**Exhibit 4.4**

 

**FORBEARANCEAGREEMENT**ANDSECOND AMENDMENT TO MASTER SECURITY AGREEMENT AND NOTE

 

**THIS FORBEARANCEAGREEMENT****AND SECOND AMENDMENT TO MASTER SECURITY AGREEMENT ANDNOTE**(the “Agreement”) is made and entered into as of October18, 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 ATCHISONCASTING CORPORATION, a Kansas corporation (“Borrower”).

 

**RECITALS**

 

A.                Borrowerand Lender are parties to that certain Master Security Agreement dated as ofDecember 29, 1999, as amended by that certain Amendment No. 1 to MasterSecurity Agreement and Other Related Documents (“Amendment No. 1”) datedas of February 25, 2000 (which, among other things, amended the effective dateof such Master Security Agreement to December 28, 1999; such Master SecurityAgreement, as amended by Amendment No. 1, and as amended from time to time, isherein referred to as the “Master Agreement;” capitalized terms usedherein and not otherwise defined shall have the same definition as set forth inthe Master Agreement), pursuant to which Lender made a term loan to Borrower inthe original principal amount of $35,000,000 (the “Loan”).  The Loan is evidenced by that certainPromissory 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 originalface amount of $35,000,000.

 

B.                  Tosecure its obligations to Lender under the Master Agreement and the Note,Borrower has granted to Lender, as a part of the Master Agreement, a securityinterest in the Collateral.  TheCollateral includes, but is not limited to, Borrower’s furniture, fixtures andequipment located at Borrower’s Atchison, Kansas and St. Joseph, Missourifacilities .

 

C.                  Inconnection with the Master Agreement, the Borrower has executed anddelivered:  (i) that certain Mortgage,Security Agreement and Fixture Filing dated as of December 28, 1999 by Borrowerin favor of Lender and filed of record with the Register of Deeds of AtchisonCounty, Kansas, on July 22, 2002 in Book 481 at Page 558; and (ii) that certainDeed 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 ofrecord 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 oftrust are sometimes herein collectively referred to as the “Mortgages”).  The real property encumbered by theMortgages is sometimes herein referred to as the “Real Property Collateral”.  The Mortgages secure all Indebtedness.

 

D.                 Thereis presently outstanding to Lender $26,541,666.57 in principal amount of theLoan, together with accrued interest thereon and certain costs and expenses ofLender.

 

E.                   Borrowerhas, prior to the date hereof, failed to (i) meet the financial covenantscontained in Section 2(m) of the Master Agreement, and (ii) failed to makeprincipal and interest payments required under and pursuant to the terms of theNote.  Such failures constitute Eventsof Default under the Master Agreement (such Events of Default are sometimesherein referred to as the “Existing Defaults”).

 

F.                   Byreason of the existence of the Existing Defaults, Lender has full legal rightto exercise its rights and remedies under the Master Agreement.  Such remedies include, but are not limitedto, the right to accelerate the Indebtedness and repossession and sale of theCollateral and the Real Property Collateral.

 

G.                  Borrowerand certain related entities are indebted to Harris Trust and Savings Bank, asagent, and to Teachers Insurance and Annuity Association (collectively, alongwith the lenders represented by such institutions as agent, the “HarrisLenders”; and the credit facilities with or in favor of the Harris Lendersare sometimes herein referred to as the “Harris Facilities”).  The Harris Facilities are in default andBorrower, certain related entities and the Harris Lenders have entered intoforbearance agreements (the “Harris Forbearance Agreements”).

 

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H.                 Borrowerhas requested that Lender forbear for a period of time from exercising itsrights and remedies under the Master Agreement, the Note and the Mortgages(collectively, the “Loan Documents”) and to amend the terms of theMaster Agreement and the Note.

 

I.                      Lenderis 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 andconditions set forth herein.

 

**AGREEMENT**

 

Inconsideration of the Recitals and of the mutual promises and covenantscontained herein, Lender and Borrower agree as follows:

 

1.                    **Forbearance.**  During the period (the “ForbearancePeriod”) commencing on the Effective Date and ending on the earlier tooccur of (a) the date that any Forbearance Default (as defined in Section 7hereof) occurs, (b) the date of a Variance Based Termination (as defined in Section3(b) below), or (c) the Final Forbearance Date (as defined in Section3(c) below), Lender will forbear in the exercise of its rights and remediesunder the Loan Documents with respect to the Existing Defaults and any otherEvents of Default (collectively, the “Designated Defaults”), exceptas set forth in the following sentence. Notwithstanding anything herein to the contrary, the Designated Defaultsshall not include (x) those Events of Default of the type or nature identifiedin Section 7(b), (c), (e) (but only to the extent the samerelates to the maintenance or protection of Collateral), (g), (i),(j), (k) and (m) of the Master Agreement, (y) any defaultin the performance of obligations of the Borrower under this Agreement, and (z)any default under the Mortgages arising out of Borrower’s failure to maintainor protect the Real Estate Collateral.

 

2.                    **Amendmentof Note.** Notwithstandinganything to the contrary set forth in the Note:

 

(a)                                  **InterestOnly During Forbearance Period**. The Periodic Installments (as defined in the Note) due June 29, 2002through the end of the Forbearance Period shall each be in an amount equal toaccrued but unpaid interest on the unpaid balance of the Note.  The principal amount which otherwise wouldhave been paid with respect to such Periodic Installments shall be payable onDecember 29, 2004 and such amount shall be added to the final installmentamount reflected in the Note.

 

(b)                                 **IncreasedInterest Rate**.  EffectiveNovember 1, 2002, interest shall accrue on the unpaid principal balance of theNote, 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)                                  **PreliminaryForecast**.  Borrower has made a preliminary forecast of itsearnings before interest and taxes (“EBIT”) and its ratio of currentassets to current liabilities (“Current Ratio”) for the time periods anddates 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 toLender a final forecast in writing, of the EBIT and Current Ratio, for thedates and time periods referenced in Section 3(a) above, in form andcontent reasonably acceptable to Lender (the “Final Forecast”).  If any component of the Final Forecast isless than or greater than the Preliminary Forecast by more than twenty percent(20%), the Lender may, by notice to the Borrower, terminate the ForbearancePeriod (the “Variance Based Termination”).  The Final Forecast of EBIT and Current Ratio on or as of6/30/2003 is sometimes herein referred to as the “6/30 Forecast”, andthe Final Forecast of EBIT and Current Ratio on or as of 9/30/2003 is sometimesherein referred to as the “9/30 Forecast”.

 

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(c)                                  **Final Forbearance Date**.  Subject to the followingprovisions, the term “Final Forbearance Date”, as used in this Agreementshall mean June 29, 2003.  If theBorrower’s actual EBIT or Current Ratio for the period ending 6/30/2003 is notless than 85% nor more than 120% of the 6/30 Forecast, the Final ForbearanceDate shall be extended through September 29, 2003. If the Final ForbearanceDate has previously been extended to September 29, 2003, and theBorrower’s actual EBIT or Current Ratio for the period ending 9/30/2003 is notless than 85% nor more than 120% of the 9/30 Forecast, the Final ForbearanceDate shall be extended through December 29, 2003.  If the Final Forbearance Date is not extended based on 6/30/2003actual 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 actualEBIT and Current Ratio (or if the Final Forbearance Date has not beenpreviously extended), the Final Forbearance Date shall be 9/29/2003.  Notwithstanding anything herein to thecontrary, the obligations of the Lender to extend the Final Forbearance Date issubject to the condition precedent that (i) the Company’s credit facilitieswith the Harris Lenders shall have been restructured in a manneracceptable to Lender, or (ii) the Harris Lenders shall have extended theirforbearance period through a period which expires no earlier than the datewhich would otherwise become the Final Forbearance Date.

 

4.                    **ConditionsPrecedent to Effectiveness of Agreement.**  The provisions set forth in Section 1and Section 2(a) of this Agreement shall not be effective unless anduntil each of the following conditions shall have been satisfied in Lender’ssole discretion or waived by Lender, for whose sole benefit such conditionsexist:

 

(a)                                  **AccruedBut Unpaid Interest**. Borrower shall have paid to Lender, by wire transfer of good funds onExecution Date, all accrued but unpaid interest on the Note as of the ExecutionDate.

 

(b)                                 **Costs andExpenses**.  Borrower shallhave paid to the Lender by wire transfer of good funds on the Execution Date,its costs and expenses (including Lender’s attorneys fees) incurred inconnection with the recording of the Mortgages, and the preparation of thisAgreement and any other outstanding costs and expenses owing by Borrower toLender 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 mortgagefiling fees and registration tax of $17,868.40).

 

(c)                                  **Executionand Delivery**.  Borrowershall have executed and delivered this Agreement.

 

(d)                                 **HarrisLenders**.  Borrower shallhave delivered to Lender (i) copies of all documentation evidencing or relatingto the Harris Facilities, and (ii) evidence satisfactory to Lender that each ofthe Harris Lenders shall have extended their respective Harris ForbearanceAgreements with the Borrower through a date which is not earlier than April 3,2003.

 

5.                    **Covenants**.  Borrower hereby covenants and agrees asfollows:

 

(a)                                  **Appraisal**.  Borrowershall cause to be performed and delivered to Lender on or before January 31,2003, an appraisal of the Real Property Collateral, in form and contentacceptable 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 ofthe Harris Facilities and the documents evidencing or relating to the HarrisFacilities, including all notices delivered to or by the Borrower, andincluding any extension, amendment, modification of the Harris ForbearanceAgreements.

 

(c)                                  **Additional Reporting Requirements**. In addition to the reporting requirements set forth in the MasterAgreement, Borrower shall deliver quarterly financial reports of the Borrowerand its subsidiaries, on a consolidated basis, certified by the chief financialofficer 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 suchperiod, in sufficient form and content to allow Lender to calculate actual EBITand 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 anyof the Harris Lenders in connection with the Harris Facilities, or any portionthereof, Borrower agrees, simultaneously with such issuance, to issue to Lenderwarrants to purchase common stock on terms which are substantially the same asthe terms of the warrants being issued to such Harris Lender(s), provided thatthe total number of shares of common stock with respect to which the warrantsissued to Lender shall equal thirty percent (30%) of the aggregate total numberof shares of common stock with respect to which the warrants are issued to eachof the Harris Lenders.

 

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6.                    **Representationsand Warranties.**  Borrowerhereby represents and warrants to Lender as follows:

 

(a)                                  **Recitals.**  The Recitals in this Agreement are true andcorrect in all respects.

 

(b)                                 **Incorporationof Representations.**  Allrepresentations and warranties of Borrower in the Master Agreement areincorporated herein in full by this reference and are true and correct in allmaterial respects as of the date hereof; provided, however, that Schedule2(f) of the Master Agreement is hereby replaced and updated by Schedule2(f) attached to this Agreement.

 

(c)                                  **CorporatePower; Authorization.**  Borrowerhas the corporate power, and has been duly authorized by all requisitecorporate action, to execute and deliver this Agreement and to perform itsobligations hereunder and thereunder. This Agreement has been duly executed and delivered by Borrower.

 

(d)                                 **Enforceability.**  This Agreement is the legal, valid andbinding obligations of Borrower, enforceable against Borrower in accordancewith its respective terms.

 

(e)                                  **NoViolation.**  Borrower’sexecution, 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 ofIncorporation or Bylaws or any agreement or instrument to which Borrower isparty or by which it or its properties are bound; or (iii) result in thecreation or imposition of any lien, security interest or encumbrance on anyproperty of Borrower, whether now owned or hereafter acquired, other than liensin favor of Lender.

 

(f)                                    **ObligationsAbsolute.**  The obligationof Borrower to repay the Loan, together with all interest accrued thereon, isabsolute 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 enforceableagainst Borrower in accordance with their respective terms, and create,constitute and evidence good, valid and perfected first liens on the RealProperty Collateral in favor of Lender securing the Indebtedness referencedtherein.

 

7.                    **Default.**  Each of the following shall constitute a “ForbearanceDefault” hereunder:

 

(a)                                  **Events ofDefault**.  The existenceof any Event of Default or default under any Loan Document (other than aDesignated Default); provided that any such Event of Default or default (otherthan an Event of Default which occurs as a result of Borrower’s insolvency orbankruptcy) which occurs during the Forbearance Period shall not constitute aForbearance Default if the same is capable of being cured and is cured withinthirty (30) days of the date of first occurrence; or

 

(b)                                 **HarrisAcceleration**.  If any ofthe Harris Facilities or the obligations owed to the Harris Lenders under orpursuant to the Harris Facilities, are accelerated or otherwise become due andpayable in full for any reason.

 

8.                    **Effectand Construction of Agreement.** Except as expressly provided herein, the Loan Documents shall remain infull force and effect in accordance with their respective terms, and thisAgreement shall not be construed to:

 

(i)                  impairthe validity, perfection or priority of any lien or security interest securingthe Indebtedness;

 

(ii)               waiveor impair any rights, powers or remedies of Lender under the Loan Documentsupon termination of the Forbearance Period, with respect to the DesignatedDefaults or otherwise; or

 

(iii)            constitutean agreement by Lender or require Lender to extend the Forbearance Period, orgrant additional forbearance periods, or extend the term of the Note or thetime for payment of any of the Indebtedness, except as expressly set forthherein.

 

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In the event of anyinconsistency between the terms of this Agreement and the Loan Documents, thisAgreement shall govern.  Borroweracknowledges that it has consulted with counsel and with such other experts andadvisors 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 orrule requiring that it be construed against the party causing this Agreement orany part hereof to be drafted.

 

9.                    **Expenses.**  Borrower agrees to pay all costs, fees andexpenses of Lender (including the fees of Lender’s counsel) incurred by Lenderin connection with the negotiation, preparation, administration and enforcementof this Agreement.

 

10.              **Miscellaneous.**

 

(a)                                  **Agreementas Debt Document**.  Lenderand Borrower agree that this Agreement is a Debt Document, as defined in theMaster Agreement.

 

(b)                                 **FurtherAssurance.**  Borroweragrees to execute such other and further documents and instruments as Lendermay request to implement the provisions of this Agreement.

 

(c)                                  **Benefitof Agreement.**  ThisAgreement shall be binding upon and inure to the benefit of and be enforceableby the parties hereto, their respective successors and assigns.  No other person or entity shall be entitledto claim any right or benefit hereunder, including, without limitation, the statusof a third-party beneficiary of this Agreement.

 

(d)                                 **Integration.**  This Agreement, together with the LoanDocuments, constitutes the entire agreement and understanding among the partiesrelating to the subject matter hereof, and supersedes all prior proposals,negotiations, agreements and understandings relating to such subjectmatter.  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 employeeor agent of the Lender, except for the agreements of Lender set forth herein.

 

(e)                                  **Severability.**  The provisions of this Agreement areintended to be severable.  If anyprovisions of this Agreement shall be held invalid or unenforceable in whole orin part in any jurisdiction, such provision shall, as to such jurisdiction, beineffective to the extent of such invalidity or enforceability without in anymanner affecting the validity or enforceability of such provision in any otherjurisdiction or the remaining provisions of this Agreement in any jurisdiction.

 

(f)                                    **GoverningLaw.**  This Agreementshall be governed by and construed in accordance with the internal substantivelaws of the State of New York, without regard to the choice of law principlesof such state.

 

(g)                                 **VENUE;JURISDICTION; JURY TRIAL WAIVER.**  **LENDER, AND BORROWER EACH HEREBY IRREVOCABLY WAIVE THEIR RIGHT TO TRIALBY JURY IN ANY CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THEMASTER AGREEMENT, AND/OR THE LOAN DOCUMENTS.**

 

(h)                                 **Counterparts;Telecopied Signatures.** This Agreement may be executed in any number of counterparts and bydifferent parties to this Agreement on separate counterparts, each of which,when so executed, shall be deemed an original, but all such counterparts shallconstitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall bedeemed to be an original signature hereto.

 

(i)                                     **Survival.**  All representations, warranties, covenants,agreements, undertakings, waivers and releases of Borrower contained hereinshall survive the termination of the Forbearance Period and payment in full ofthe 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 unlessthe same shall be in writing and signed by the parties hereto.

 

(k)                                  **Restructure**.  If, during the Forbearance Period, theHarris Facilities are restructured in whole, and such restructure involves,among other things, (i) the waiver by the Harris Lenders of all defaults and

 

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events of default which existunder or with respect to the Harris Facilities, (ii) the extension of the termsof the Harris Facilities, and (iii) the amendment and modification of theHarris Facilities, Lender agrees to utilize its best efforts to restructure thecredit facilities represented by the Master Agreement and the Note on termswhich are consistent, in-so-far as possible or practical with the restructuredarrangements under the Harris Facilities. This paragraph does not constitute acommitment by Lender, and Lender has no approval and has no obligation torestructure the facilities evidenced by the Master Agreement and the Note onany terms.  Lender’s failure torestructure the credit facilities evidenced by the Master Agreement or the Notewill not create any liability on behalf of Lender, and Borrower agrees toindemnify and hold Lender harmless from any and all claims, liabilities,damages, costs and expenses Borrower may incur as a result of Lender’s failureto restructure the credit facilities evidenced by the Master Agreement and theNote.

 

11.                                 **Releaseof Claims and Waiver.** Borrower hereby releases, remises, acquits and forever discharges Lenderand Lender’s employees, agents, representatives, consultants, attorneys,fiduciaries, servants, officers, directors, partners, predecessors, successorsand assigns, subsidiary corporations, parent corporations, and relatedcorporate divisions (all of the foregoing hereinafter called the “ReleasedParties”), from any and all actions and causes of action, judgments,executions, suits, debts, claims, demands, liabilities, obligations, damagesand 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 orhereafter arising, for or because of any matter or things done, omitted orsuffered to be done by any of the Released Parties prior to and including thedate of execution hereof, and in any way directly or indirectly arising out ofor in any way connected to this Agreement and the Loan Documents, including butnot limited to, claims relating to any settlement negotiations (all of theforegoing hereinafter called the “Released Matters”).  Borrower acknowledges that the agreements inthis paragraph are intended to be in full satisfaction of all or any allegedinjuries or damages arising in connection with the Released Matters.  Borrower represents and warrants to Lenderthat 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 andthat the foregoing constitutes a full and complete release of all ReleasedMatters.

 

IN WITNESSWHEREOF, the parties hereto have executed this Agreement as of the day and yearfirst 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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