Exhibit 4.4




 




FORBEARANCE

AGREEMENT  AND

SECOND AMENDMENT TO MASTER SECURITY AGREEMENT AND NOTE




 




THIS FORBEARANCE

AGREEMENT  AND SECOND AMENDMENT TO MASTER SECURITY AGREEMENT AND

NOTE (the “Agreement”) is made and entered into as of October

18, 2002 (the “Execution Date”), and effective as of June 29, 2002 (the

“Effective Date”), by and between GENERAL ELECTRIC CAPITAL CORPORATION,

for itself and as agent for certain participants (“Lender”) and ATCHISON

CASTING CORPORATION, a Kansas corporation (“Borrower”).




 




RECITALS




 




A.                Borrower

and Lender are parties to that certain Master Security Agreement dated as of

December 29, 1999, as amended by that certain Amendment No. 1 to Master

Security Agreement and Other Related Documents (“Amendment No. 1”) dated

as of February 25, 2000 (which, among other things, amended the effective date

of such Master Security Agreement to December 28, 1999; such Master Security

Agreement, as amended by Amendment No. 1, and as amended from time to time, is

herein referred to as the “Master Agreement;” capitalized terms used

herein and not otherwise defined shall have the same definition as set forth in

the Master Agreement), pursuant to which Lender made a term loan to Borrower in

the original principal amount of $35,000,000 (the “Loan”).  The Loan is evidenced by that certain

Promissory Note as amended by Amendment No. 1 (as amended, the “Note”),

dated as of December 28, 1999 by Borrower in favor of Lender in the original

face amount of $35,000,000.




 




B.                  To

secure its obligations to Lender under the Master Agreement and the Note,

Borrower has granted to Lender, as a part of the Master Agreement, a security

interest in the Collateral.  The

Collateral includes, but is not limited to, Borrower’s furniture, fixtures and

equipment located at Borrower’s Atchison, Kansas and St. Joseph, Missouri

facilities .




 




C.                  In

connection with the Master Agreement, the Borrower has executed and

delivered:  (i) that certain Mortgage,

Security Agreement and Fixture Filing dated as of December 28, 1999 by Borrower

in favor of Lender and filed of record with the Register of Deeds of Atchison

County, Kansas, on July 22, 2002 in Book 481 at Page 558; and (ii) that certain

Deed of Trust, Security Agreement and Fixture Filing dated as of December 28,

1999 by Borrower in favor of Husch Trustee, Inc. as trustee for Lender filed of

record with the Recorder of Deeds in Buchanan County, Missouri, on July 22,

2002 as Document No. 11400 in Book 2045 at Page 569, (such mortgage and deed of

trust are sometimes herein collectively referred to as the “Mortgages”).  The real property encumbered by the

Mortgages is sometimes herein referred to as the “Real Property Collateral”.  The Mortgages secure all Indebtedness.




 




D.                 There

is presently outstanding to Lender $26,541,666.57 in principal amount of the

Loan, together with accrued interest thereon and certain costs and expenses of

Lender.




 




E.                   Borrower

has, prior to the date hereof, failed to (i) meet the financial covenants

contained in Section 2(m) of the Master Agreement, and (ii) failed to make

principal and interest payments required under and pursuant to the terms of the

Note.  Such failures constitute Events

of Default under the Master Agreement (such Events of Default are sometimes

herein referred to as the “Existing Defaults”).




 




F.                   By

reason of the existence of the Existing Defaults, Lender has full legal right

to exercise its rights and remedies under the Master Agreement.  Such remedies include, but are not limited

to, the right to accelerate the Indebtedness and repossession and sale of the

Collateral and the Real Property Collateral.




 




G.                  Borrower

and certain related entities are indebted to Harris Trust and Savings Bank, as

agent, and to Teachers Insurance and Annuity Association (collectively, along

with the lenders represented by such institutions as agent, the “Harris

Lenders”; and the credit facilities with or in favor of the Harris Lenders

are sometimes herein referred to as the “Harris Facilities”).  The Harris Facilities are in default and

Borrower, certain related entities and the Harris Lenders have entered into

forbearance agreements (the “Harris Forbearance Agreements”).




 





























 




H.                 Borrower

has requested that Lender forbear for a period of time from exercising its

rights and remedies under the Master Agreement, the Note and the Mortgages

(collectively, the “Loan Documents”) and to amend the terms of the

Master Agreement and the Note.




 




I.                      Lender

is willing to forbear in the exercise of its remedies under the Loan Documents,

and to amend the terms of the Master Agreement and the Note on the terms and

conditions set forth herein.




 




AGREEMENT




 




In

consideration of the Recitals and of the mutual promises and covenants

contained herein, Lender and Borrower agree as follows:




 




1.                    Forbearance.  During the period (the “Forbearance

Period”) commencing on the Effective Date and ending on the earlier to

occur of (a) the date that any Forbearance Default (as defined in Section 7

hereof) occurs, (b) the date of a Variance Based Termination (as defined in Section

3(b) below), or (c) the Final Forbearance Date (as defined in Section

3(c) below), Lender will forbear in the exercise of its rights and remedies

under the Loan Documents with respect to the Existing Defaults and any other

Events of Default (collectively, the “Designated Defaults”), except

as set forth in the following sentence. 

Notwithstanding anything herein to the contrary, the Designated Defaults

shall not include (x) those Events of Default of the type or nature identified

in Section 7(b), (c), (e) (but only to the extent the same

relates to the maintenance or protection of Collateral), (g), (i),

(j), (k) and (m) of the Master Agreement, (y) any default

in the performance of obligations of the Borrower under this Agreement, and (z)

any default under the Mortgages arising out of Borrower’s failure to maintain

or protect the Real Estate Collateral.




 




2.                    Amendment

of Note.  Notwithstanding

anything to the contrary set forth in the Note:




 




(a)                                  Interest

Only During Forbearance Period. 

The Periodic Installments (as defined in the Note) due June 29, 2002

through the end of the Forbearance Period shall each be in an amount equal to

accrued but unpaid interest on the unpaid balance of the Note.  The principal amount which otherwise would

have been paid with respect to such Periodic Installments shall be payable on

December 29, 2004 and such amount shall be added to the final installment

amount reflected in the Note.




 




(b)                                 Increased

Interest Rate.  Effective

November 1, 2002, interest shall accrue on the unpaid principal balance of the

Note, as set forth in the Note, at the fixed interest rate of 9.30% per annum.




 




3.                    Forecast;

Variance Based Termination; Final Forbearance Date.




 




(a)                                  Preliminary

Forecast.  Borrower has made a preliminary forecast of its

earnings before interest and taxes (“EBIT”) and its ratio of current

assets to current liabilities (“Current Ratio”) for the time periods and

dates set forth below (the “Preliminary Forecast”):




 




	

  EBIT for 6 month period ending 6/30/2003:


  	

   


  	

  $


  	

  466,000


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  Current Ratio as of 6/30/2003:


  	

   


  	

  0.93 to 1.0


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  EBIT for 9 month period ending 9/30/2003:


  	

   


  	

  $


  	

  215,000


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  Current Ratio as of 9/30/2003:


  	

   


  	

  0.93 to 1.0


  	

   


  





 




(b)                                 Final Forecast; Variance Based Termination. 

Within 30 days following the Execution Date, Borrower shall deliver to

Lender a final forecast in writing, of the EBIT and Current Ratio, for the

dates and time periods referenced in Section 3(a) above, in form and

content reasonably acceptable to Lender (the “Final Forecast”).  If any component of the Final Forecast is

less than or greater than the Preliminary Forecast by more than twenty percent

(20%), the Lender may, by notice to the Borrower, terminate the Forbearance

Period (the “Variance Based Termination”).  The Final Forecast of EBIT and Current Ratio on or as of

6/30/2003 is sometimes herein referred to as the “6/30 Forecast”, and

the Final Forecast of EBIT and Current Ratio on or as of 9/30/2003 is sometimes

herein referred to as the “9/30 Forecast”.




 




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(c)                                  Final Forbearance Date.  Subject to the following

provisions, the term “Final Forbearance Date”, as used in this Agreement

shall mean June 29, 2003.  If the

Borrower’s actual EBIT or Current Ratio for the period ending 6/30/2003 is not

less than 85% nor more than 120% of the 6/30 Forecast, the Final Forbearance

Date shall be extended through September 29, 2003. If the Final Forbearance

Date has previously been extended to September 29, 2003, and the

Borrower’s actual EBIT or Current Ratio for the period ending 9/30/2003 is not

less than 85% nor more than 120% of the 9/30 Forecast, the Final Forbearance

Date shall be extended through December 29, 2003.  If the Final Forbearance Date is not extended based on 6/30/2003

actual EBIT and Current Ratio, the Final Forbearance Date shall be 6/29/2003,

and if the Final Forbearance Date is not extended based on 9/30/2003 actual

EBIT and Current Ratio (or if the Final Forbearance Date has not been

previously extended), the Final Forbearance Date shall be 9/29/2003.  Notwithstanding anything herein to the

contrary, the obligations of the Lender to extend the Final Forbearance Date is

subject to the condition precedent that (i) the Company’s credit facilities

with the Harris Lenders shall have been restructured in a manner

acceptable to Lender, or (ii) the Harris Lenders shall have extended their

forbearance period through a period which expires no earlier than the date

which would otherwise become the Final Forbearance Date.




 




4.                    Conditions

Precedent to Effectiveness of Agreement.  The provisions set forth in Section 1

and Section 2(a) of this Agreement shall not be effective unless and

until each of the following conditions shall have been satisfied in Lender’s

sole discretion or waived by Lender, for whose sole benefit such conditions

exist:




 




(a)                                  Accrued

But Unpaid Interest. 

Borrower shall have paid to Lender, by wire transfer of good funds on

Execution Date, all accrued but unpaid interest on the Note as of the Execution

Date.




 




(b)                                 Costs and

Expenses.  Borrower shall

have paid to the Lender by wire transfer of good funds on the Execution Date,

its costs and expenses (including Lender’s attorneys fees) incurred in

connection with the recording of the Mortgages, and the preparation of this

Agreement and any other outstanding costs and expenses owing by Borrower to

Lender under the Loan Documents as of the date this Agreement is executed.  Such costs and expenses are $32,868.40

(legal fees of $15,000 and out of pocket costs and expenses, including mortgage

filing fees and registration tax of $17,868.40).




 




(c)                                  Execution

and Delivery.  Borrower

shall have executed and delivered this Agreement.




 




(d)                                 Harris

Lenders.  Borrower shall

have delivered to Lender (i) copies of all documentation evidencing or relating

to the Harris Facilities, and (ii) evidence satisfactory to Lender that each of

the Harris Lenders shall have extended their respective Harris Forbearance

Agreements with the Borrower through a date which is not earlier than April 3,

2003.




 




5.                    Covenants.  Borrower hereby covenants and agrees as

follows:




 




(a)                                  Appraisal.  Borrower

shall cause to be performed and delivered to Lender on or before January 31,

2003, an appraisal of the Real Property Collateral, in form and content

acceptable to Lender, and prepared by an MAI appraiser acceptable to Lender.




 




(b)                                 Harris Facility Amendments. 

Borrower shall deliver to Lender copies of any and all extension,

amendments, modifications, revisions or restatements of all or any portion of

the Harris Facilities and the documents evidencing or relating to the Harris

Facilities, including all notices delivered to or by the Borrower, and

including any extension, amendment, modification of the Harris Forbearance

Agreements.




 




(c)                                  Additional Reporting Requirements. 

In addition to the reporting requirements set forth in the Master

Agreement, Borrower shall deliver quarterly financial reports of the Borrower

and its subsidiaries, on a consolidated basis, certified by the chief financial

officer of Borrower, for the periods ending June 30, 2003 and September 30,

2003 on or before the 29th day following the last day of each such

period, in sufficient form and content to allow Lender to calculate actual EBIT

and Current Ratio ending on and as of the last day of each such period.




 




(d)                                 Warrants.  If Borrower,

now or hereafter, issues and delivers warrants to purchase common stock to any

of the Harris Lenders in connection with the Harris Facilities, or any portion

thereof, Borrower agrees, simultaneously with such issuance, to issue to Lender

warrants to purchase common stock on terms which are substantially the same as

the terms of the warrants being issued to such Harris Lender(s), provided that

the total number of shares of common stock with respect to which the warrants

issued to Lender shall equal thirty percent (30%) of the aggregate total number

of shares of common stock with respect to which the warrants are issued to each

of the Harris Lenders.




 




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6.                    Representations

and Warranties.  Borrower

hereby represents and warrants to Lender as follows:




 




(a)                                  Recitals.  The Recitals in this Agreement are true and

correct in all respects.




 




(b)                                 Incorporation

of Representations.  All

representations and warranties of Borrower in the Master Agreement are

incorporated herein in full by this reference and are true and correct in all

material respects as of the date hereof; provided, however, that Schedule

2(f) of the Master Agreement is hereby replaced and updated by Schedule

2(f) attached to this Agreement.




 




(c)                                  Corporate

Power; Authorization.  Borrower

has the corporate power, and has been duly authorized by all requisite

corporate action, to execute and deliver this Agreement and to perform its

obligations hereunder and thereunder. 

This Agreement has been duly executed and delivered by Borrower.




 




(d)                                 Enforceability.  This Agreement is the legal, valid and

binding obligations of Borrower, enforceable against Borrower in accordance

with its respective terms.




 




(e)                                  No

Violation.  Borrower’s

execution, delivery and performance of this Agreement does not and will not (i)

violate any law, rule, regulation or court order to which Borrower is subject;

(ii) conflict with or result in a breach of Borrower’s Articles of

Incorporation or Bylaws or any agreement or instrument to which Borrower is

party or by which it or its properties are bound; or (iii) result in the

creation or imposition of any lien, security interest or encumbrance on any

property of Borrower, whether now owned or hereafter acquired, other than liens

in favor of Lender.




 




(f)                                    Obligations

Absolute.  The obligation

of Borrower to repay the Loan, together with all interest accrued thereon, is

absolute and unconditional, and there exists no right of set off or recoupment,

counterclaim or defense of any nature whatsoever to payment of the Obligations.




 




(g)                                 Mortgages.  The Mortgages are and remain enforceable

against Borrower in accordance with their respective terms, and create,

constitute and evidence good, valid and perfected first liens on the Real

Property Collateral in favor of Lender securing the Indebtedness referenced

therein.




 




7.                    Default.  Each of the following shall constitute a “Forbearance

Default” hereunder:




 




(a)                                  Events of

Default.  The existence

of any Event of Default or default under any Loan Document (other than a

Designated Default); provided that any such Event of Default or default (other

than an Event of Default which occurs as a result of Borrower’s insolvency or

bankruptcy) which occurs during the Forbearance Period shall not constitute a

Forbearance Default if the same is capable of being cured and is cured within

thirty (30) days of the date of first occurrence; or




 




(b)                                 Harris

Acceleration.  If any of

the Harris Facilities or the obligations owed to the Harris Lenders under or

pursuant to the Harris Facilities, are accelerated or otherwise become due and

payable in full for any reason.




 




8.                    Effect

and Construction of Agreement. 

Except as expressly provided herein, the Loan Documents shall remain in

full force and effect in accordance with their respective terms, and this

Agreement shall not be construed to:




 




(i)                  impair

the validity, perfection or priority of any lien or security interest securing

the Indebtedness;




 




(ii)               waive

or impair any rights, powers or remedies of Lender under the Loan Documents

upon termination of the Forbearance Period, with respect to the Designated

Defaults or otherwise; or




 




(iii)            constitute

an agreement by Lender or require Lender to extend the Forbearance Period, or

grant additional forbearance periods, or extend the term of the Note or the

time for payment of any of the Indebtedness, except as expressly set forth

herein.




 




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In the event of any

inconsistency between the terms of this Agreement and the Loan Documents, this

Agreement shall govern.  Borrower

acknowledges that it has consulted with counsel and with such other experts and

advisors as it has deemed necessary in connection with the negotiation,

execution and delivery of this Agreement. 

This Agreement shall be construed without regard to any presumption or

rule requiring that it be construed against the party causing this Agreement or

any part hereof to be drafted.




 




9.                    Expenses.  Borrower agrees to pay all costs, fees and

expenses of Lender (including the fees of Lender’s counsel) incurred by Lender

in connection with the negotiation, preparation, administration and enforcement

of this Agreement.




 




10.              Miscellaneous.




 




(a)                                  Agreement

as Debt Document.  Lender

and Borrower agree that this Agreement is a Debt Document, as defined in the

Master Agreement.




 




(b)                                 Further

Assurance.  Borrower

agrees to execute such other and further documents and instruments as Lender

may request to implement the provisions of this Agreement.




 




(c)                                  Benefit

of Agreement.  This

Agreement shall be binding upon and inure to the benefit of and be enforceable

by the parties hereto, their respective successors and assigns.  No other person or entity shall be entitled

to claim any right or benefit hereunder, including, without limitation, the status

of a third-party beneficiary of this Agreement.




 




(d)                                 Integration.  This Agreement, together with the Loan

Documents, constitutes the entire agreement and understanding among the parties

relating to the subject matter hereof, and supersedes all prior proposals,

negotiations, agreements and understandings relating to such subject

matter.  In entering this Agreement,

Borrower acknowledges that it is relying on no statement, representation,

warranty, covenant or agreement of any kind made by the Lender or any employee

or agent of the Lender, except for the agreements of Lender set forth herein.




 




(e)                                  Severability.  The provisions of this Agreement are

intended to be severable.  If any

provisions of this Agreement shall be held invalid or unenforceable in whole or

in part in any jurisdiction, such provision shall, as to such jurisdiction, be

ineffective to the extent of such invalidity or enforceability without in any

manner affecting the validity or enforceability of such provision in any other

jurisdiction or the remaining provisions of this Agreement in any jurisdiction.




 




(f)                                    Governing

Law.  This Agreement

shall be governed by and construed in accordance with the internal substantive

laws of the State of New York, without regard to the choice of law principles

of such state.




 




(g)                                 VENUE;

JURISDICTION; JURY TRIAL WAIVER.  LENDER, AND BORROWER EACH HEREBY IRREVOCABLY WAIVE THEIR RIGHT TO TRIAL

BY JURY IN ANY CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE

MASTER AGREEMENT, AND/OR THE LOAN DOCUMENTS.




 




(h)                                 Counterparts;

Telecopied Signatures. 

This Agreement may be executed in any number of counterparts and by

different parties to this Agreement on separate counterparts, each of which,

when so executed, shall be deemed an original, but all such counterparts shall

constitute one and the same agreement. 

Any signature delivered by a party by facsimile transmission shall be

deemed to be an original signature hereto.




 




(i)                                     Survival.  All representations, warranties, covenants,

agreements, undertakings, waivers and releases of Borrower contained herein

shall survive the termination of the Forbearance Period and payment in full of

the Indebtedness of Borrower under the Loan Documents.




 




(j)                                     Amendment.  No amendment, modification, rescission,

waiver or release of any provision of this Agreement shall be effective unless

the same shall be in writing and signed by the parties hereto.




 




(k)                                  Restructure.  If, during the Forbearance Period, the

Harris Facilities are restructured in whole, and such restructure involves,

among other things, (i) the waiver by the Harris Lenders of all defaults and




 




5





























 




events of default which exist

under or with respect to the Harris Facilities, (ii) the extension of the terms

of the Harris Facilities, and (iii) the amendment and modification of the

Harris Facilities, Lender agrees to utilize its best efforts to restructure the

credit facilities represented by the Master Agreement and the Note on terms

which are consistent, in-so-far as possible or practical with the restructured

arrangements under the Harris Facilities. This paragraph does not constitute a

commitment by Lender, and Lender has no approval and has no obligation to

restructure the facilities evidenced by the Master Agreement and the Note on

any terms.  Lender’s failure to

restructure the credit facilities evidenced by the Master Agreement or the Note

will not create any liability on behalf of Lender, and Borrower agrees to

indemnify and hold Lender harmless from any and all claims, liabilities,

damages, costs and expenses Borrower may incur as a result of Lender’s failure

to restructure the credit facilities evidenced by the Master Agreement and the

Note.




 




11.                                 Release

of Claims and Waiver. 

Borrower hereby releases, remises, acquits and forever discharges Lender

and Lender’s employees, agents, representatives, consultants, attorneys,

fiduciaries, servants, officers, directors, partners, predecessors, successors

and assigns, subsidiary corporations, parent corporations, and related

corporate divisions (all of the foregoing hereinafter called the “Released

Parties”), from any and all actions and causes of action, judgments,

executions, suits, debts, claims, demands, liabilities, obligations, damages

and expenses of any and every character, known or unknown, direct and/or indirect,

at law or in equity, of whatsoever kind or nature, whether heretofore or

hereafter arising, for or because of any matter or things done, omitted or

suffered to be done by any of the Released Parties prior to and including the

date of execution hereof, and in any way directly or indirectly arising out of

or in any way connected to this Agreement and the Loan Documents, including but

not limited to, claims relating to any settlement negotiations (all of the

foregoing hereinafter called the “Released Matters”).  Borrower acknowledges that the agreements in

this paragraph are intended to be in full satisfaction of all or any alleged

injuries or damages arising in connection with the Released Matters.  Borrower represents and warrants to Lender

that it has not purported to transfer, assign or otherwise convey any right,

title or interest of Borrower in any Released Matter to any other Person and

that the foregoing constitutes a full and complete release of all Released

Matters.




 




IN WITNESS

WHEREOF, the parties hereto have executed this Agreement as of the day and year

first above written.




 




	

   


  	

   


  	

  GENERAL

  ELECTRIC CAPITAL CORPORATION


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

  By:


  	

  /s/ Kevin G.

  Wortman


  	

   


  
	

   


  	

   


  	

   


  	

  Name: Kevin

  G. Wortman


  
	

   


  	

   


  	

   


  	

  Title: SVP,

  Strategic Asset Financing Group


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

  ATCHISON

  CASTING CORPORATION


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

  By:


  	

  /s/ Kevin T.

  McDermed


  	

   


  
	

   


  	

   


  	

   


  	

  Name Kevin

  T. McDermed


  
	

   


  	

   


  	

   


  	

  Title: V.P.

  & Treasurer


  
						





 




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