2

<PAGE>
any date as of which the amount thereof is to be determined, the capitalized
amount thereof that would appear on the face of a balance sheet of such Person
in accordance with GAAP.

            "BANKRUPTCY COURT" is defined in Section 4.12.

            "BASE AMOUNT" has the meaning provided in Section 9.8(b)(vi).

            "BOARD OF DIRECTORS" means, with respect to any Person, the Board of
Directors or comparable governing body (which may be the Board of Directors of a
managing general partner of a partnership or managing member of a limited
liability company or the Board of Directors of its managing general partner or
managing member, as the case may be) of such Person or any committee thereof
authorized to act for it hereunder. Unless the context requires otherwise,
"Board of Directors" refers to the Board of Directors of the Company.

            "BLUE STEEL" means Blue Steel Capital Corp., a Delaware corporation.

            "BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York, Chicago, Illinois, or
Boston, Massachusetts are required or authorized to be closed.

            "CAPITAL EXPENDITURES" means, with respect to the Company, for any
period, on a consolidated basis for the Company and the Restricted Subsidiaries,
the aggregate of all expenditures during such period which, as determined in
accordance with GAAP, are required to be included in property, plant or
equipment or a similar fixed asset account.

            "CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or nonvoting) of, such Person's capital stock
(including, without limitation, partnership or membership interests in a
partnership or a limited liability company or any other interest or
participation that confers on a Person the right to receive a share of the
profits and loss of, or distributions of assets of, the issuing Person) whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.

            "CAPITALIZED LEASE OBLIGATION" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be classified
and accounted for as a capitalized lease obligation under GAAP, and, for the
purposes of this Agreement, the amount of such obligation at any date shall be
the capitalized amount thereof at such date, determined in accordance with GAAP.

            "CASH EQUIVALENTS" means, at any time,

            1. with respect to Asset Sales of Collateral: (i) wire transfers of
U.S. dollars in immediately available funds, (ii) certified checks, (iii) any
evidence of Indebtedness with a maturity of 30 days or less issued or directly
and fully guaranteed or issued by the United States of America or any agency or
instrumentality thereof (provided the full faith and credit of the United States
of America is pledged in support thereof), and (iv) repurchase agreements and

                                  Schedule B-3
<PAGE>

reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 30 days from the date of acquisition; provided,
however, that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions with Securities
Dealers and Others, as adopted by the Comptroller of the Currency; or

            2. with respect to any other application: (i) any evidence of
Indebtedness with a maturity of 365 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 365 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $250.0 million; (iii) commercial
paper with a maturity of 365 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-I by Standard & Poor's
Corporation ("S&P") or at least P-I by Moody's Investors Service, Inc.
("Moody's"); (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States Government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing within one
year from the date of acquisition; provided, however, that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency; (v) investment funds investing 95%
of their assets in securities of the types described in clauses (i)-(iv) above;
and (vi) readily marketable direct obligations issued by any state of the United
States of America or any political subdivision thereof having one of the two
highest rating categories obtainable from either Moody's or S&P.

            "CANTON CAST ROLL FACILITY" means the cast roll facility and related
assets of the Company located in Canton, Ohio at the premises described in
Exhibit A to the Mortgage, including, without limitation, all equipment,
fixtures, goods and other fixture and personal property located from time to
time at such premises and related property.

            "CHANGE OF CONTROL" means at any time the occurrence of one or more
of the following events:

            (a)the sale, lease or transfer, in one or a series of related
      transactions, of all or substantially all the assets of the Company and
      its Subsidiaries, taken as a whole, to a person other than the Permitted
      Holders; or

            (b) following an IPO (as defined below), (i) the acquisition by any
      person or group (within the meaning of Section 13(d)(3) or Section
      14(d)(2) of the Exchange Act, or any successor provision), including any
      group acting for the purpose of acquiring, holding or disposing of
      securities (within the meaning of Rule 13d-5(b)(1) under the Exchange
      Act), other than the Permitted Holders, in a single transaction or in a
      related series of transactions, by way of merger, consolidation or other
      business combination or purchase of beneficial ownership (within the
      meaning of Rule 13d-3 under the Exchange

                                  Schedule B-4

<PAGE>

      Act, or any successor provision), of 35% or more of the total voting power
      of the Capital Stock of the Company and (ii) the Permitted Holders
      beneficially own (as defined above), directly or indirectly, in the
      aggregate a lesser percentage of the total voting power of the Voting
      Stock of the Company than such other person or group and do not have the
      right or ability by voting power, contract or otherwise to elect or
      designate for election a majority of the Board of Directors; or

            (c) (i) prior to the completion of an initial public offering of the
      Company's equity interests in accordance with a registration statement on
      Form S-l filed with the Securities and Exchange Commission (the "IPO"),
      the Permitted Holders shall collectively own, beneficially, directly or
      indirectly less than 35% of the total voting and economic interest of the
      capital stock or membership interests of the Company, and (ii) following
      an IPO, the Permitted Holders shall collectively own, beneficially,
      directly or indirectly less than 20% of the total voting and economic
      interest of the capital stock or membership interests of the Company; or

            (d) (i) prior to an IPO, the Permitted Holders shall not have the
      right or ability by voting power, contract or otherwise to elect or
      designate for election a majority of the board of directors or similar
      governing body of the Company, or (ii) following an IPO, during any period
      of twenty four (24) consecutive calendar months, Continuing Directors
      shall cease to constitute a majority of the board of directors or similar
      governing body of the Company.

            "CHANGE OF CONTROL DATE" has the meaning provided in Section 9.11.

            "CHANGE OF CONTROL OFFER" has the meaning provided in Section 9.11.

            "CHANGE OF CONTROL PAYMENT DATE" has the meaning provided in Section
9.11.

            "CLOSING" is defined in Section 3.

            "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.

            "COLLATERAL" means all of the property, rights and interests of the
Company and its Subsidiaries that are or intended to be subject to the Liens
created by the Security Documents.

            "COLLATERAL AGENT" means Fleet Capital Corporation.

            "COLLATERAL AGENT'S SPECIAL COUNSEL" means Bingham McCutchen LLP.

            "COMPANY" means Republic Engineered Products, Inc., a Delaware
corporation.

            "CONFIDENTIAL INFORMATION" is defined in Section 23.

            "CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, with
respect to the Company for any period, (a) the sum of, without duplication, the
amounts for such period, taken as a single accounting period, of (i)
Consolidated Net Income, (ii) Consolidated Non-cash

                                  Schedule B-5

<PAGE>

Charges, (iii) Consolidated Interest Expense, (iv) Consolidated Income Tax
Expense, (v) any fees, expenses or non-recurring charges related to any issuance
of Capital Stock, Permitted Investments, acquisitions, the acquisition or
recapitalization of Indebtedness (in each case, whether or not successful) and
fees, expenses or charges related to the Transactions to the extent reducing
Consolidated Net Income for such period, less (b) any non-cash items to the
extent increasing Consolidated Net Income for such period.

            "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" as of any date of
determination means the ratio of (i) the aggregate amount of Consolidated Cash
Flow Available for Fixed Charges for the four quarter period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
(the "CALCULATION DATE") for which financial statements are available (the "FOUR
QUARTER PERIOD") to (ii) Consolidated Fixed Charges for such Four Quarter
Period. In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to, without duplication, (a) the
incurrence of any Indebtedness by the Company or any of the Restricted
Subsidiaries (and the application of the net proceeds thereof) during the period
commencing on the first day of the Four Quarter Period to and including the
Calculation Date (the "REFERENCE PERIOD"), including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such calculation
(and the application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first date of the Reference Period, (b) an
adjustment to eliminate or include, as the case may be, the Consolidated Cash
Flow Available for Fixed Charges and Consolidated Fixed Charges of such Person
directly or indirectly attributable to assets which are the subject of any Asset
Sale or Asset Acquisition (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of the Company or
one of the Restricted Subsidiaries (including any person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness) occurring during the
Reference Period, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Reference Period, (c) the retirement of Indebtedness during the
Reference Period which cannot thereafter be reborrowed occurring as if retired
on the first day of the Reference Period, and (d) an adjustment to eliminate any
net after-tax extraordinary gains or losses. For purposes of calculating
"Consolidated Fixed Charges" for this "Consolidated Fixed Charge Coverage
Ratio," (a) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Calculation Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Calculation Date, (b)
if interest on any Indebtedness actually incurred on the Calculation Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a Eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Calculation Date will be deemed to have been in
effect during the Reference Period and (c) notwithstanding clauses (a) and (b)
of this sentence, interest on Indebtedness determined on a fluctuating basis, to
the extent such interest is covered by agreements relating to Interest Rate
Protection Obligations for the twelve month period following the Calculation
Date, shall be deemed to have accrued at the rate per annum resulting after
giving effect to the operation of such agreements to the extent then applicable.
If the Company or any of the Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, this definition shall give effect to
the incurrence of such guaranteed Indebtedness as if such person or such
Restricted Subsidiary had directly incurred or otherwise assumed such

                                  Schedule B-6

<PAGE>

guaranteed Indebtedness. Notwithstanding the foregoing, for the purposes of
making the computation referred to above, interest on any Indebtedness under a
revolving credit facility computed on a pro forma basis shall be computed based
upon the average daily balance of such Indebtedness during the applicable
period. In addition, for purposes of this definition, whenever pro forma effect
is to be given to an Asset Acquisition or Investment, pro forma calculations
(including, without limitation, with respect to cost savings and synergies)
shall be determined in accordance with Regulation S-X under the Securities Act
and the interpretations thereof by the SEC; provided that such computation shall
be adjusted from time to time following the Asset Acquisition to eliminate cost
savings and synergies that have either been realized (and therefore are
reflected in actual results) or cannot reasonably be expected to be realized
(whether based upon information and results obtained following the applicable
Asset Acquisition or Investment or otherwise) by the Company and the Restricted
Subsidiaries.

            "CONSOLIDATED FIXED CHARGES" means, with respect to the Company for
any period, the sum of, without duplication, the amounts for such period of (a)
the Consolidated Interest Expense of the Company and (b) the aggregate amount of
dividends and other distributions paid or accrued during such period in respect
of Disqualified Capital Stock of the Company and the Restricted Subsidiaries and
Preferred Stock of Restricted Subsidiaries on a consolidated basis.

            "CONSOLIDATED INCOME TAX EXPENSE" means, with respect to the Company
for any period, the provision for federal, state, local and foreign income taxes
of the Company and the Restricted Subsidiaries for such period as determined on
a consolidated, combined or unitary basis in accordance with GAAP.

            "CONSOLIDATED INTEREST EXPENSE" means, with respect to the Company
for any period, without duplication, the sum of (i) the interest expense
(whether cash or non-cash) of the Company and the Restricted Subsidiaries for
such period as determined on a consolidated basis in accordance with GAAP to the
extent deducted in calculating Consolidated Net Income, including, without
limitation, (a) any amortization of debt discount, (b) the net cost under
Interest Rate Protection Obligations relating to interest (including any
amortization of discounts), (c) the interest portion of any deferred payment
obligation, (d) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and (e) all
capitalized interest and all accrued interest and (ii) the interest component of
Capitalized Lease Obligations or any other obligations representative of
interest expense associated with any Sale-Leaseback Transaction paid, accrued
and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP to the extent deducted in calculating Consolidated Net
Income.

            "CONSOLIDATED NET INCOME" means, with respect to the Company, for
any period, the consolidated net income (or loss) of the Company and the
Restricted Subsidiaries for such period as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income, by excluding,
without duplication, (a) all net after-tax extraordinary gains or losses, (b)
the portion of net income (but not losses) of the Company and the Restricted
Subsidiaries allocable to minority interests in unconsolidated persons to the
extent that cash dividends or distributions have not actually been received by
the Company or one of the

                                  Schedule B-7

<PAGE>

Restricted Subsidiaries, (c) net income (or loss) of any person combined with
the Company or one of the Restricted Subsidiaries on a "pooling of interests"
basis attributable to any period prior to the date of combination, (d) any gain
or loss realized upon the termination of any employee pension benefit plan, on
an after-tax basis, (e) gains or losses in respect of any Asset Sales by the
Company or one of the Restricted Subsidiaries, (f) the cumulative non-cash
effect of any change in any accounting principle, (g) the non-cash effect of
compensation expense related to the contribution of shares held by any qualified
employee stock ownership trust formed for employees of the Company and the
Restricted Subsidiaries, and (h) the net income of any Restricted Subsidiary of
such person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, law, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholder(s).

            "CONSOLIDATED NON-CASH CHARGES" means, the aggregate depreciation,
amortization and other non-cash expenses of the Company and the Restricted
Subsidiaries (including any non-cash charges related to any employee stock
ownership plan and workforce reduction charges) reducing Consolidated Net Income
of the Company and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which required an
accrual of or a reserve for cash charges for any future period).

            "CONSOLIDATED TANGIBLE ASSETS" means, as of any date of
determination, the total assets, less goodwill and other intangibles shown on
the balance sheet of the Company and the Restricted Subsidiaries as of the most
recent date for which such a balance sheet is available, determined on a
consolidated basis in accordance with GAAP.

            "CONTINUING DIRECTORS" means with respect to any period of twenty
four (24) consecutive calendar months, any member of the Board of Directors of
the Company who (a) was a member of the Board of Directors on the first day of
such period or (b) was nominated for election or elected to the Board of
Directors with the approval of a majority of the Continuing Directors who were
members of the Board of Directors at the time of such nomination or election.

            "CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
against fluctuations in currency values.

            "DEBT INSTRUMENT" is defined in Section 13 (h).

            "DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.

            "DEFAULT RATE" means that rate of interest that is the greater of
(i) 2% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 4% over the rate of interest reported in The Wall
Street Journal from time to time as the "Prime Rate."

                                  Schedule B-8

<PAGE>

            "DIP FACILITY" means the Debtor-in-Possession Revolving Credit
Agreement, dated as of October 9, 2003, among Sellers, Fleet Capital
Corporation, Bank of America, N.A., GE Capital CFE, Inc., JP Morgan Chase Bank,
Wells Fargo Foothill, Inc., the other lending institutions named therein, and
Fleet Capital Corporation as Administrative Agent.

            "DISQUALIFIED CAPITAL STOCK" means, with respect to any Person, any
Capital Stock which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final Stated Maturity of the Notes, but only to the extent such Capital Stock so
matures or is exchangeable or redeemable.

            "ELECTING HOLDERS" is defined in Section 9.11(e).

            "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.

            "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.

            "EVENT OF DEFAULT" is defined in Section 13.

            "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

            "EXISTING LENDING FACILITY" means the Revolving Credit Agreement,
dated as of August 16, 2002 among Sellers, Fleet Capital Corporation, Bank of
America, N.A., GE Capital CFE, Inc., JP Morgan Chase Bank, Wells Fargo Foothill,
Inc., the other lending institutions named therein, and Fleet Capital
Corporation as Administrative Agent.

            "FAIR MARKET VALUE" or "FAIR VALUE" MEANS, WITH RESPECT TO ANY ASSET
OR property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value shall be determined by the Board of Directors of the Company acting
in good faith and shall be evidenced by a board resolution of the Company
delivered to the Collateral Agent except (a) any determination of Fair Market
Value or fair value made with respect to any parcel of real property and related
fixtures constituting a part of, or proposed to be made a part of, the
Collateral shall be made by an Independent Appraiser, (b) any determination of
Fair Market Value with respect to any assets to be valued at $4.0 million or
more that is contributed as or received in exchange for Capital Stock

                                  Schedule B-9

<PAGE>

of the Company that is to be included in clause (B) of paragraph (a) of Section
9.8 shall be made by an Independent Financial Advisor; (c) any determination of
Fair Market Value with respect to any Collateral to be valued at $2.0 million or
more that is to be the subject of an Asset Sale shall be made by an Independent
Appraiser or Independent Financial Advisor, as appropriate, and (d) as otherwise
indicated in the Agreement or the Security Documents.

            "FUNDING GUARANTOR" has the meaning provided in Section 11.6.

            "GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.

            "GOVERNMENTAL AUTHORITY" means

            (a) the government of

                  (i) the United States of America or any State or other
            political subdivision thereof, or

                  (ii) any jurisdiction in which the Company or any Subsidiary
            conducts all or any part of its business, or which asserts
            jurisdiction over any properties of the Company or any Subsidiary,
            or

            (b) any entity exercising executive, legislative, judicial,
      regulatory or administrative functions of, or pertaining to, any such
      government.

            "GOVERNMENT ASSISTED INDEBTEDNESS (OHIO)" means Indebtedness from
any state or local Governmental Authority of the State of Ohio in an aggregate
principal amount at any time outstanding not exceeding $10 million incurred in
connection with the acquisition of equipment and fixtures for, and the
improvement and refurbishment of, the Four Stand facilities situated in the
Primary Mill at the Lorain Plant located in Lorain, Ohio.

            "GUARANTY" means the guaranty of the Guarantors set forth in Section
11 and any additional guaranty of the Notes executed by any Person.

            "GUARANTY" or "GUARANTEE" means, with respect to any Person, any
obligation (except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person guaranteeing or
in effect guaranteeing any indebtedness, dividend or other obligation of any
other Person in any manner, whether directly or indirectly, including (without
limitation) obligations incurred through an agreement, contingent or otherwise,
by such Person:

            (a) to purchase such indebtedness or obligation or any property
      constituting security therefor;

            (b) to advance or supply funds (i) for the purchase or payment of
      such indebtedness or obligation, or (ii) to maintain any working capital
      or other balance sheet condition or any income statement condition of any
      other Person or otherwise to advance or make available funds for the
      purchase or payment of such indebtedness or obligation;

                                 Schedule B-10

<PAGE>

            (c) to lease properties or to purchase properties or services
      primarily for the purpose of assuring the owner of such indebtedness or
      obligation of the ability of any other Person to make payment of the
      indebtedness or obligation; or

            (d) otherwise to assure the owner of such indebtedness or obligation
      against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under
any guaranty, the indebtedness or other obligations that are the subject of such
guaranty shall be assumed to be direct obligations of such obligor.

            "GUARANTOR" means the Parent Guarantor and the Subsidiary
Guarantors.

            "HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).

            "HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 15.1.

            "INDEBTEDNESS" with respect to any Person means, at any time,
without duplication

            (a) its liabilities for borrowed money and its redemption
      obligations in respect of mandatorily redeemable Preferred Stock;

            (b) its liabilities for the deferred purchase price of property
      acquired by such Person (excluding accounts payable arising in the
      ordinary course of business but including all liabilities created or
      arising under any conditional sale or other title retention agreement with
      respect to any such property);

            (c) all liabilities appearing on its balance sheet in accordance
      with GAAP in respect of Capitalized Lease Obligations;

            (d) all liabilities for borrowed money secured by any Lien with
      respect to any property owned by such Person (whether or not it has
      assumed or otherwise become liable for such liabilities);

            (e) all its liabilities in respect of letters of credit or
      instruments serving a similar function issued or accepted for its account
      by banks and other financial institutions (whether or not representing
      obligations for borrowed money);

                                 Schedule B-11

<PAGE>

            (f) Swaps of such Person; and

            (g) any Guaranty of such Person with respect to liabilities of a
      type described in any of clauses (a) through (f) hereof.

Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.

            "INDEPENDENT APPRAISER" means a reputable, nationally recognized
Person or firm who in the ordinary course of its business appraises property
and, where real property is involved, is a member in good standing of the
American Institute of Real Estate Appraisers, recognized and licensed to do
business in the jurisdiction where such real property is situated who (a) does
not, and whose directors, officers and employees and Affiliates do not, have a
direct or indirect material financial interest in the Company or any of its
Subsidiaries, and (b) in the judgment of the Board of Directors of the Company,
is otherwise independent and qualified to perform the task for which it is to be
engaged.

            "INDEPENDENT FINANCIAL ADVISOR" means a reputable, nationally
recognized investment banking, appraisal, consulting or public accounting firm
(a) which does not, and whose directors, officers and employees and Affiliates
do not, have a direct or indirect material financial interest in the Company or
any of its Subsidiaries, and (b) which, in the judgment of the Board of
Directors of the Company, is otherwise independent and qualified to perform the
task for which it is to be engaged.

            "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 3% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.

            "INSURANCE PROCEEDS" is defined in Section 12.

            "INTEREST RATE PROTECTION OBLIGATIONS" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.

            "INVESTMENT" means, with respect to any Person, (i) any direct or
indirect loan, advance (other than advances to customers and employees for
moving, entertainment, travel expenses and commissions, drawing accounts and
similar expenditures in the ordinary course of business), extension of credit
(other than trade credit) or capital contribution to any Person (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or (ii) any purchase or acquisition
by such Person of any

                                 Schedule B-12

<PAGE>

Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by, any other Person. "Investments" shall not include (x)
accounts receivable and extensions of credit by any Person in the ordinary
course of business and (y) Investments to the extent made with consideration
which consists of Capital Stock (other than Disqualified Capital Stock) of the
Company. In addition to the foregoing, any Currency Agreement shall constitute
an Investment hereunder.

            "INVESTMENT GRADE SECURITIES" means (i) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof (other than Cash Equivalents), (ii) debt
securities or debt instruments with a rating of BBB- or higher by S&P or Baa3 or
higher by Moody's or the equivalent of such rating by such rating organization,
or, if no rating of S&P or Moody's then exists, the equivalent of such rating by
any other nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (iii) investments in any fund that invests 95% of their
assets in securities in the type described in clauses (i) and (ii) above.

            "ISSUE DATE" means December 19, 2003, the date of original issuance
of the Notes.

            "LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capitalizaed Lease
Obligation, upon or with respect to any property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust agreements
and all similar arrangements).

            "MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.

            "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the other Note Documents, or
(c) the validity or enforceability of this Agreement or the Notes.

            "MORTGAGE" means the mortgage dated as of the date of the Closing,
and as amended and in effect from time to time, from the Company to the
Collateral Agent, for the benefit of you and the other Purchasers, with respect
to the Mortgaged Property.

            "MORTGAGED PROPERTY" is defined in Section 12.

            "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).

            "NEW CREDIT FACILITY" means the credit agreement dated as of the
Issue Date, among the Company, the lenders (which may include any Affiliate of
the Permitted Holders) and

                                 Schedule B-13

<PAGE>

the agents parties thereto from time to time, including any related notes,
guaranties, collateral documents, instruments and agreements executed in
connection therewith that are permitted under this Agreement, each as the same
may at any time in whole or in part be amended, amended and restated,
supplemented or otherwise modified, including any refinancing, refunding,
replacement or extension thereof and whether by the same or any other lender or
group of lenders, and up to the maximum amount permitted under Section
9.5(b)(iii).

            "NEW SENIOR SECURED NOTES" means the senior secured notes
representing the Note Consideration (as defined under the Asset Purchase
Agreement, to be governed by the New Senior Secured Note Indenture and issued at
Closing by the Company.

            "NEW SENIOR SECURED NOTE INDENTURE" means the indenture, dated as of
the Issue Date, governing the New Senior Secured Notes in such form reasonably
acceptable to each of the Company and Republic.

            "NON-COLLATERAL PROCEEDS" is defined in Section 9.9(b).

            "NOTES" is defined in Section 1.

            "NOTE DOCUMENTS" means, collectively, this Agreement, the Notes, and
the Security Documents.

            "N&T" means N&T Railway Company LLC, a Delaware limited liability
company.

            "OBLIGATIONS" means the payment and performance in full when due,
whether at stated maturity, by acceleration or otherwise (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the filing of a petition in bankruptcy or the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
Sections 362(a)) of (i) all obligations of the Company now or hereafter existing
under or in respect of this Agreement and the other Note Documents (including,
without limitation, the obligations of the Company to pay principal of and
interest on the Notes when due and payable) and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and all other
amounts due or to become due under or in connection with this Agreement and the
other Note Documents, (ii) all obligations of the Guarantors now or hereafter
existing under or in respect of this Agreement and the other Note Documents
(including, without limitation, the obligations of each Guarantor to pay
principal of, premium, if any, and interest on the Notes when due and payable)
and all other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and all other amounts due or to become due under or in connection
with this Agreement and the other Note Documents and (iii) without duplication
of the amounts described in clauses (i) and (ii), all obligations, indebtedness
and liabilities of the Company and the Guarantors now existing or hereafter
arising under or in respect of any Security Document, including, without
limitation, with respect to all charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the obligations contained in any Security Document.

                                 Schedule B-14

<PAGE>

            "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.

            "OPINION OF COUNSEL" means a written opinion from legal counsel who
is reasonably acceptable to the Collateral Agent, which may include counsel to
the Company.

            "PARENT GUARANTOR" means PAV Republic, Inc. in its capacity as
Guarantor any successors.

            "PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.

            "PERFECTION CERTIFICATE" means the Perfection Certificate as defined
in the Security Agreement.

            "PERMITTED COLLATERAL LIENS" means (i) the Liens created by the
Notes, the Guaranty, this Agreement and the Security Documents; (ii) after
giving effect to the Sale Order, Liens on the Collateral existing on the Issue
Date to the extent and in the manner such Liens are in effect on the Issue Date,
as such Liens are more specifically described in the Security Documents
("EXISTING LIENS"); (iii) Liens for taxes, assessments or other governmental
charges or levies not yet delinquent; (iv) carriers', warehousemen's,
mechanics', materialmen's, repairmen's, laborers' employees' or suppliers' or
other like Liens on the Collateral arising in the ordinary course of business
and securing obligations that are not due and payable; (v) junior Liens on the
Canton Cast Roll Facility to secure the New Credit Facility, provided such Liens
do not extend to any Insurance Proceeds and are subject to a customary
intercreditor agreement in form and substance reasonably satisfactory to the
Required Holders; and (vii) any other Liens on the Collateral expressly
permitted by the applicable Security Documents.

            "PERMITTED HOLDERS" means Perry Capital, L.P. and Perry Partners
International, Inc. and their respective Affiliates.

            "PERMITTED INVESTMENTS" means any of the following: (a) (i)
Investments in any Restricted Subsidiary (including any Person that pursuant to
such Investment becomes a Restricted Subsidiary) and (ii) Investments in any
Person that is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, the Company or any Restricted Subsidiary
at the time such Investment is made; (b) Investments in Cash Equivalents or
Investment Grade Securities; (c) Investments in deposits with respect to leases
or utilities provided to third parties in the ordinary course of business; (d)
Investments in the Notes; (e) Investments in Currency Agreements, Interest Rate
Protection Obligations and commodities hedging arrangements permitted by clause
(vi) or (vii) of Section 9.5(b); (f) loans or advances to officers or employees
of the Company and the Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes of the Company and the Restricted
Subsidiaries (including travel and moving expenses) not in excess of $2.0
million in the aggregate at anyone time outstanding: (g) Investments in
evidences of Indebtedness, securities or other property received from another
Person by the Company or any of the Restricted Subsidiaries in connection with
any bankruptcy proceeding or by reason of a composition or readjustment of

                                 Schedule B-15

<PAGE>

debt or a reorganization of such Person or as a result of foreclosure,
perfection or enforcement of any Lien in exchange for evidences of Indebtedness,
securities or other property of such Person held by the Company or any of the
Restricted Subsidiaries, or for other liabilities or obligations of such other
Person to the Company or any of the Restricted Subsidiaries that were created in
accordance with the terms of the Agreement; (h) so long as no Default or Event
of Default has occurred and is continuing at the time such Investment is made,
Investments in an amount not to exceed the greater of (i) $20.0 million and (ii)
1.0% of Consolidated Tangible Assets of the Company at the time of such
Investment (with the Fair Market Value of each Investment being measured at the
time made and without giving effect to subsequent changes in value); (i) any
Investment constituting a Restricted Payment received pursuant to and in
compliance with Section 9.8; (j) Investments consisting of the licensing or
contribution of intellectual property pursuant to joint marketing arrangements
with other Persons; (k) Investments consisting of purchases and acquisitions of
inventory, supplies, materials and equipment or licenses or leases of
intellectual property, in any case, in the ordinary course of business; (1) any
Investment in securities or other assets not constituting cash or Cash
Equivalents and received in connection with an Asset Sale made pursuant to the
provisions of Section 9.9 or any other disposition of assets not constituting an
Asset Sale; and (m) any Investment existing on the Issue Date.

            "PERMITTED LIENS" means, with respect to any Person and as to any
property other than the Collateral, (a) Liens to secure the New Credit Facility,
(b) Liens for taxes, assessments or other governmental charges or levies not yet
delinquent, or which are for less than $10.0 million in the aggregate, or which
are being validly contested in good faith by appropriate proceedings or for
property taxes on property that the Company or any of its Restricted
Subsidiaries has determined to abandon if the sole recourse for such tax,
assessment, charge, levy or claim is to such property; (c) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, laborers', employees' or
suppliers' or other like Liens on property of the Company or any of the
Restricted Subsidiaries arising in the ordinary course of business and securing
obligations that are not due and payable or that are being contested in good
faith by negotiations or appropriate proceedings and in respect of which, if
applicable, the Company or the relevant Restricted Subsidiary shall have set
aside on its books reserves in accordance with GAAP; (d) pledges and deposits
made in the ordinary course of business by the Company or any of the Restricted
Subsidiaries in compliance with the Federal Employers Liability Act or any other
workmen's compensation, unemployment insurance and other social security laws or
regulations and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements in respect of such obligations; (e)
deposits by the Company or any of the Restricted Subsidiaries to secure the
performance of tenders, bids, contracts (other than for Indebtedness), leases
(other than Capitalized Lease Obligations), statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business, including those incurred to secure health,
safety and environmental obligations in the ordinary course of business; (f)
zoning restrictions, easements, trackage rights, leases (other than Capitalized
Lease Obligations), licenses, special assessments, rights-of-way, restrictions
on use of Real Property and other similar encumbrances incurred by the Company
or any of the Restricted Subsidiaries in the ordinary course of business which,
individually and in the aggregate, are not substantial in amount and do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Company or any of the
Restricted Subsidiaries; (g) Liens consisting of interests of lessors under
capital or operating leases; (h) Liens securing judgments, decrees or orders
against the Company or any of

                                 Schedule B-16

<PAGE>

the Restricted Subsidiaries, so long as such Lien is being contested in good
faith and is adequately bonded, any appropriate legal proceedings which may have
been duly initiated for the review of such judgment, decree or order shall not
have been finally terminated or the period within which such proceedings may be
initiated shall not have expired; (i) any leases or subleases to other Persons
of properties or assets owned or leased by the Company or any of the Restricted
Subsidiaries; (j) any Lien arising by operation of law pursuant to Section
107(1) of CERCLA, 42 U.S.C. Section 9607(1), or pursuant to analogous state law,
for costs or damages which are not yet due (by virtue of a written demand for
payment by a government authority) or which are being contested in good faith by
appropriate proceedings, or on property that the Company or any of the
Restricted Subsidiaries has determined to abandon if the sole recourse for such
costs or damages is to such property; provided that the liability of the Company
and the Restricted Subsidiaries with respect to the matter giving rise to all
such Liens shall not, in the reasonable estimate of the Company (in the light of
all attendant circumstances, including the likelihood of contribution by third
parties), exceed $25.0 million; (k) Liens that are contractual rights of setoff
(1) relating to the establishment by the Company or any of its Subsidiaries of
depository relations with banks not given in connection with the issuance of
Indebtedness or (2) pertaining to pooled deposit and/or sweep accounts of the
Company and/or any of the Restricted Subsidiaries to permit satisfaction of
overdraft or similar obligations incurred in the ordinary course of business of
the Company and the Restricted Subsidiaries; (1) Liens securing obligations in
respect of trade-related letters of credit and covering the goods (or the
documents of title in respect of such goods) financed by such letters of credit;
(m) the sale of accounts receivable in connection with collection in the
ordinary course of business; (n) construction Liens arising in the ordinary
course of business, including Liens for work performed for which payment has not
been made, securing obligations that are not due and payable or are being
contested in good faith by appropriate proceedings and in respect of which, if
applicable, the Company Of the relevant Restricted Subsidiary shall have set
aside on its books reserves in accordance with GAAP; (o) Liens securing Currency
Agreements, Interest Rate Protection Obligations and commodity hedging
agreements; (p) any other Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements,
including rights of offset and set off; (q) purchase money Liens to finance the
acquisition of property or assets of the Company or any Restricted Subsidiary of
the Company acquired in the ordinary course of business; provided that (1) the
related purchase money Indebtedness shall not be secured by or extend to any
Collateral or any other property or assets of the Company or any Restricted
Subsidiary other than the property or assets so acquired, (2) the amount of
Indebtedness secured by any such Lien shall not exceed the purchase price of the
property or assets acquired and (3) Lien securing such Indebtedness either (x)
exists at the time of such acquisition or construction or (y) shall be created
within 180 days of such acquisition; (r) 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; (s) Liens securing Indebtedness which
is incurred to refinance Indebtedness which has been secured by a Lien or Liens
permitted under this Agreement and which has been incurred in accordance with
the provisions of the Agreement; provided that such Liens do not extend to or
cover any property or assets of the Company or any of the Restricted
Subsidiaries not securing the Indebtedness so refinanced: (t) Liens upon
specific items of inventory or other goods and proceeds of any Person securing
such Person's obligations in respect of bankers' acceptances issued or created
for the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods; (u) Liens

                                 Schedule B-17

<PAGE>

securing reimbursement obligations with respect to commercial letters of credit
which encumber documents and other property relating to such letters of credit
and products and proceeds thereof; (v) Liens securing Acquired Indebtedness
permitted by Section 9.5; provided that (1) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary thereof and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary thereof and (2)
such Liens do not extend to or cover any property or assets of the Company or
any of the Restricted Subsidiaries other than the property or assets that
secured the Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or such Restricted Subsidiary and are no
more favorable to the lienholders than those securing the Acquired Indebtedness
prior to the incurrence of such Acquired Indebtedness by the Company or such
Restricted Subsidiary; (w) Liens on assets acquired or constructed after the
Issue Date and not constituting Collateral securing Indebtedness not to exceed
70% of the lower of the cost of construction or acquisition of such assets or
the fair market value of such assets, in each case determined at the time of
incurrence of such Indebtedness; and (x) Liens for securing the New Senior
Secured Notes.

            "PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

            "PLAN" means an "employee benefit plan" (as defined in section 3(3)
of ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

            "PREFERRED STOCK" means any class of Capital Stock of a corporation
that is preferred over any other class of Capital Stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.

            "PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

            "REAL PROPERTY" means any interest in any real property or any
portion thereof whether owned in fee or leased or otherwise owned.

            "REFINANCING INDEBTEDNESS" means (a) Indebtedness of the Company or
a Subsidiary Guarantor to the extent the proceeds thereof are used solely to
refinance (whether by amendment, renewal, extension or refunding) all or any
part of any Indebtedness of the Company or any of the Restricted Subsidiaries
and (b) Indebtedness of any Restricted Subsidiary (other than a Subsidiary
Guarantor) to the extent the proceeds thereof are used solely to refinance
(whether by amendment, renewal, extension or refunding) all or any part of any
Indebtedness of a Restricted Subsidiary (other than a Subsidiary Guarantor), in
each such event; provided that (i) the principal amount of Indebtedness incurred
pursuant to this definition (or, if such Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof, the accreted value of such

                                 Schedule B-18

<PAGE>

Indebtedness) shall not exceed the sum of the principal amount of Indebtedness
so refinanced (less any discount from principal amount due upon payment pursuant
to the terms of such Indebtedness) was not incurred in violation of this
Indenture, (ii) in the case of Indebtedness incurred pursuant to this definition
by the Company or any Subsidiary Guarantor, such Indebtedness (x) has no
scheduled principal payment prior to the earlier of (A) the final maturity of
the corresponding portion of the Indebtedness being refinanced or (B) the 91st
day after the final maturity date of the Notes and (y) has an Average Life to
Stated Maturity greater than either (A) the Average Life to Stated Maturity of
the Indebtedness refinanced or (B) the remaining Average Life to Stated Maturity
of the Notes and (iii) if the Indebtedness to be refinanced is Subordinated
Indebtedness, the Indebtedness to be incurred pursuant to this definition shall
also be Subordinated Indebtedness.

            "REGISTER" is defined in Section 15.1.

            "REPUBLIC" means Republic Engineered Products LLC, a Delaware
limited liability company.

            "REQUIRED HOLDERS" means, at any time, the holders of at least 66
2/3% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).

            "RESPONSIBLE OFFICER" means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of the
relevant portion of this agreement.

            "RESTRICTED PAYMENT" is defined in Section 9.8.

            "RESTRICTED SUBSIDIARY" means each Subsidiary of the Company.

            "SALE-LEASEBACK TRANSACTION" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.

            "SALE ORDER" is defined in Section 4.12.

            "SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.

            "SECURITY AGREEMENT" means the security agreement, dated or to be
dated on or prior to date of the Closing, between the Company and the Collateral
Agent, for the benefit of the holders of the Notes, in form and substance
satisfactory to you, the other Purchasers and the Collateral Agent.

                                 Schedule B-19

<PAGE>

            "SECURITY DOCUMENTS" means the Security Agreement and the Mortgage.

            "SELLERS" means collectively, Republic, N&T, and Blue Steel.

            "SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or controller of the Company.

            "SPECIFIED FACILITY" means each of the following: (i) the Massillon
Cold Finish Bar Plant in Massillon, Ohio; (ii) the Gary Cold Finished Bar Plant
in Gary, Indiana; (iii) the Lackawanna Hot Rolled Bar Plant in Blasdell, New
York; (iv) any of the following facilities at the Canton Plant in Canton, Ohio:
the Melt Shop, the Cast Roll, or the Bar Billet Conditioning facility; and (v)
any of the following facilities at the Lorain Plant in Lorain, Ohio: the Blast
Furnace, the BOP Shop, the Billet Caster, the Bloom Caster, the Primary Mill
(includes the four stand), or the "9/10" Mill.

            "STATED MATURITY" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.

            "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a
Subsidiary Guarantor which is expressly subordinated in right of payment to the
Notes or the Guaranty of such Guarantor, as the case may be.

            "SUBSIDIARY" means, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.

            "SUBSIDIARY GUARANTORS" means (a) each domestic Subsidiary of the
Company that owns or holds any Collateral and (b) any domestic Subsidiary of the
Company that guarantees the Notes.

            "SURVIVING ENTITY" is defined in Section 10.1(a).

            "SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based

                                 Schedule B-20

<PAGE>

on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.

            "TITLE INSURANCE COMPANY" means Chicago Title Insurance Company.

            "TITLE POLICY" means, in relation to the Mortgaged Property, an ALTA
standard form title insurance policy issued by the Title Insurance Company (with
such reinsurance or coinsurance as the Collateral Agent may require, any such
reinsurance to be with direct access endorsements) in such amount as may be
determined by the Collateral Agent insuring the priority of the Mortgage of the
Mortgaged Property and that the Company or one of its Subsidiaries holds
marketable fee simple title to the Mortgaged Property, subject only to the
encumbrances permitted by the Mortgage and which shall not contain exceptions
for mechanics liens, persons in occupancy or matters which would be shown by a
survey (except as may be permitted by the Mortgage), shall not insure over any
matter except to the extent that any such affirmative insurance is acceptable to
the Collateral Agent in its sole discretion, and shall contain such endorsements
and affirmative insurance as the Collateral Agent in its discretion may require,
including but not limited to (i) comprehensive endorsement, (ii) usury
endorsement, (iii) and (iv) doing business endorsement.

            "TRANSACTIONS" means the transactions contemplated by the Asset
Purchase Agreement.

            "WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by anyone or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.

                                 Schedule B-21

<PAGE>

                                  SCHEDULE 5.3

<TABLE>
<CAPTION>
               NAME              JURISDICTION         OWNERSHIP           DIRECTORS                    OFFICERS
               ----              ------------         ---------           ---------                    --------
<S>                              <C>                <C>               <C>                <C>
PAV Republic, Inc. ("Parent")      Delaware         N.A.              P F Schweinfurth   President & Secretary:
                                                                      P Leff             P F Schweinfurth
                                                                      E J Antonio        Chief Executive Officer:
                                                                                         P Leff
                                                                                         Vice President & Assistant Secretary:
                                                                                         E J Antonio

Republic Engineered Products,      Delaware         100% by Parent    P F Schweinfurth   President & Secretary:
Inc. ("Company")                                                      P Leff             P F Schweinfurth
                                                                      E J Antonio        Vice President & Assistant Secretary:
                                                                                         P Leff
                                                                                         Vice President & Assistant Secretary:
                                                                                         E J Antonio
                                                                                         Chief Executive Officer:
                                                                                         J Lapinsky

PAV Machine, LLC                   Delaware         100% by Company   P F Schweinfurth   President & Secretary:
                                                                      P Leff             P F Schweinfurth
                                                                      E J Antonio        Vice President & Assistant Secretary:
                                                                                         P Leff
                                                                                         Vice President & Assistant Secretary:
                                                                                         E J Antonio
                                                                                         Chief Executive Officer:
                                                                                         J Lapinsky

PAV Railroad, Inc.                 Delaware         100% by Company   P F Schweinfurth   President & Secretary:
                                                                      P Leff             P F Schweinfurth
                                                                      E J Antonio        Vice President & Assistant Secretary:
                                                                                         P Leff
                                                                                         Vice President & Assistant Secretary:
                                                                                         E J Antonio
                                                                                         Chief Executive Officer:
                                                                                         J Lapinsky

2011448 Ontario Limited            Ontario, Canada  100% by Company   Hugh Laurence      None
</TABLE>

<PAGE>

                                                                       EXHIBIT 1

                                  FORM OF NOTE

                       REPUBLIC ENGINEERED PRODUCTS, INC.
                       10% SENIOR NOTE DUE AUGUST 31, 2009

No. [___]

$[_____________________]                                       December 19, 2003

            FOR VALUE RECEIVED, the undersigned, REPUBLIC ENGINEERED PRODUCTS,
INC. (herein called the "Company"), a corporation organized and existing under
the laws of the State of Delaware, hereby promises to pay to [_____________], or
registered assigns, the principal sum of [_____________] on August 31, 2009,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) on the unpaid balance thereof at the rate of 10% per annum payable quarterly
in arrears, together with principal amortization in the aggregate annual amount
of 1% of the original principal amount, on March 31, June 30, September 30 and
December 31 in each year, commencing with December 31, 2003 or the next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest
payable quarterly as aforesaid (or, at the option of the registered holder
hereof, on demand), at a rate per annum from time to time equal to the greater
of (i) 12% or (ii) 4% over the rate of interest reported in The Wall Street
Journal from time to time as the "Prime Rate."

            Payments of principal of and interest on this Note are to be made in
lawful money of the United States of America by wire transfer to the account
designated for the holder hereof on Schedule A to the Note Purchase Agreement
(as defined below) or as otherwise directed by the holder hereof in accordance
with Section 16.2 of the Note Purchase Agreement.

            This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to the Note Purchase Agreement, dated as of even date
herewith (as from time to time amended, the "Note Purchase Agreement"), between
the Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 23 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.1 of the Note Purchase Agreement.

            This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the

                                   Exhibit 1-1

<PAGE>

purpose of receiving payment and for all other purposes, and the Company will
not be affected by any notice to the contrary.

            The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Note Purchase Agreement, but not otherwise.

            If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price and with the effect
provided in the Note Purchase Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                   Exhibit 1-2

<PAGE>

            This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

                                             REPUBLIC ENGINEERED PRODUCTS, INC.

                                             By _____________________________
                                                Name:
                                                Title:

Signature pages to Note

                                   Exhibit 1-3

<PAGE>

                                                                     EXHIBIT 4.5

                       FORM OF OPINION OF SPECIAL COUNSEL
                                 TO THE COMPANY

                            Matters To Be Covered In
                    Opinion of Special Counsel To the Company

            1. Each of the Parent Guarantor, the Company and their respective
Subsidiaries being duly incorporated, validly existing and in good standing and
having requisite corporate power and authority to issue and sell the Notes and
to execute and deliver the documents.

            2. Due authorization and execution of the documents and such
documents being legal, valid, binding and enforceable.

            3. No conflicts with charter documents, laws or other agreements.

            4. All consents required to issue and sell the Notes and to execute
and deliver the documents having been obtained.

            5. No litigation questioning validity of documents.

            6. The Notes not requiring registration under the Securities Act of
1933, as amended; no need to qualify an indenture under the Trust Indenture Act
of 1939, as amended.

            7. No violation of Regulations U or X of the Federal Reserve Board.

            8. Company not an "investment company", or a company "controlled" by
an "investment company", under the Investment Company Act of 1940, as amended.

            9. Attachment, perfection and enforceability of the security
interests granted by the Company to the Collateral Agent, including an opinion
of local counsel as to enforceability of the Mortgage.

                                  Exhibit 4.5-1

<PAGE>

                                                                 EXHIBIT 9.15(a)

                            FORM OF JOINDER AGREEMENT

                  JOINDER AGREEMENT (this "Joinder Agreement") dated as of
            _____________________________, among [GUARANTOR] (the "New
            Subsidiary Guarantor"), a subsidiary of REPUBLIC ENGINEERED
            PRODUCTS, INC., a Delaware corporation (the "Company") and the
            Guarantors (the "Existing Guarantors") under the Note Purchase
            Agreement referred to below, and FLEET CAPITAL CORPORATION, as
            collateral agent under the Note Purchase Agreement (the "Collateral
            Agent").

                                   WITNESSETH:

            WHEREAS the Company and the Existing Guarantors have heretofore
executed and delivered to the Collateral Agent a Note Purchase Agreement (the
"Note Purchase Agreement") dated as of December 19, 2003 providing for the
issuance of an aggregate principal amount at maturity of up to $21,000,000 of
10% Senior Notes due 2009 (the "Notes");

            WHEREAS Section 9.15 of the Note Purchase Agreement provides that
under certain circumstances the Company is required to cause the New Subsidiary
Guarantor to execute and deliver to the Collateral Agent a joinder agreement
pursuant to which the New Subsidiary Guarantor shall unconditionally guarantee
all the Company's obligations under the Notes pursuant to a Guaranty on the
terms and conditions set forth herein; and

            NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor, the Company, the Existing Guarantors and the Collateral
Agent mutually covenant and agree for the equal and ratable benefit of the
holders of the Notes as follows:

                  1. Agreement to Guarantee. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Guarantors, to unconditionally
guarantee the Company's obligations under the Notes and under Note Purchase
Agreement the on the terms and subject to the conditions set forth in Section 11
of the Note Purchase Agreement and to be bound by all other applicable
provisions of the Note Purchase Agreement.

                  2. Ratification of Note Purchase Agreement. Except as
expressly amended hereby, the Note Purchase Agreement is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Joinder Agreement shall form a part
of the Note Purchase Agreement for all purposes, and every holder of Notes
heretofore or hereafter authenticated and delivered shall be bound hereby.

                  3. Governing Law. The internal laws of the State of New York
shall govern this Supplemental Indenture.

                                  Exhibit 4.5-1

<PAGE>

                  4. Collateral Agent Makes No Representation. The Collateral
Agent makes no representation as to the validity or sufficiency of this Joinder
Agreement.

                  5. Counterparts. The parties may sign any number of copies of
this Joinder Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.

                  6. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.

            IN WITNESS WHEREOF, the parties hereto have caused this Joinder
Agreement to be duly executed as of the date first above written.

                                           [NEW SUBSIDIARY GUARANTOR],

                                           By: _________________________________
                                               Name:
                                               Title:

                                           REPUBLIC ENGINEERED PRODUCTS, INC.

                                           By: _________________________________
                                               Name:
                                               Title:

<PAGE>

                                        PAV REPUBLIC, INC., as Parent Guarantor

                                        By: _________________________________
                                            Name:
                                            Title:

<PAGE>

                                           PAV RAILROAD, INC., as Subsidiary
                                           Guarantor:

                                           By: _________________________________
                                               Name:
                                               Title:

<PAGE>

                                           PAV MACHINE, LLC, as Subsidiary
                                           Guarantor:

                                           By: _________________________________
                                               Name:
                                               Title:

                                           FLEET CAPITAL CORPORATION, as
                                           Collateral Agent

                                           By: _________________________________
                                               Name:
                                               Title:<PAGE>

                                                                    EXHIBIT 10.8

                                                                  EXECUTION COPY

                               SECURITY AGREEMENT

            SECURITY AGREEMENT, dated as of December 19, 2003, between Republic
Engineered Products, Inc., a Delaware corporation (the "Company"), and Fleet
Capital Corporation, as collateral agent (hereinafter, in such capacity, the
"Collateral Agent") for itself and other holders of Notes (hereinafter,
collectively, the "Noteholders") which are or may become purchasers under a Note
Purchase Agreement dated as of December 19, 2003 (as amended and in effect from
time to time, the "Note Purchase Agreement"), among the Company, the Noteholders
and the Collateral Agent.

            WHEREAS, the Company has entered into an Amended and Restated Asset
Purchase Agreement, dated as of December 19, 2003 (the" Asset Purchase
Agreement"), by and among the Company, as purchaser, and Republic Engineered
Products LLC ("Republic"), N&T Railway Company LLC ("N&T"), and Blue Steel
Capital Corp. ("Blue Steel" and collectively with Republic and N&T, the
"Sellers");

            WHEREAS, delivery of the Notes is a condition precedent to the
Sellers' obligation to sell their assets pursuant to the Asset Purchase
Agreement;

            WHEREAS, it is a condition precedent to the Noteholders' purchasing
any Note under the Note Purchase Agreement that the Company execute and deliver
to the Collateral Agent, for the benefit of the Noteholders and the Collateral
Agent, a security agreement in substantially the form hereof; and

            WHEREAS, the Company wishes to grant a security interest in favor of
the Collateral Agent, for the benefit of the Noteholders and the Collateral
Agent, as herein provided;

            NOW, THEREFORE, in consideration of the promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

            1. Definitions. All capitalized terms used herein without
definitions shall have the respective meanings provided therefor in the Note
Purchase Agreement. The term "State", as used herein, means the State of New
York. All terms defined in the Uniform Commercial Code of the State and used
herein shall have the same definitions herein as specified therein. However, if
a term is defined in Article 9 of the Uniform Commercial Code of the State
differently than in another Article of the Uniform Commercial Code of the State,
the term has the meaning specified in Article 9. The term "electronic document"
applies in the event that the 2003 revisions to Article 7, with amendments to
Article 9, of the Uniform Commercial Code, in substantially the form approved by
the American Law Institute and the National Conference of Commissioners on
Uniform State Laws, are now or hereafter adopted and become effective in the
State or in any other relevant jurisdiction. The term "Obligations", as used
herein, means all of the indebtedness, obligations and liabilities of the
Company to the Collateral Agent and the Noteholders, individually or
collectively, whether direct or indirect, joint or several,

<PAGE>

                                      -2-

absolute or contingent, due or to become due, now existing or hereafter arising
under or in respect of the Note Purchase Agreement, any promissory notes or
other instruments or agreements executed and delivered pursuant thereto or in
connection therewith or this Agreement.

            2. GRANT OF SECURITY INTEREST. The Company hereby grants to the
Collateral Agent, for the benefit of the Noteholders and the Collateral Agent,
to secure the payment and performance in full of all of the Obligations, a
security interest in and pledges and assigns to the Collateral Agent, for the
benefit of the Noteholders and the Collateral Agent, all of the following
properties, assets and rights of the Company, as applicable, whether now owned
or hereafter acquired or arising, and all proceeds (including insurance
proceeds) and products thereof and all general intangibles, documents and
instruments relating to any of the following (all of the same being hereinafter
called the "Collateral"):

                        (a) business interruption insurance claims and proceeds
                  of business interruption insurance provided that such security
                  interests shall be limited to fifty percent (50%) of any
                  proceeds greater than Five Million U.S. Dollars ($5,000,000)
                  but less than Twenty Five Million U.S. Dollars ($25,000,000)
                  received by the Sellers or the Company after December 5, 2003,
                  for business interruption insurance coverage relating to the
                  loss events experienced by the Sellers at their Lorain, Ohio,
                  plant in January, June, and August of 2003; provided that such
                  security interests shall in no event exceed Ten Million U.S.
                  Dollars ($10,000,000) in the aggregate; and

                        (b) all furniture, fixtures, equipment, or other goods
                  associated with or used in connection with the Canton Cast
                  Roll Facility (all of the foregoing of the Company described
                  in this clause (b) collectively referred to herein as the
                  "Canton Fixed Assets"), and all insurance claims, tort claims,
                  chattel paper and all general intangibles related to the
                  Canton Fixed Assets (including, without limitation, all
                  patents of the Company relating to equipment used by the
                  Company exclusively at the Canton Cast Roll Facility but
                  excluding the Mexican patent applications with numbers 9802605
                  and 9603223) (all such patents of the Company collectively
                  referred to herein as the "Cast Roll Intellectual Property").

            3. AUTHORIZATION TO FILE FINANCING STATEMENTS. The Company hereby
irrevocably authorizes the Collateral Agent at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as described in Section 2 above or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdiction for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether the Company is an organization, the type of organization
and any organizational

<PAGE>

                                      -3-

identification number issued to the Company and, (ii) in the case of a financing
statement filed as a fixture filing, a sufficient description of real property
to which the Collateral relates. The Company agrees to furnish any such
information to the Collateral Agent promptly upon the Collateral Agent's
request. The Company also ratifies its authorization for the Collateral Agent to
have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.

            4. OTHER ACTIONS. Further to ensure the attachment, perfection and
first priority of, and the ability of the Collateral Agent to enforce, the
Collateral Agent's security interest in the Collateral, the Company agrees, in
each case at the Company's expense, to take the following actions with respect
to the following Collateral, as applicable, and without limitation on the
Company's other obligations contained in this Agreement:

                  4.1. PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If the
            Company shall, now or at any time hereafter, hold or acquire any
            promissory notes or tangible chattel paper constituting Collateral,
            the Company shall forthwith endorse, assign and deliver the same to
            the Collateral Agent, accompanied by such instruments of transfer or
            assignment duly executed in blank as the Collateral Agent may from
            time to time specify.

                  4.2. COLLATERAL IN THE POSSESSION OF A BAILEE. If any
            Collateral is, now or at any time hereafter, in the possession of a
            bailee, the Company shall promptly notify the Collateral Agent
            thereof and, at the Collateral Agent's request and option, shall
            promptly obtain an acknowledgement from the bailee, in form and
            substance reasonably satisfactory to the Collateral Agent, that the
            bailee holds such Collateral for the benefit of the Collateral
            Agent, such bailee's agreement to comply, without further consent of
            the Company, at any time with instructions of the Collateral Agent
            as to such Collateral. The Collateral Agent agrees with the Company
            that the Collateral Agent shall not give any such instructions
            unless an Event of Default has occurred and is continuing or would
            occur after taking into account any action by the Company with
            respect to the bailee.

                  4.3. ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If the
            Company, now or at any time hereafter, holds or acquires an interest
            in any Collateral consisting of electronic chattel paper or any
            "transferable record," as that term is defined in Section 201 of the
            federal Electronic Signatures in Global and National Commerce Act,
            or in Section 16 of the Uniform Electronic Transactions Act as in
            effect in any relevant jurisdiction, the Company shall promptly
            notify the Collateral Agent thereof and, at the request and option
            of the Collateral Agent, shall take such action as the Collateral
            Agent may reasonably request to vest in the Collateral Agent
            control, under Section 9-105 of the Uniform Commercial Code in
            effect in such jurisdiction, of such electronic chattel paper or
            control under Section 201 of the federal Electronic Signatures in
            Global and National Commerce Act or, as the case may be, Section 16
            of the Uniform Electronic Transactions Act, as so in effect in such
            jurisdiction, of such transferable record. The Collateral Agent
            agrees with the Company that the Collateral Agent will

<PAGE>

                                      -4-

            arrange, pursuant to procedures satisfactory to the Collateral Agent
            and so long as such procedures will not result in the Collateral
            Agent's loss of control, for the Company to make alterations to the
            electronic chattel paper or transferable record permitted under
            Section 9-105 of the Uniform Commercial Code or, as the case may be,
            Section 201 of the federal Electronic Signatures in Global and
            National Commerce Act or Section 16 of the Uniform Electronic
            Transactions Act for a party in control to make without loss of
            control, unless an Event of Default has occurred and is continuing
            or would occur after taking into account any action by the Company
            with respect to such electronic chattel paper or transferable
            record.

                  4.4. LETTER-OF-CREDIT RIGHTS. If the Company is, now or at any
            time hereafter, a beneficiary under a letter of credit constituting
            Collateral described in Section 2 above, the Company shall promptly
            notify the Collateral Agent thereof and, at the request and option
            of the Collateral Agent, the Company shall, pursuant to an agreement
            in form and substance reasonably satisfactory to the Collateral
            Agent, either (a) arrange for the issuer and any confirmer or other
            nominated person of such letter of credit to consent to an
            assignment to the Collateral Agent of the proceeds of the letter of
            credit or (b) arrange for the Collateral Agent to become the
            transferee beneficiary of the letter of credit, with the Collateral
            Agent agreeing, in each case, that the proceeds of the letter of
            credit are to be applied to the Obligations as provided in the Note
            Purchase Agreement.

                  4.5. COMMERCIAL TORT CLAIMS. If the Company shall, now or at
            any time hereafter, hold or acquire a commercial tort claim
            described in Section 2 above, the Company shall immediately notify
            the Collateral Agent in a writing signed by the Company of the
            particulars thereof and grant to the Collateral Agent, for the
            benefit of the Noteholders and the Collateral Agent, in such writing
            a security interest therein and in the proceeds thereof, all upon
            the terms of this Agreement, with such writing to be in form and
            substance reasonably satisfactory to the Collateral Agent.

                  4.6. OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. The Company
            further agrees, upon the request of the Collateral Agent and at the
            Collateral Agent's option, to take any and all other actions as the
            Collateral Agent may reasonably determine to be necessary or useful
            for the attachment, perfection and first priority of, and the
            ability of the Collateral Agent to enforce, the Collateral Agent's
            security interest in any and all of the Collateral, including,
            without limitation, (a) executing, delivering and, where
            appropriate, filing financing statements and amendments relating
            thereto under the Uniform Commercial Code as in effect in any
            relevant jurisdiction, to the extent, if any, that the Company's
            signature thereon is required therefor, (b) causing the Collateral
            Agent's name to be noted as secured party on any certificate of
            title for a titled good if such notation is a condition to
            attachment, perfection or priority of, or ability of the Collateral
            Agent to enforce, the Collateral Agent's security interest in such
            Collateral, (c) complying with any provision of any statute,
            regulation or treaty of the United States as to any Collateral if
            compliance with such provision is a condition to attachment,
            perfection or priority of, or ability of the Collateral Agent
<PAGE>

                                       -5-

            to enforce, the Collateral Agent's security interest in such
            Collateral, (d) using commercially reasonable efforts to obtain
            governmental and other third party waivers, consents and approvals,
            in form and substance reasonably satisfactory to the Collateral
            Agent, including, without limitation, any consent of any licensor,
            lessor or other person obligated on Collateral, and (e) taking all
            actions under any other law, as reasonably determined by the
            Collateral Agent to be applicable in any foreign jurisdiction.

            5. RELATION TO OTHER SECURITY DOCUMENTS. The provisions of this
Agreement supplement the provisions of any real estate mortgage or deed of trust
granted by the Company to the Collateral Agent, for the benefit of the
Noteholders and the Collateral Agent, and which secures the payment or
performance of any of the Obligations. Nothing contained in any such real estate
mortgage or deed of trust shall derogate from any of the rights or remedies of
the Collateral Agent or any of the Noteholders hereunder.

            6. REPRESENTATIONS AND WARRANTIES CONCERNING COMPANY'S LEGAL STATUS.
The Company has previously delivered to the Collateral Agent a certificate
signed by the Company and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Company represents and warrants to the Noteholders and the
Collateral Agent as follows: (a) the Company's exact legal name is that
indicated on the Perfection Certificate and on the signature page hereof, (b)
the Company is an organization of the type, and is organized in the
jurisdiction, set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Company's organizational identification
number or accurately states that the Company has none, (d) the Perfection
Certificate accurately sets forth the Company's place of business or, if more
than one, its chief executive office, as well as the Company's mailing address,
if different, (e) all other information set forth on the Perfection Certificate
pertaining to the Company is accurate and complete, and (f) there has been no
change in any of such information since the date on which the Perfection
Certificate was signed by the Company.

            7. COVENANTS CONCERNING COMPANY'S LEGAL STATUS. The Company
covenants with the Noteholders and the Collateral Agent as follows: (a) without
providing at least thirty (30) days prior written notice to the Collateral
Agent, the Company will not change its name, its place of business or, if more
than one, chief executive office, or its mailing address or organizational
identification number if it has one, (b) if the Company does not have an
organizational identification number and later obtains one, the Company will
forthwith notify the Collateral Agent of such organizational identification
number, and (c) except as otherwise permitted by the Note Purchase Agreement,
the Company will not change its type of organization, jurisdiction of
organization or other legal structure.

            8. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. The
Company further represents and warrants to the Noteholders and the Collateral
Agent as follows: (a) the Company is the owner of or has other rights in or
power to transfer the Collateral, free from any right or claim of any person or
any adverse Lien, except for the security interest created by this Agreement and
other Liens permitted by the Note

<PAGE>

                                      -6-

Purchase Agreement, (b) none of the Collateral constitutes, or is the proceeds
of, "farm products" as defined in Section 9-102(a)(34) of the Uniform Commercial
Code of the State, (c) the Company holds no commercial tort claim, (d) except
where non-compliance would not have a Material Adverse Effect, the Company has
at all times operated its business in compliance with all applicable provisions
of the federal Fair Labor Standards Act, as amended, and with all applicable
provisions of federal, state and local statutes and ordinances dealing with the
control, shipment, storage or disposal of hazardous materials or substances, and
(e) there has been no change in any of such information since the date on which
the Perfection Certificate was signed by the Company.

            9. COVENANTS CONCERNING COLLATERAL, ETC. The Company further
covenants with the Collateral Agent and the Noteholders as follows: (a) the
Collateral, to the extent not delivered to the Collateral Agent pursuant to
Section 4, will be kept at those locations listed on the Perfection Certificate
and the Company will not remove the Collateral from such locations, without
providing at least thirty (30) days prior written notice to the Collateral
Agent, (b) except for the security interests herein granted and liens permitted
by the Note Purchase Agreement, the Company shall be the owner of or have other
rights in the Collateral free from any right or claim of any other person or any
Lien, and the Company shall defend the same against all claims and demands of
all persons at any time claiming the same or any interests therein adverse to
the Collateral Agent or any of the Noteholders, (c) the Company shall not
pledge, mortgage or create, or suffer to exist any right of any person in or
claim by any person to the Collateral, or any Lien in the Collateral in favor of
any person, other than the Collateral Agent other than Liens permitted by the
Note Purchase Agreement, (d) the Company will keep the Collateral in good order
and repair and will not use the same in violation of law or any policy of
insurance thereon, except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect, (e) the Company will permit the
Collateral Agent, or its designee, to inspect the Collateral at any reasonable
time, wherever located, (f) the Company will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of the Collateral or incurred in connection
with this Agreement, except as permitted by the Note Purchase Agreement, (g) the
Company will continue to operate its business in compliance with all applicable
provisions of the federal Fair Labor Standards Act, as amended, and with all
applicable provisions of federal, state and local statutes and ordinances
dealing with the control, shipment, storage or disposal of hazardous materials
or substances, except where the failure to do so would not have a Material
Adverse Effect, and (h) the Company will not sell or otherwise dispose, or offer
to sell or otherwise dispose, of the Collateral or any interest therein except
for dispositions permitted by the Note Purchase Agreement.

            10. INSURANCE.

                  10.1. MAINTENANCE OF INSURANCE. The Company will maintain with
            financially sound and reputable insurers insurance with respect to
            its properties and business against such casualties and
            contingencies as shall be in accordance with general practices of
            businesses of established reputations engaged in the same or similar
            activities in similar geographic areas. Such insurance shall be in

<PAGE>

                                      -7-

            such minimum amounts that the Company will not be deemed a
            co-insurer under applicable insurance laws, regulations and policies
            and otherwise shall be in such amounts, contain such terms, be in
            such forms and be for such periods as may be reasonably satisfactory
            to the Collateral Agent. In addition, all insurance insuring any of
            the Collateral and the interruption of the business of the Company
            shall be payable to the Collateral Agent as additional insured and
            loss payee under a "standard" or "New York" loss payee clause for
            the benefit of the Noteholders and the Collateral Agent. Without
            limiting the foregoing, the Company will (a) keep all of its
            physical property insured with casualty or physical hazard insurance
            on an "all risks" basis, with broad form flood and earthquake
            coverages and electronic data processing coverage, with a full
            replacement cost endorsement and an "agreed amount" clause in an
            amount equal to 100% of the full replacement cost of such property,
            (b) maintain all such workers' compensation or similar insurance as
            may be required by law and (c) maintain, in amounts and with
            deductibles equal to those generally maintained by businesses
            engaged in similar activities in similar geographic areas, general
            public liability insurance against claims of bodily injury, death or
            property damage occurring, on, in or about the properties of the
            Company; and business interruption insurance.

                  10.2. INSURANCE PROCEEDS. The proceeds of any casualty
            insurance in respect of any casualty loss of any of the Collateral
            (a) so long as no Default or Event of Default has occurred and is
            continuing and to the extent that the amount of such proceeds is
            less than $100,000, be disbursed to the Company for direct
            application by the Company solely to the repair or replacement of
            the Company's property so damaged or destroyed and (b) in all other
            circumstances, be held by the Collateral Agent as cash collateral
            for the Obligations. The Collateral Agent may, at its sole option,
            disburse from time to time all or any part of such proceeds so held
            as cash collateral, upon such terms and conditions as the Collateral
            Agent may reasonably prescribe, for direct application by the
            Company solely to the repair or replacement of the Company's
            property so damaged or destroyed, or the Collateral Agent may apply
            all or any part of such proceeds to the Obligations with the Notes
            (if not then terminated) being reduced by the amount so applied to
            the Obligations. All proceeds of business interruption insurance
            constituting Collateral will be applied to prepay the Notes as set
            forth in the Note Purchase Agreement.

                  10.3. CONTINUATION OF INSURANCE. All policies of insurance
            shall provide for at least thirty (30) days prior written
            cancellation notice to the Collateral Agent. In the event of failure
            by the Company to provide and maintain insurance as herein provided,
            the Collateral Agent may, at its option, provide such insurance and
            charge the amount thereof to the Company. The Company shall furnish
            the Collateral Agent with certificates of insurance and policies
            evidencing compliance with the foregoing insurance provision.

<PAGE>

                                      -8-

            11. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.

                  11.1. EXPENSES INCURRED BY COLLATERAL AGENT. In the Collateral
            Agent's discretion, the Collateral Agent may discharge taxes and
            other encumbrances at any time levied or placed on any of the
            Collateral, maintain any of the Collateral, make repairs thereto,
            and pay any necessary filing fees or insurance premiums. The Company
            agrees to reimburse the Collateral Agent on demand for any and all
            expenditures so made. The Collateral Agent shall have no obligation
            to the Company to make any such expenditures, nor shall the making
            thereof be construed as a waiver or cure of any Default or Event of
            Default.

                  11.2. COLLATERAL AGENT'S OBLIGATIONS AND DUTIES. Anything
            herein to the contrary notwithstanding, the Company shall remain
            obligated and liable under each contract or agreement comprised in
            the Collateral to be observed or performed by the Company
            thereunder. Neither the Collateral Agent nor any Noteholder shall
            have any obligation or liability under any such contract or
            agreement by reason of or arising out of this Agreement or the
            receipt by the Collateral Agent or any Noteholder of any payment
            relating to any of the Collateral, nor shall the Collateral Agent or
            any Noteholder be obligated in any manner to perform any of the
            obligations of the Company under or pursuant to any such contract or
            agreement, to make inquiry as to the nature or sufficiency of any
            payment received by the Collateral Agent or any Noteholder in
            respect of the Collateral or as to the sufficiency of any
            performance by any party under any such contract or agreement, to
            present or file any claim, to take any action to enforce any
            performance or to collect the payment of any amounts which may have
            been assigned to the Collateral Agent or to which the Collateral
            Agent or any Noteholder may be entitled at any time or times. The
            Collateral Agent's sole duty with respect to the custody, safe
            keeping and physical preservation of the Collateral in its
            possession, under Section 9-207 of the Uniform Commercial Code of
            the State or otherwise, shall be to deal with such Collateral in the
            same manner as the Collateral Agent deals with similar property for
            its own account.

            12. POWER OF ATTORNEY.

                  12.1. APPOINTMENT AND POWERS OF COLLATERAL AGENT. The Company
            hereby irrevocably constitutes and appoints the Collateral Agent and
            any officer or agent thereof, with full power of substitution, as
            its true and lawful attorneys-in-fact with full irrevocable power
            and authority in the place and stead of the Company or in the
            Collateral Agent's own name, for the purpose of carrying out the
            terms of this Agreement, to take (while an Event of Default shall
            have occurred and be continuing) any and all appropriate action and
            to execute any and all documents and instruments that may be
            necessary or useful to accomplish the purposes of this Agreement
            and, without limiting the generality of the foregoing, hereby gives
            said attorneys the power and right, on behalf of the Company,
            without notice to or assent by the Company, to do the following:

<PAGE>

                                      -9-

                        (a) upon the occurrence and during the continuance of an
                  Event of Default, generally to sell, transfer, pledge, make
                  any agreement with respect to or otherwise dispose of or deal
                  with the Collateral in such manner as is consistent with the
                  Uniform Commercial Code of the State and as fully and
                  completely as though the Collateral Agent were the absolute
                  owner thereof for all purposes, and to do, at the Company's
                  expense, at any time, or from time to time, all acts and
                  things which the Collateral Agent deems necessary or useful to
                  protect, preserve or realize upon the Collateral and the
                  Collateral Agent's security interest therein, in order to
                  effect the intent of this Agreement, all no less fully and
                  effectively as the Company might do, including, without
                  limitation, the filing and prosecuting of registration and
                  transfer applications with the appropriate federal, state, or
                  local agencies or authorities with respect to patentable
                  inventions and processes, the execution, delivery and
                  recording, in connection with any sale or other disposition of
                  the Collateral, of the endorsements, assignments or other
                  instruments of conveyance or transfer with respect to such
                  Collateral; and

                        (b) regardless of whether or not an Event of Default has
                  occurred and is continuing, to the extent that the Company's
                  authorization given in Section 3 is not sufficient, to file
                  such financing statements with respect hereto, with or without
                  the Company's signature, or a photocopy of this Agreement in
                  substitution for a financing statement, as the Collateral
                  Agent may deem appropriate and to execute in the Company's
                  name such financing statements and amendments thereto and
                  continuation statements which may require the Company's
                  signature.

                  12.2. RATIFICATION BY COMPANY. To the extent permitted by law,
            the Company hereby ratifies all that said attorneys shall lawfully
            do or cause to be done by virtue hereof. This power of attorney is a
            power coupled with an interest and is irrevocable.

                  12.3. NO DUTY ON COLLATERAL AGENT. The powers conferred on the
            Collateral Agent hereunder are solely to protect the interests of
            the Collateral Agent and the Noteholders in the Collateral and shall
            not impose any duty upon the Collateral Agent to exercise any such
            powers. The Collateral Agent shall be accountable only for the
            amounts that it actually receives as a result of the exercise of
            such powers, and neither it nor any of its officers, directors,
            employees or agents shall be responsible to the Company for any act
            or failure to act, except for the Collateral Agent's own gross
            negligence or willful misconduct.

            13. RIGHTS AND REMEDIES. If an Event of Default shall have occurred
and be continuing, the Collateral Agent, without any other notice to or demand
upon the Company, shall have in any jurisdiction in which enforcement hereof is
sought, in addition to all other rights and remedies, the rights and remedies of
a secured party under the Uniform Commercial Code of the State and any
additional rights and remedies as may be provided to a secured party in any
jurisdiction in which Collateral is located,

<PAGE>

                                      -10-

including the right to take possession of the Collateral, and for that purpose
the Collateral Agent may, so far as the Company can give authority therefor,
enter upon any premises on which the Collateral may be situated and remove the
same therefrom. The Collateral Agent may in its discretion require the Company
to assemble all or any part of the Collateral at such location or locations
within the jurisdiction(s) of the Company's principal office(s) or at such other
locations as the Collateral Agent may reasonably designate. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Collateral Agent shall give to
the Company at least ten (10) Business Days prior written notice of the time and
place of any public sale of Collateral or of the time after which any private
sale or any other intended disposition is to be made. The Company hereby
acknowledges that ten (10) Business Days prior written notice of such sale or
sales shall be reasonable notice. In addition, the Company waives any and all
rights that it may have to a judicial hearing in advance of the enforcement of
any of the Collateral Agent's rights and remedies hereunder, including its right
following an Event of Default to take immediate possession of the Collateral and
to exercise its rights and remedies with respect thereto.

            14. STANDARDS FOR EXERCISING RIGHTS AND REMEDIES. To the extent that
applicable law imposes duties on the Collateral Agent to exercise remedies in a
commercially reasonable manner, the Company acknowledges and agrees that it is
not commercially unreasonable for the Collateral Agent (a) to fail to incur
expenses reasonably deemed significant by the Collateral Agent to prepare
Collateral for disposition or otherwise to fail to complete raw material or work
in process into finished goods or other finished products for disposition, (b)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
fail to remove Liens on or any adverse claims against Collateral, (d) to
exercise collection remedies against account debtors and other persons obligated
on Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (f) to contact other persons, whether or not in the
same business as the Company, for expressions of interest in acquiring all or
any portion of the Collateral, (g) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the collateral is of
a specialized nature, (h) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, (k) to purchase insurance or
credit enhancements to insure the Collateral Agent against risks of loss,
collection or disposition of Collateral or to provide to the Collateral Agent a
guaranteed return from the collection or disposition of Collateral, or (l) to
the extent deemed appropriate by the Collateral Agent, to obtain the services of
brokers, investment bankers, consultants and other professionals to assist the
Collateral Agent in the collection or disposition of any of the Collateral. The
Company acknowledges that the purpose of this Section 14 is to provide
non-exhaustive indications of what actions or omissions by the Collateral Agent
would fulfill the

<PAGE>

                                      -11-

Collateral Agent's duties under the Uniform Commercial Code of the State or any
other relevant jurisdiction in the Collateral Agent's exercise of remedies
against the Collateral and that other actions or omissions by the Collateral
Agent shall not be deemed to fail to fulfill such duties solely on account of
not being indicated in this Section 14 Without limitation upon the foregoing,
nothing contained in this Section 14 shall be construed to grant any rights to
the Company or to impose any duties on the Collateral Agent that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section 14.

            15. NO WAIVER BY COLLATERAL AGENT, ETC. The Collateral Agent shall
not be deemed to have waived any of its rights and remedies in respect of the
Obligations or the Collateral unless such waiver shall be in writing and signed
by the Collateral Agent with the consent of the Required Holders. No delay or
omission on the part of the Collateral Agent in exercising any right or remedy
shall operate as a waiver of such right or remedy or any other right or remedy.
A waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. All rights and remedies of the
Collateral Agent with respect to the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or concurrently at such
time or at such times as the Collateral Agent deems expedient.

            16. SURETYSHIP WAIVERS BY COMPANY. The Company waives demand,
notice, protest, notice of acceptance of this Agreement, notice of loans made,
credit extended, Collateral received or delivered or other action taken in
reliance hereon and all other demands and notices of any description. With
respect to both the Obligations and the Collateral, the Company assents to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Collateral Agent may deem advisable. The Collateral
Agent shall have no duty as to the collection or protection of the Collateral or
any income therefrom, the preservation of rights against prior parties, or the
preservation of any rights pertaining thereto beyond the safe custody thereof as
set forth in Section 11.2. The Company further waives any and all other
suretyship defenses.

            17. MARSHALLING. Neither the Collateral Agent nor any Noteholder
shall be required to marshal any present or future collateral security
(including but not limited to the Collateral) for, or other assurances of
payment of, the Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order, and all of the
rights and remedies of the Collateral Agent or any Noteholder hereunder and of
the Collateral Agent or any Noteholder in respect of such collateral security
and other assurances of payment shall be cumulative and in addition to all other
rights and remedies, however existing or arising. To the extent that it lawfully
may, the Company hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Collateral Agent's rights and remedies under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which

<PAGE>

                                      -12-

any of the Obligations is secured or payment thereof is otherwise assured, and,
to the extent that it lawfully may, the Company hereby irrevocably waives the
benefits of all such laws.

            18. PROCEEDS OF DISPOSITIONS; EXPENSES. The Company shall pay to the
Collateral Agent on demand any and all reasonable expenses, including reasonable
attorneys' fees and disbursements, incurred or paid by the Collateral Agent in
protecting, preserving or enforcing the Collateral Agent's rights and remedies
under or in respect of any of the Obligations or the Collateral. After deducting
all of said expenses, the residue of any proceeds of collection or sale or other
disposition of the Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in such order or preference as is
provided in the Note Purchase Agreement, proper allowance and provision being
made for any Obligations not then due. Upon the final payment and satisfaction
in full of all of the Obligations and after making any payments required by
Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the
State, any excess shall be returned to the Company. In the absence of final
payment and satisfaction in full of all of the Obligations, the Company shall
remain liable for any deficiency.

            19. OVERDUE AMOUNTS. Until paid, all amounts due and payable by the
Company hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the rate of interest for overdue
principal set forth in the Note Purchase Agreement.

            20. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. The Company agrees that any action or claim arising out of any dispute in
connection with this Agreement, any rights or obligations hereunder or the
performance or enforcement of such rights or obligations may be brought in the
courts of the State of New York or any federal court sitting therein and
consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Company by mail at the address
specified in Section 21 of the Note Purchase Agreement. The Company hereby
waives any objection that it may now or hereafter have to the venue of any such
suit or any such court or that such suit is brought in an inconvenient court.

            21. WAIVER OF JURY TRIAL. THE COMPANY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OR ENFORCEMENT OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as
prohibited by law, the Company waives any right which it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. The Company (a) certifies that neither the
Collateral Agent or any Noteholder nor any representative, agent or attorney of
the Collateral Agent or any Noteholder has represented, expressly or otherwise,
that the Collateral Agent or any Noteholder would not, in the event of
litigation, seek to

<PAGE>

                                      -13-

enforce the foregoing waivers or other waivers contained in this Agreement and
(b) acknowledges that, in entering into the Note Purchase Agreement and the
other Note Documents to which the Collateral Agent or any Noteholder is a party,
the Collateral Agent and the Noteholders are relying upon, among other things,
the waivers and certifications contained in this Section 21.

            22. TERMINATION. At such time as all of the Obligations have been
finally paid and satisfied in full in cash, this Agreement shall terminate and
the Collateral Agent shall, upon the written request and at the expense of the
Company, execute and deliver to the Company all releases, assignments and other
instruments as may be necessary or proper to terminate the Collateral Agent's
security interest granted hereunder, as fully as if this Agreement had not been
made, subject to any disposition of all or any part thereof that may have been
made by the Collateral Agent pursuant hereto. Upon the sale of any Collateral in
accordance with the provisions of the Note Purchase Agreement and this
Agreement, the Collateral Agent shall, upon the written request and at the
expense of the Company, execute and deliver to the Company, all releases,
assignments and other instruments as may be necessary or proper to terminate the
Collateral Agent's security interest in such Collateral. Notwithstanding the
foregoing, this Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any amount received by the Collateral Agent, or
any Noteholder in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any Noteholder upon insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company, upon the
appointment of any intervenor or conservator of, or trustee or similar official
for the Company or any substantial part of its assets, or otherwise, all as
though such payments had not been made.

            23. MISCELLANEOUS. The headings of each section of this Agreement
are for convenience only and shall not define or limit the provisions thereof.
This Agreement and all rights and obligations hereunder shall be binding upon
the Company and its successors and assigns, and shall inure to the benefit of
the Collateral Agent, the Noteholders and their respective successors and
assigns. If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein. The
Company acknowledges receipt of a copy of this Agreement.

                  [Remainder of Page Intentionally Left Blank]

<PAGE>

            IN WITNESS WHEREOF, intending to be legally bound, the Company has
caused this Agreement to be duly executed as of the date first above written.

                                         REPUBLIC ENGINEERED PRODUCTS, INC.

                                         By: /s/ Joseph F. Lapinsky
                                             -----------------------------------
                                             Name:  Joseph F. Lapinsky
                                             Title: Chief Executive Officer

Accepted:

FLEET CAPITAL CORPORATION, AS
COLLATERAL AGENT

By:  /s/ Timothy J. Broderick
     ------------------------------------------------
Name:  Timothy J. Broderick
Title: SR.V.P.

Signature page to Security Agreement

<PAGE>

                          CERTIFICATE OF ACKNOWLEDGMENT

COMMONWEALTH OR STATE OF NEW YORK   )
                                    ) ss.
COUNTY OF NEW YORK                  )

            Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this _______ day of _________, 20__, personally appeared Joseph F.
Lapinsky to me known personally, and who, being by me duly sworn, deposes and
says that [s]he is the CEO of Republic Engineered Products, Inc., and that said
instrument was signed and sealed on behalf of said corporation by authority of
its Board of Directors, and said CEO acknowledged said instrument to be the free
act and deed of said corporation.

                                          /s/ Thaina Lesperance
                                          -------------------------------------
                                          Notary Public
                                          My Commission expires:

                                                    THAINA LESPERANCE
                                            Notary Public, State of New York
                                                     No. 01LE6069337
                                               Qualified in Nassau County
                                          Certificate Filed in New York County
                                               Commission Expires 1/28/06

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