Item 1.01. Entry into a Material Definitive Agreement.
On November 10, 2009, Neenah Foundry Company (the "Company") and certain
subsidiaries of the Company (together with the Company, the "Borrowers") entered
into an Amendment No. 2 to Amended and Restated Loan and Security Agreement and
Forbearance Agreement (the "Forbearance Agreement") with Bank of America, N.A.,
as administrative agent and as a lender, and the other lenders party thereto
(collectively, the "Lenders"), with respect to that certain Amended and Restated
Loan and Security Agreement, dated as of December 29, 2006, among the Borrowers
and the Lenders from time to time party thereto (as amended, the "Credit
Agreement").
Pursuant to the Forbearance Agreement, the Lenders agreed to, among other
things, forbear from exercising certain of the Lenders' rights and remedies in
respect of or arising out of certain specified defaults that had occurred as of
November 10, 2009 and that are expected to occur during the effective period of
the Forbearance Agreement, including the Company's anticipated failure to
satisfy its minimum fixed charge coverage ratio under the Credit Agreement for
the 2009 fiscal year. The Forbearance Agreement is effective until the earlier
of (i) December 23, 2009, (ii) the occurrence or existence of any event of
default other than the events of default specified in the Forbearance Agreement,
or (iii) the occurrence of a "termination event" under the Forbearance
Agreement. A "termination event" includes the initiation of any action by any
Borrower to invalidate or limit the enforceability of (i) the acknowledgements
set forth in the Forbearance Agreement relating to obligations of the borrowers,
security interests and the binding effect of agreements relating to the Credit
Agreement, (ii) the release set forth in the Forbearance Agreement or (iii) the
covenant not to sue set forth in the Forbearance Agreement.
Among other modifications to the Credit Agreement, pursuant to the
Forbearance Agreement, (i) a block of $1 million was established that acts to
reduce availability under the borrowing base as set forth in the Credit
Agreement, (ii) the Lenders confirmed $1.5 million of additional reserves
against availability under the borrowing base as set forth in the Credit
Agreement that had been established during 2009, (iii) certain other
modifications were made to the calculation of the borrowing base under the
Credit Agreement, and (iv) the applicable margin for base rate loans was
increased to 3.75%, the applicable margin for LIBOR loans was increased to 5.25%
(and a floor of 1.50% was established for LIBOR), and the unused facility fee
was increased to 1.00%. The Borrowers also paid a forbearance fee of $250,000
pursuant to the Forbearance Agreement.
In addition, the Borrowers agreed to (i) continue to use certain efforts to
pursue additional financing and, in the absence of such financing, to use
certain efforts during the term of the Forbearance Agreement to pursue a
restructuring of certain of the Company's outstanding indebtedness, (ii) to
engage an operational consultant to prepare a report to be provided to the
Lenders evaluating the operational components of the Borrowers' businesses, and
(iii) arrange for an updated appraisal of the Borrowers' eligible inventory
included in its borrowing base under the Credit Agreement, which appraisal would
become effective at the expiration of the Forbearance Agreement absent an
agreement of a majority of the Lenders otherwise. The Borrowers also agreed to
minimum monthly EBITDA thresholds during the term of the Forbearance Agreement.
