Document:

EXHIBIT 10.1

 

FORM

OF

LOAN AND SECURITY AGREEMENT

 

This Loan And Security

Agreement (this “Agreement”), dated as

of                        ,

2002 is entered into by and between                          ,

(“Borrower”) having its offices

at                         and                         (“Lender”)

having its offices                 .

 

Borrower desires to borrow from the Lender

$                           ,

as more particularly described below (the “Loan”), secured by a lien on all of

the Borrower’s right, title and interest in and to certain Equipment (as

defined herein). As further inducement for Lender to enter into this Agreement,

Borrower agrees to obtain the guaranty of its parent company (“Guarantor”) for

the full and prompt payment by Borrower of all obligations hereunder

(“Guaranty”), such Guaranty to be substantially in the form of Exhibit C

attached hereto. In consideration of the mutual covenants hereinafter set forth

the parties agree as follows:

 

1.             As

security for the prompt payment of all debt, principal, interest, and other

amounts owed to Lender by Borrower and the prompt performance of each of the

Borrower’s covenants and duties hereunder and under one or more Promissory

Note(s) (the “Notes”) in the original principal amounts as set forth in

Exhibit A hereto and payable by the Borrower to the Lender or any other

agreement, whether absolute or contingent, due or to become due, including any

interest that accrues after the commencement of an insolvency proceeding

(“Indebtedness”), the Borrower hereby assigns to the Lender, and grants to the

Lender a security interest in all the Borrower’s right, title and interest in

and to property (“Collateral”) consisting of the equipment (“Equipment”)

described in Exhibit A hereto and any repairs and replacements thereof and

subsequent additions, modifications and accessions thereto, and all proceeds of

the foregoing and of the insurance referred to in paragraph (3) hereof, except

for income or proceeds generated by the use of the Equipment including, without

limitation, income, accounts, or instruments. A form of Note is attached hereto

as Exhibit B.

 

2.             The

Borrower represents, warrants and agrees that (i) it has good title to the

Collateral, free of all liens, claims and encumbrances, except for liens inferior

or subordinate to the Lender’s interest existing on the date hereof to which

Lender shall have consented to in writing; (ii) it is a corporation duly

existing and in good standing under the laws of its state of incorporation and

qualified and licensed to do business in the jurisdiction where the Equipment

is or will be located; (iii) the Note and this Agreement (the “Collateral

Documents”) are valid and are enforceable in accordance with their respective

terms subject to applicable bankruptcy, insolvency, reorganization or other

similar laws affecting 

 

 

the

enforceability generally of the rights of creditors; (iv) the making and

performance by the Borrower of the Collateral Documents, and any related

documents and transactions contemplated hereby and thereby do not contravene

any provisions of law applicable to the Borrower and do not conflict with and

will not result in a breach of or constitute a default or require any consent

under, or result in the creation of any lien, charge or encumbrance upon the

Collateral (other than the lien created hereunder) pursuant to the terms of

Borrower’s charter or bylaws or of any credit agreement, lease, guaranty, or

other instrument to which the Borrower is a party or by which the Borrower may

be bound or to which its properties may be subject (v) there are no set-offs,

counterclaims or defenses on the part of the Borrower with respect to its

obligations hereunder; (vi) the Equipment has been delivered to and accepted by

the Borrower and will be kept at the Borrower’s address set forth in

Exhibit A hereto unless such Equipment is disposed of  as provided under Section 5 hereof or

the Lender otherwise consents (which consent shall not be withheld

unreasonably) or at the address of another subsidiary of Guarantor provided

that Borrower or Guarantor notifies Lender of such other address in advance;

(vii) it will not assign its rights to, convey, sell, lease, or transfer any

Collateral, or create, incur, assume or allow any lien with respect to the

Collateral, to any person other than the Lender, except for assignments and

security interests which are inferior or subordinate to the Lender’s interest

and to which Lender has consented in writing in its sole discretion; (viii) it

will execute such financing statements in connection herewith as the Lender may

reasonably request; (ix) it will preserve its corporate existence and remain

qualified to do business in the jurisdiction(s) where the Equipment is or will

be located; (x) its chief executive office is located at the address of the

Borrower stated above, and it will promptly notify Lender of any change in such

address; and (xi) there is no pending or threatened litigation against the

Borrower which could reasonably be expected to have a material adverse effect

on the ability of the Borrower to perform its obligations under the Collateral

Documents. Borrower, at its own expense shall maintain the Equipment in good

repair, appearance and conditions, other than normal wear and tear and shall

obtain and keep in effect throughout the term of the applicable Note a

maintenance agreement with the manufacturer or other manufacturer approved

service provider for such Equipment. 

Notwithstanding the foregoing provisions, nothing contained herein shall

prohibit the Borrower, the Guarantor, or any subsidiary thereto from entering

into any transaction permitted by Section 6.6 of that certain Credit

Agreement by and among Consolidated Graphics, Inc., as Borrower, and its

domestic subsidiaries from time to time a party thereto as Guarantors, and

Wachovia Bank National Association (formerly First Union National Bank), and

other lenders thereto dated December 11, 2000, as it currently exists today.

 

3.             Risk

of loss or, damage to or destruction of the Equipment shall be borne by the

Borrower and the Borrower shall insure the Equipment against such risks to be

borne by it in each case in an amount not less than the aggregate amount of the

Indebtedness 

 

2

 

outstanding

from time to time with such companies and insuring against such risks as is

held by the Borrower and Guarantor and approved by Lender as of the date of

execution.  The insurance coverage of

the Guarantor and the Company as of the date of execution hereof is outlined as

to carrier, policy number, expiration date, type, and amount on Exhibit D,

attached hereto.  Lender acknowledges

and agrees that said insurance shall be satisfactory for all purposes

hereunder.  All policies for such

insurance shall contain loss payable clauses in favor of the Borrower and the

Lender as their respective interest may appear, and shall not be subject to

termination or cancellation without thirty (30) days’ prior written notice to

the Lender.  Certificates of insurance

or other reasonable evidence thereof shall be deposited with the Lender as the

Lender may request from time to time. 

The Borrower hereby assigns and sets over unto the Lender all monies

which may become payable on account of any such insurance and directs the

insurers to pay the Lender any amounts so due, unless the Borrower elects to

replace the equipment damaged with equipment of similar use and value

reasonably acceptable to Lender. Guarantor may self-insure the Equipment on

behalf of the Company, provided that at all times during such self-insurance

Guarantor maintains a credit rating of investment grade for its long term debt.

 

4.             If

(i) the Borrower defaults in the payment of any principal or interest payable

under any Note governed by this Agreement for more than five (5) days after date

due; (ii) the Borrower defaults in the payment of or performance of any other

obligation of the Borrower hereunder or under any Note hereunder for more than

thirty (30) days after either the Lender has given notice of such default to

the Borrower and the Guarantor; (iii) any other representation or warranty made

by the Borrower in any of the Collateral Documents shall prove to be false or

misleading in any material respect; (iv) there is a material adverse change in

the financial condition of Guarantor, or a change of ownership or control of

Borrower; (v) the Guarantor fails to make any payment payable under the

Guaranty or any other guaranty made by Guarantor for the purpose of securing a

loan, or (vi) either the Borrower or Guarantor becomes insolvent or admits in

writing its inability to pay its debts as they mature or applies for, consents

to or acquiesces in the appointment of a trustee or receiver for it or any of

its property, or any bankruptcy, reorganization, debt arrangement or other

proceeding, shall be instituted by or against the Borrower or Guarantor, and if

instituted against it shall be consented to or acquiesced in by it or shall not

be dismissed within a period of sixty 

(60) days, or any material portion of the Collateral is attached, seized,

subjected to a writ or distress warrant or is levied upon and the same is not

removed, discharged or rescinded within a period of thirty (30) days, then the

occurrence of any event described in any one or more of clauses (i) through

(vi) above shall be an “Event of Default” and the Lender may at its option

declare all Notes governed under this Agreement to be due and payable,

whereupon the unpaid principal of and accrued interest on all Notes shall

become immediately due and payable and the Lender may exercise all rights and

remedies, with respect to 

 

3

 

all

Collateral, available to it under applicable law; provided, however, that in

the event of the occurrence of an Event of Default under (vi) above, all Notes

under this Agreement shall become immediately due and payable automatically,

with no further action by the Lender. 

In connection with any sale or disposition of Collateral the requirement

of reasonable notice shall be met if such notice is mailed postage prepaid to

Borrower at least ten (10) days before such sale or disposition. Lender shall

be entitled to obtain reimbursement for all reasonable costs, attorney’s fees

and legal expenses incurred by it on exercising such rights and remedies against

the Borrower with respect to the Collateral. 

The Lender agrees to pay forthwith to the Borrower any surplus remaining

from the Collateral after payment of all Indebtedness.

 

5.             Borrower

may prepay the Indebtedness in whole or in part upon at least thirty (30) days

prior written notice to Lender, upon payment of principal (and interest due on

said principal at the time of such prepayment) plus the Make-Whole Premium

(defined herein).  The term “Make-Whole

Premium” shall mean an amount equal to the sum of (a) the positive difference,

if any, of (x) the present value of the remaining principal payments

outstanding discounted at a per annum rate of interest equal to the five-year

U.S. Treasury Constant Maturities (as reported in the most recently published

Federal Reserve Statistical Release H.15 prior to the prepayment date) plus 296

basis points; minus (y) the present value of the remaining principal payments

outstanding at the applicable Note rate; plus (b) any reasonable fees or costs

incurred by the Lender resulting from Borrower’s election to prepay.

 

6.             The

Agreement and the Notes shall be contracts made under and governed by the laws

of New York, excluding its conflicts of law principles.  Whenever possible, each provision of the

Agreement shall be interpreted in such manner as to be effective and valid

under applicable law, but if any provision of this Agreement shall be

prohibited by or invalid under such law, such provision shall be ineffective

only to the extent and duration of such prohibition or invalidity, without

invalidating the remainder of such provision or the remaining provisions of the

Agreement. LENDER AND BORROWER WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY

LITIGATION RELATING TO THIS AGREEMENT, THE NOTE, AND THE TRANSACTIONS

CONTEMPLATED HEREBY AND THEREBY.

 

7.             Notices

shall be deemed given when deposited in the U.S. mails, with postage prepaid

for certified or registered services, return receipt requested, addressed to

the parties at the addresses indicated on the first page of this Agreement, or

to such other addresses as the parties shall provide by notice. All notices

required to be given to the Borrower hereunder or under any document executed

in connection herewith shall also be given to the Guarantor at the address

provided in this paragraph 7.  In

addition, all notices to the Guarantor hereunder or under any document executed

in connection herewith shall be given to the Guarantor at the following

address:

 

4

 

Consolidated Graphics, Inc.

5858 Westheimer Road, Suite 200

Houston, Texas  77057

Attention:  Chief Financial Officer

 

8.             This

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

successors and assigns of the Borrower and the Lender. This Agreement, the

Notes and the documents executed in connection herewith or as security for the

Notes may be assigned, transferred, pledged, or participated to any other

person or entity only upon prior written notice to Borrower of at least five

(5) business days. The Lender agrees that, in the event of any transfer by it

of the Note, it will endorse thereon a notation as to the portion of the

principal of the Note which shall have been paid at the time of such transfer

and as to the date to which interest shall have been paid thereon.

 

9.             The

obligations of the Borrower under this Agreement shall cease and terminate when

all principal, interest and other amounts payable or due hereunder have been

indefeasibly paid in full, whether at maturity of the Note, by acceleration, by

prepayment or otherwise.  Upon

termination of this Agreement Lender shall, at Borrower’s request, execute and

deliver to Borrower the documents or instruments necessary to evidence the

termination of its security interest under this Agreement.

 

10.           This

agreement may be executed by the Borrower and the Lender in counterparts, each

of which when so executed shall be deemed to be an original, and all such

counterparts together shall constitute but one agreement.

 

11.           Borrower

and Lender acknowledge that revised Article 9 of the Uniform Commercial Code,

(“Revised Article 9”), has been adopted by the applicable

jurisdiction(s)governing the Equipment and this transaction. Lender may at any

time and from time to time file financing statements, continuation statements

and amendments thereto that describe the Collateral and which contain any other

information required by Part 5 of Revised Article 9 for the sufficiency or

filing office acceptance of any financing statement, continuation statement or

amendment, including whether Borrower is an organization, the type of

organization and any organization identification number issued to such

Borrower, if Borrower fails to execute and return to Lender or object to any

document reasonably requested in writing by the Lender within five (5) business

days from such request. Borrower agrees to furnish any such information to

Lender promptly upon request. Any such financing statements, continuation

statements or amendments may be signed by Lender on behalf of Borrower and may

be filed at any time in any jurisdiction whether or not Revised Article 9 is

then in effect in that jurisdiction.

 

5

 

12.           The

Lender agrees that it will not disclose without the prior consent of the

Borrower and the Guarantor (other than to its employees, affiliates, auditors,

counsel, or other lenders hereunder) any information with respect to the

Borrower and/or Guarantor which is furnished pursuant to this Agreement, any

other documents contemplated by or referred to herein or therein and which is

designated by the Borrower and/or Guarantor to the Lender in writing as

confidential or as to which it is otherwise reasonably clear such information

is not public except that Lender may disclose any such information (a) as has

become generally available to the public other than by a breach of this

Section 12; (b) as may be required or appropriate in any report,

statement, or testimony submitted to any municipal, state or federal regulatory

body having or claiming to have jurisdiction over Lender or to the National

Association of Insurance Commissioners, the Federal Reserve Board, the Federal

Deposit Insurance Corporation, the OCC or any similar regulatory organizations

(whether in the United States or elsewhere) or their successors; (c) as may be

required or appropriate in response to any summons or subpoena or any law,

order, regulation or ruling application to Lender; (d) to any prospective

participant or assignee in connection with any contemplated transfer pursuant

to Section 8 provided that such prospective transferee shall have been

made aware of this Section 12 and shall have agreed in writing to be bound

by its provisions as if it were a party to this Agreement; or (e) to Lender’s

representatives (which shall include, without limitation, any other bank and

company affiliated with Lender or the parent of Lender), it being expressly

understood and agreed that such representatives shall be informed of the

confidential nature of the information, shall be required by such Lender to

treat the information as confidential in accordance with the terms and

conditions hereof and such representative shall have agreed in writing to be

bound by this provision as if it were a party to this Agreement.

 

13.           Borrower

hereby covenants and agrees that, during the term of this Agreement, in the

event that Guarantor ceases to be a publicly traded company or Guarantor fails

to file any public consolidated reports, for any reason, Borrower shall cause

Guarantor to furnish to Lender (i) as soon as available, but in any event

within one hundred twenty (120) days after the end of each fiscal year, a copy

of the consolidated balance sheet of Guarantor and its consolidated

subsidiaries as at the end of such fiscal year and the related consolidated

statements of income and retained earnings and of cash flows of the Guarantor

and its consolidated subsidiaries for such year, which consolidated statements

shall be audited by a firm of independent certified public accountants of

nationally recognized standing; and (ii) as soon as available, and in any event

within sixty (60) days after the end of each of the first three fiscal quarters

of the Guarantor, a company-prepared consolidated balance sheet of the

Guarantor and its consolidated subsidiaries as at the end of such period and

related company-prepared consolidated statements of income and retained

earnings and of cash flows for the Guarantor and its consolidated subsidiaries

for such quarterly period and for the portion of the fiscal year ending with

such period, in each case 

 

6

 

setting

forth in comparative form consolidated figures for the corresponding period or

periods of the preceding fiscal year (subject to normal year-end audit

adjustments).

 

14.           As

stated in Section 6, the parties hereto have chosen New York law to apply

to this Agreement and the Notes.  It is

expressly stipulated and agreed to be the intent of Borrower and Lender at all

times to comply strictly with the applicable laws including, without

limitation, the laws of the State of New York (and any other State law, if for

any reason a court should follow such law (including without limitation Texas)

notwithstanding the parties express intention to follow New York law),

governing the maximum rate or amount of interest payable on the Notes or the

Related Indebtedness (or applicable United States federal law to the extent

that it permits Lender to contract for, charge, take, reserve or receive a

greater amount of interest than under any applicable state law).  If the applicable law is ever judicially

interpreted so as to render usurious any amount (i) contracted for, charged,

taken, reserved or received pursuant to any of the Notes, any of the other

documents executed in connection therewith or as security therefore including

the Guaranty and this Agreement (the “Loan Documents”), or any other

communication or writing by or between Borrower and Lender related to the

transaction or transactions that are the subject matter of the Loan Documents,

(ii) contracted for, charged or received by reason of Lender’s exercise of the

option to accelerate the maturity of any of the Notes and/or the Related

Indebtedness, or (iii) Borrower will have paid or Lender will have received by

reason of any voluntary prepayment by Borrower of any of the Notes and/or the

Related Indebtedness, then it is Borrower’s and Lender’s express intent that

all amounts charged in excess of the Maximum Lawful Rate shall be automatically

cancelled, ab initio, and all amounts in excess of the Maximum Lawful Rate

theretofore collected by Lender shall be credited on the principal balance of

any of the Notes and/or the Related Indebtedness (or, if the Notes and all

Related Indebtedness have been or would thereby be paid in full, refunded to Borrower),

and the provisions of the Notes and the other Loan Documents immediately be

deemed reformed and the amounts thereafter collectible hereunder and thereunder

reduced, without the necessity of the execution of any new document, so as to

comply with the applicable law, but so as to permit the recovery of the fullest

amount otherwise called for hereunder and thereunder; provided, however, if any

of the Notes have been paid in full before the end of the stated term of any of

the applicable Notes, then Borrower and Lender agree that Lender shall, with

reasonable promptness after Lender discovers or is advised by Borrower that

interest was received in an amount in excess of the Maximum Lawful Rate, either

refund such excess interest to Borrower and/or credit such excess interest

against the Notes and/or any Related Indebtedness then owing by Borrower to

Lender.  Borrower hereby agrees that as

a condition precedent to any claim seeking usury penalties against Lender, Borrower

will provide written notice to Lender, advising Lender in reasonable detail of

the nature and amount of the violation, and Lender shall have sixty (60) days

after receipt of such notice in 

 

7

 

which

to correct such usury violation, if any, by either refunding such excess

interest to Borrower or crediting such excess interest against the Notes and/or

the Related Indebtedness then owing by Borrower to Lender.  All sums contracted for, charged or received

by Lender for the use, forbearance or detention of any debt evidenced by any of

the Notes and/or the Related Indebtedness shall, to the extent permitted by

applicable law, be amortized or spread, using the actuarial method, throughout

the stated term of the applicable Note and/or the Related Indebtedness

(including any and all renewal and extension periods) until payment in full so

that the rate or amount of interest on account of any of the Notes and/or the

Related Indebtedness does not exceed the Maximum Lawful Rate from time to time

in effect and applicable to the Note and/or the Related Indebtedness for so

long as debt is outstanding.  In no

event shall the provisions of Chapter 346 of the Texas Finance Code (which

regulates certain revolving credit loan accounts and revolving triparty accounts)

apply to any of the Notes and/or the Related Indebtedness.  Notwithstanding anything to the contrary

contained herein or in any of the other Loan Documents, it is not the intention

of Lender to accelerate the maturity of any interest that has not accrued at

the time of such acceleration or to collect unearned interest at the time of

such acceleration.

 

As used herein, the term “Maximum Lawful Rate” shall

mean the maximum lawful rate of interest which may be contracted for, charged,

taken, received or reserved by Lender in accordance with the applicable laws of

the State of New York (and the law of any other State, if for any reason a

court should follow such law (including without limitation Texas law)

notwithstanding the parties express intention to follow New York law, or

applicable United States federal law to the extent that it permits Lender to

contract for, charge, take, receive or reserve a greater amount of interest

than under applicable state law), taking into account all Charges (as herein

defined) made in connection with the transaction evidenced by the Notes and the

other Loan Documents.  As used herein,

the term “Charges” shall mean all fees, charges and/or any other things of

value, if any, contracted for, charged, received, taken or reserved by Lender

in connection with the transactions relating to any of the Notes and the other

Loan Documents, which are treated as interest under applicable law.  As used herein, the term “Related

Indebtedness” shall mean any and all debt paid or payable by Borrower to Lender

pursuant to the Loan Documents or any other communication or writing by or

between Borrower and Lender related to the transaction or transactions that are

the subject matter of the Loan Documents, except such debt which has been paid

or is payable by Borrower to Lender under the Notes.

 

If for any reason any other State law (including

without limitation Texas) should be deemed to apply (notwithstanding the

parties’ express intention to follow New York law):  (i) to the extent that Lender is relying on Chapter 303 of the

Texas Finance Code (collectively “Chapter 303”), to determine the Maximum

Lawful Rate 

 

8

 

payable on the Note and/or the Related Indebtedness, Lender will

utilize the weekly ceiling from time to time in effect as provided in such

Chapter 303, as amended; (ii) to the extent United States federal law permits

Lender to contract for, charge, take, receive or reserve a greater amount of

interest than under the applicable law, Lender will rely on United States

federal law instead of such Chapter 303 for the purpose of determining the

Maximum Lawful Rate; and (iii) to the extent permitted by applicable law now or

hereafter in effect, Lender may, at its option and from time to time, utilize

any other method of establishing the Maximum Lawful Rate under such Chapter 303

or under other applicable law by giving notice, if required, to Borrower as

provided by applicable law now or hereafter in effect.

 

IN WITNESS WHEREOF, the Borrower and the Lender have

duly executed and delivered this Agreement as of the day and year first above

written.

 

 

	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

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  ITS:

  	

   

  	

   

  	

  ITS:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

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9

 

EXHIBIT A

 

to the Loan and Security Agreement

dated             ,

2002

between

            , as

Borrower and

            , as

Lender

 

	

  Promissory Note No.

           

  	

  Name of Borrower:

  
	

  Equipment:

  	

  Amount: $

  
	

  Location:

  	

  Date:

  
	

   

  	

  Maturity:

  

 

A-1

 

EXHIBIT B

 

$

                               

Date:

                       ,

2002

Final Due Date: 

                          ,

2007

 

PROMISSORY  NOTE NO.    

 

For value received,                          (the

“Borrower”) promises to pay to the order of                          (together

with its successors and assigns, the “Lender”), at the Lender’s office at                          (or

such other address as Lender may designate in writing) the principal amount

of  $                          with

interest at the rate of                %

per annum from the date hereof to maturity, such principal and interest to be

paid each month in installments of $                    plus

interest each (except that the last such installment shall be in a balloon

payment amount equal to all unpaid principal and interest on this Note),

commencing                          ,

200   and on the last date of each month thereafter to and including                          ,

2007, such installments to be applied first to accrued and unpaid interest and

the balance to unpaid principal, pursuant to the attached amortization

schedule.  Interest shall be computed in

arrears on the basis of a 360-day year consisting of twelve months of thirty

days each.  If any payment due hereunder

is not made within 3 days of the due date, the Borrower shall pay the Lender a

late fee equal to the lesser of (i) five percent (5%) of the amount of such

unpaid amount or (ii) the maximum amount permitted to be charged under

applicable law. All amounts due hereunder shall bear interest, from and after

the occurrence and during the continuance of an Event of Default (as defined in

the Security Agreement), at a rate equal to the lesser of (y) five (5)

percentage points above the interest rate applicable immediately prior to the

occurrence of the Event of Default or (z) the maximum amount permitted to be

charged under applicable law.

 

This Note is governed by and incorporates by reference

that certain Loan and Security Agreement of even date herewith (the “Security

Agreement”), between the Borrower and Lender, to which Security Agreement

reference is made as to the nature and extent of the security (“Collateral”)

for this Note, the rights of the Lender, the Borrower and any holder of this

Note with respect to the Collateral, the personal liability of the Borrower,

interest on late installments and the acceleration of the maturity of the Note.

In the event of a casualty loss of the Collateral, the Borrower may prepay this

Note, in whole or in part, provided that any such prepayment shall be applied

to installments of principal hereof in the inverse order of the maturity of

such installments, and any prepayments of the full amount of this Note shall

include accrued interest thereon, and provided that prepayment of this Note is

further governed by the prepayment terms of Section 5 of the Security

Agreement.

 

B-1

 

Except as provided in the Security Agreement, the

Borrower waives presentment and demand for payment, notification of dishonor,

protest and notice of protest of the Note, and shall pay all reasonable costs

of collection when incurred, including reasonable attorneys’ fees.

 

This Note is a negotiable instrument and the rights of

the holders hereof shall be governed by New York law, excluding its conflicts

of law principles.

 

	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Name:

  	

   

  
	

   

  	

  Title:

  	

   

  
					

 

B-2

 

EXHIBIT C

 

GUARANTY

 

For value received, and in order to induce

                        (“Holder”)

to enter into certain Loan and Security Agreements and Promissory Notes

(collectively, the “Loan Agreement”) as set forth in Exhibit A hereto and

incorporated herein by reference with                              (the

“Borrower”) for financing of certain equipment (the “Equipment”), the

undersigned (the “Guarantor”), does hereby unconditionally guaranty to Holder

the full and prompt payment by Borrower of all obligations which said Borrower

presently or hereafter may have to Holder under the Loan Agreement and under

any other agreement related thereto, and agree to indemnify Holder against any

losses Holder may sustain and expenses it may incur in its collection efforts,

including but not limited to any reasonable administrative or legal costs, fees

(including reasonable attorneys’ fees) or expenses, as a result of any default

by Borrower under any Loan Agreement hereunder and/or as a result of the

enforcement or attempted enforcement by Holder of any of its rights against

Guarantor hereunder, except those losses arising from the gross negligence or

willful misconduct of the Holder. Guarantor hereby expressly waives the

following defenses which might constitute a legal or equitable discharge of a

surety or guarantor, and agrees that this Guaranty shall be valid and

unconditionally binding upon Guarantor regardless of (i) the reorganization,

merger, or consolidation of Borrower into or with another entity, corporate or

otherwise, or the dissolution of Borrower, or the sale or other disposition of

all or substantially all of the capital stock, business, or assets of Borrower

to any other person or party, or (ii) the voluntary or involuntary bankruptcy

(including a reorganization in bankruptcy) of Borrower, or (iii) the granting

by Holder of any indulgences to Borrower, or (iv) the assertion by Holder

against Borrower of any of Holder’s rights and remedies provided for under any

Loan Agreement or existing in its favor in law, equity or bankruptcy, or (v)

the release of Borrower from any of its obligations under any Loan Agreement

hereunder by Holder or by operation of law or otherwise, or (vi) any

invalidity, irregularity, or defect, of any provision of any Loan Agreement, or

(vii) any defect in Holder’s title or right to use any of the Equipment, or

(viii) the dissolution of Guarantor. As an accommodation to Guarantor, and not

as a condition of Guarantor’s liability to make payment when due, Guarantor

shall have five (5) days’ notice and opportunity to cure any payment defaults

by the Borrower and thirty (30) days’ notice and opportunity to cure any other

defaults, if curable within thirty (30) days, by the Borrower under the Loan

Agreement, or any document executed in connection therewith or as security

therefor; notwithstanding the foregoing, in no event will any failure to give

such notice result in a discharge of Guarantor’s obligations hereunder. Except

as provided herein, Guarantor hereby waives notice of any consents to the

financing of all Equipment under the Loan Agreement, and to any amendment (but

not increases) thereof, and to any actions taken thereunder, and to the

execution by any 

 

C-1

 

Borrower of the foregoing documents and of any Guaranty, of any default

and nonpayment and/or nonperformance any Borrower under any Loan Agreement

hereunder, of presentment, protest, and demand, and of all other matters to

which Guarantor might otherwise be entitled. Guarantor further agrees that this

Guaranty shall remain and continue in full force and effect notwithstanding any

renewal, modification, or extension of any Loan Agreement (but not increases

thereof). Guarantor hereby expressly waives all notice of and consents to any

such renewal, modification, or extension, and to the execution by any Borrower

of any document pertaining to any such renewal, modification, or

extension.  Guarantor further agrees

that its liability under this Guaranty shall be absolute, primary, and direct,

joint and several, and that Holder shall not be required to pursue any right or

remedy it may have against any Borrower under any Loan Agreement or otherwise

(and shall not be required to first commence any action or obtain any judgment

against Borrower) before enforcing this Guaranty against Guarantor, and the

Guarantor will, upon demand, pay Holder all amounts and all other sums, due and

owing under any Loan Agreements in default hereunder, and will, upon demand,

perform all other obligations of the Borrower, the performance of which is in

default under any Loan Agreement hereunder.

 

Guarantor knowingly and voluntarily waives, releases,

and relinquishes Guarantor’s rights of indemnification, subrogation,

contribution and reimbursement from the Borrower in respect of demands under

this guaranty, except those arising out of the gross negligence or willful

misconduct of the Holder, until such time as the Borrower’s obligations under

the Loan Agreement have been fully satisfied. 

Any obligation of Borrower, now or hereafter held by or owing, to

Guarantor is hereby subordinated to obligations of Borrower to Holder, and,

upon an Event of Default, as defined in the Loan Agreement, any indebtedness

shall be collected, enforced and received by Guarantor as trustee for Holder

and paid over to Holder. Notwithstanding the foregoing, and provided that

Borrower has not failed to make any payment when due hereunder, Guarantor shall

be entitled to collect and keep any indebtedness or other obligations

(including, without limitation, management fees), of Borrower to Guarantor.

Guarantor hereby agrees that the failure of Holder to insist in any one or more

instances upon a strict performance or observance of any of the terms,

provisions, or covenants of any Loan Agreement or any other agreements, or to

exercise any of its rights thereunder, shall not be construed or deemed to be a

waiver or relinquishment for the future of any such terms, provisions,

covenants, or rights, but such terms, provisions, covenants, and rights shall

continue and remain in full force and effect. 

Receipt by Holder of any payment or other sums payable under any Loan

Agreement with knowledge that Borrower has breached any of the terms,

provisions or covenants or the Loan Agreement shall not be deemed to be a

waiver by Holder of such breach.

 

No assignment or other transfer by Holder or Borrower

of any interest, rights, or obligation under any Loan Agreement, or assumption

by any third party of the obligations of Borrower under any 

 

C-2

 

Loan Agreement, shall extinguish or diminish the unconditional,

absolute, primary, and direct liability of Guarantor under this Guaranty, if

done in accordance with all the Loan Agreements. Guarantor hereby consents to

and waives all notice of any such assignment, transfer, or assumption.

 

Guarantor hereby warrants and represents to Holder

that the execution and delivery of this Guaranty is not in contravention of

Guarantor’s charter, certificate of incorporation, by-laws, and applicable law,

and that the execution and delivery of this Guaranty, and the performance thereof

has been duly authorized by Guarantor’s Board of Directors or an authorized

Committee thereof, and will not result in a breach of or constitute a default

under, or result in the creation of any security interest lien, charge, or

encumbrance upon any property or assets of Guarantor pursuant to any loan

agreement, indenture, or contract to which Guarantor is a party or by or under

which it is bound. This Guaranty is assignable by Holder, if done in accordance

with all the Loan Agreements but may not be assigned by Guarantor. Any Assignee

of Holder shall have all of the rights of Holder hereunder and may enforce this

Guaranty against Guarantor with the same force and effect as if this Guaranty

were given to such Assignee in the first instance. This Guaranty shall inure to

the benefit of Holder, and it successors and assigns, and shall be binding upon

Guarantor and its heirs, executors, administrators, personal representatives,

successors and assigns.  No term or condition

of this Guaranty may be waived or modified except by the prior written consent

of an authorized representative of Holder.

 

This Guaranty shall be governed by and construed in

all respects in accordance with the internal laws and decisions (except any

conflict of laws provisions) of the State of New York, including all matters of

construction, validity, enforceability, and performance. THE UNDERSIGNED i)

CONSENT(S), AT HOLDER’S ELECTION AND WITHOUT LIMITING HOLDER’S RIGHT TO

COMMENCE AN ACTION IN ANY OTHER JURISDICTION, TO THE NON-EXCLUSIVE JURISDICTION

AND VENUE OF ANY COURTS (FEDERAL, STATE, OR LOCAL) SITUATED IN THE COUNTY OF

NEW YORK, STATE OF NEW YORK; AND ii) WAIVE(S) ANY OBJECTION TO IMPROPER VENUE

AND FORUM NON CONVENIENS. GUARANTOR AND HOLDER HEREBY WAIVE TRIAL BY JURY.

 

IN WITNESS WHEREOF, the undersigned have executed this

Guaranty this          day

of                        ,

2002.

 

	

   

  	

  Consolidated Graphics Inc.

  5858 Westheimer Road, Suite 200

  Houston, TX 77057

  Attn: Chief Financial Officer

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  
							

 

C-3

 

EXHIBIT A

 

to the Loan and Security

Agreement

Dated             ,

2002

between

                ,

as Borrower and

                 ,

as Lender

 

	

  Promissory Note No. 

  	

  Name of Borrower:

  
	

  Equipment:

  	

  Amount: $

  
	

  Location:

  	

  Date:

  
	

   

  	

  Maturity:

  

 

C-4

 

SCHEDULE

OF

TERM EQUIPMENT NOTES WITH VARIOUS LENDERS

 

Various subsidiaries of Consolidated Graphics, Inc. executed the form

of Loan and Security Agreement and Promissory Note included in this Exhibit

10.1 in connection with the refinancing of certain term equipment notes. The

principal loan amounts borrowed by each of these subsidiaries and the

applicable interest rates charged thereon differed in each transaction.

Consolidated Graphics, Inc. guaranteed each of the borrowed amounts by

execution of a separate Guaranty Agreement in the form included in this Exhibit

10.1.

 

The schedule below sets forth the aggregate principal amounts borrowed

from various lenders by these subsidiaries, the interest rates charged thereon

and the closing dates of the transactions.

 

	

  Lenders  

  	

   

  	

  Aggregate

  Principal

  Loan Amount  

  	

   

  	

  Interest

  Rate

  	

   

  	

  Closing

  Date

  	

   

  
	

  SouthTrust Bank

  	

   

  	

  $

  	

  19,582,515.22

  	

   

  	

  5.92

  	

   

  	

  10/31/02

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  LaSalle National

  Leasing Corp.

  	

   

  	

  $

  	

  10,131,004.32

  	

   

  	

  5.92

  	

   

  	

  10/31/02

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Information

  Leasing Corporation

  	

   

  	

  $

  	

  4,910,367.65

  	

   

  	

  5.92

  	

   

  	

  10/31/02

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Allpoints

  Capital Corp.

  	

   

  	

  $

  	

  3,848,318.87 

  	

   

  	

  5.83

  	

   

  	

  12/27/02

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Total

  	

   

  	

  $

  	

  38,472,206.06Exhibit 4.1

 

MASTER SECURITY AGREEMENT

 

THIS

MASTER SECURITY AGREEMENT, made as of December 29, 1999 (“Agreement”), by and between General

Electric Capital Corporation, for itself and as agent for certain Participants,

a New York corporation with an address at 4 North Park Drive, Suite 500, Hunt Valley, Maryland

21030, and its assigns (together with its successors and assigns, if

any, “Secured

Party”), and Atchison Casting Corporation, a corporation

organized and existing under the laws of the State of Kansas with its chief

executive offices located at 400 S. Fourth Street, Atchison, Kansas 66002 (“Debtor”).

 

In consideration of the promises herein contained and of certain other

good and valuable consideration, the receipt and sufficiency of which are

hereby acknowledged, Debtor and Secured Party hereby agree as follows:

 

1.                                      CREATION OF SECURITY INTEREST.

 

Debtor hereby gives, grants and assigns to Secured Party, its

successors and assigns forever, a security interest in and against any and all

property listed on any collateral schedule now or hereafter annexed hereto or

made a part hereof (“Collateral Schedule”), and in and against

any and all additions, attachments, accessories and accessions thereto, any and

all substitutions, replacements or exchanges therefor, and any and all

insurance and/or other proceeds thereof (all of the foregoing being hereinafter

individually and collectively referred to as the “Collateral”).  The foregoing security interest is given to

secured the payment and performance of any and all debts, obligations and

liabilities of any kind, nature or description whatsoever (whether primary,

secondary, direct, contingent, sole, joint or several, or otherwise, and

whether due or to become due) of Debtor to Secured Party, now existing or hereafter

arising, including but not limited to the payment and performance of certain

Promissory Notes from time to time identified on any Collateral Schedule

(collectively “Notes” and each a “Note”), and any renewals, extensions and

modifications of such debts, obligations and liabilities (all of the foregoing

being hereinafter referred to as the “Indebtedness”).  Notwithstanding the foregoing, and notwithstanding anything to

the contrary contained elsewhere in this Agreement, to the extent that Secured

Party asserts a purchase money security interest in any items of Collateral (“PMSI

Collateral”):  (i) the

PMSI Collateral shall secure only that portion of the Indebtedness which has

been advanced by Secured Party to enable Debtor to purchase, or acquire rights

in or the use of such PMSI Collateral (the “PMSI Indebtedness”), and (ii) no

other Collateral shall secure the PMSI Indebtedness.

 

2.                                      REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.

 

Debtor hereby represents, warrants and covenants as of the date hereof

and as of the date of execution of each Collateral Schedule hereto that:

 

(a)                                  Debtor is, and will remain, duly

organized, existing and in good standing under the laws of the State set forth

in the first paragraph of this Agreement, has its chief executive offices at

the location set forth in such paragraph, and is, and will remain, duly

qualified and licensed in every jurisdiction wherever necessary to carry on its

business and operations;

 

(b)                                 Debtor has adequate power and capacity to

enter into, and to perform its obligations, under this Agreement, each Note and

any other documents evidencing, or given in

 

 

connection with, any of the

Indebtedness (all of the foregoing being hereinafter referred to as the “Debt

Documents”);

 

(c)                                  This Agreement and the other Debt

Documents have been duly authorized, executed and delivered by Debtor and

constitute legal, valid and binding agreements enforceable under all applicable

laws in accordance with their terms, except to the extent that the enforcement

of remedies may be limited under applicable bankruptcy and insolvency laws,

similar laws affecting creditors generally and general principles of equity;

 

(d)                                 No approval, consent or withholding of

objections is required from any governmental authority or instrumentality with

respect to the entry into, or performance by, Debtor of any of the Debt

Documents, except such as may have already been obtained;

 

(e)                                  The entry into, and performance by,

Debtor of the Debt Documents will not (i) violate any of the organizational

documents of Debtor or any judgment, order, law or regulation applicable to

Debtor, or (ii) result in any breach of, constitute a default under, or

result in the creation of any lien, claim or encumbrance on any of Debtor’s

property (except for liens in favor of Secured Party) pursuant to any indenture

mortgage, deed of trust, bank loan, credit agreement, or other agreement or

instrument to which Debtor is a party;

 

(f)                                    There are no suits or proceedings pending

or threatened in court of before any commission, board or other administrative

agency against Debtor which could, in the aggregate, have a material adverse

effect on Debtor, its business or operations, or its ability to perform its

obligations under the Debt Documents other than that described in Schedule 2(f)

hereto;

 

(g)                                 All financial statements delivered to

Secured Party in connection with the Indebtedness have been prepared in

accordance with generally accepted accounting principles, and since the date of

the most recent financial statement, there has been no material adverse change;

 

(h)                                 The Collateral is not, and will not be,

used by Debtor for personal, family or household purposes;

 

(i)                                     The Collateral is, and will remain, in

good condition and repair, ordinary wear and tear excepted, and Debtor will not

be negligent in the care and use thereof;

 

(j)                                     Debtor is, and will remain, the sole and

lawful owner, and in possession of, the Collateral (except as expressly

permitted pursuant to Section 3(h) hereof), and has the sole right and lawful

authority to grant the security interest described in this Agreement;

 

(k)                                  The Collateral is, and will remain, free

and clear of all liens, claims and encumbrances of every kind, nature and

description, except for (i) liens in favor of Security Party,

(ii) liens for taxes not yet due or for taxes being contested in good

faith and which do not involve, in the reasonable judgment of Secured Party,

any risk of the sale, forfeiture or loss of any of the Collateral having an

aggregate value in excess of $250,000, and (iii) inchoate materialmen’s,

mechanic’s, repairmen’s and similar liens arising by operation of law in the

normal course of business for amounts which are not delinquent (all of such

permitted liens being hereinafter referred to as “Permitted Liens”);

 

2

 

(l)                                     Debtor shall, at all times while any

Indebtedness is outstanding, remain the owner of the real property at which the

Collateral is located and cause such real property (except as expressly

permitted pursuant to the Negative Pledge Agreements referred to in Section

7(h) hereof) to remain free and clear of all liens, claims and encumbrances of

every kind, nature and description, including without limitation, any lien or

security interest arising from a deed of trust, mortgage, assignment or lease,

except for Permitted Liens; and

 

(m)                               At all times while any Indebtedness is

outstanding, Debtor hereby agrees that it shall comply with the following

covenants:

 

1.                                       Minimum Tangible Net Worth. 

Debtor shall at all times maintain a minimum Tangible Net Worth

(hereinafter defined) of not less than $90,000,000.

 

2.                                       Debt to Tangible Net Worth. 

Debtor will not permit the ratio of Debtor’s total current and long term

debt (as determined in accordance with generally accepted accounting principles

consistently applied) to Debtor’s Tangible Net Worth to be greater than 2.00 to

1.00, as measured quarterly.

 

3.                                       Debt Service Coverage Ratio. 

Debtor shall at all times maintain a ratio of Operating Cash Flow (as

hereinafter defined) to Debt Service (as hereinafter defined) of not less than

2.00 to 1.00, as measured quarterly on a rolling four-quarter basis.

 

As used herein:

 

(a)                                  the terms “Tangible Net Worth” means, as

of any date, Debtor’s stockholder equity less Debtor’s intangible assets, as

determined in accordance with generally accepted accounting principles,

consistently applied;

 

(b)                                 the term “Operating Cash Flow” means, for

any period, Debtor’s pre-tax net income, plus interest expense, plus

depreciation, amortization, and operating lease rentals, all determined in

accordance with generally accepted accounting principles, consistently applied;

 

(c)                                  the terms “Debt Service” means, for any

period, Debtor’s interest expense, plus operating lease rentals, determined in

accordance with generally accepted accounting principles, consistently applied.

 

Concurrently with the delivery of each financial statement pursuant to

Section 5(b) hereof, Debtor shall deliver to Secured Party a compliance

certificate in form and substance satisfactory to Secured Party and signed by

Debtor’s Chief Financial Officer or Treasurer that sets forth (x) that

Debtor is in compliance with the financial covenants provided in this Section

5(b) and (y) the computations in reasonable detail demonstrating such

compliance for the fiscal periods to which such financial statements relate.

 

3.                                      COLLATERAL.

 

(a)                                  Until the declaration of any default

hereunder, Debtor shall remain in possession of the Collateral except with

respect to Collateral sold pursuant to Section 3(h) hereof; provided, however,

that Secured Party shall have the right to possess (i) any chattel paper

or instrument that constitutes a part of the Collateral, and (ii) any

other Collateral which because of its nature may require that Secured Party’s

security interest therein be perfected by possession.  Secured

 

3

 

Party, its successors and

assigns, and their respective agents, shall have the right to examine and

inspect any of the Collateral at any time during normal business hours.  Upon any request from Secured Party, Debtor

shall provide Secured Party with notice of the then current location of the

Collateral.

 

(b)                                 Debtor shall (i) use the Collateral

only in its trade or business, (ii) maintain all of the Collateral in good

condition and working order, (iii) use and maintain the Collateral only in

compliance with all applicable laws, and (iv) keep all of the Collateral

free and clear of all liens, claims and encumbrances (except for Permitted

Liens).

 

(c)                                  Except as expressly permitted pursuant to

Section 3(h) hereof, Debtor shall not, without the prior written consent of

Secured Party, (i) part with possession of any of the Collateral (except

to Secured Party or for maintenance and repair), (ii) remove any of the

Collateral from the continental United States, or (iii) sell, rent, lease,

mortgage, grant a security interest in or otherwise transfer or encumber

(except for Permitted Liens) any of the Collateral.

 

(d)                                 Debtor shall pay promptly when due all

taxes, license fees, assessments and public and private charges levied or

assessed on any of the Collateral, on the use thereof, or on this Agreement or

any of the other Debt Documents except for taxes, assessments and charges

contested in good faith and which do not involve in the reasonable judgement of

Secured Party, any risk of the sale, forfeiture or loss of any of the

Collateral having an aggregate value in excess of $250,000.  At its option, Secured Party may discharge

taxes, liens, security interests or other encumbrances at any time levied or

placed on the Collateral and may pay for the maintenance, insurance and

preservation of the Collateral or to effect compliance with the terms of this

Agreement or any of the other Debt Documents. 

Debtor shall reimburse Secured Party, on demand, for any and all

reasonable costs and expenses incurred by Secured Party in connection therewith

and agrees that such reimbursement obligation shall be secured hereby.

 

(e)                                  Debtor shall, at all times, keep accurate

and complete records of the Collateral, and Secured Party, its successors and

assigns, and their respective agents, shall have the right to examine, inspect,

and make extracts from all of Debtor’s books and records relating to the

Collateral at any time during normal business hours.

 

(f)                                    If agreed by the parties, Secured Party

may, but shall in no event be obligated to, accept substitutions and exchanges

of property for property, and additions to the property, constituting all or

any part of the Collateral.  Such

substitutions, exchanges and additions shall be accomplished at any time and

from time to time, by the substitution of a revised Collateral Schedule for the

Collateral Schedule now or hereafter annexed. 

Any property which may be substituted, exchanged or added as aforesaid

shall constitute a portion of the Collateral and shall be subject to the

security interest granted herein. 

Additions to, reductions or exchanges of, or substitutions for, the

Collateral, payments on account of any obligation or liability secured hereby,

increases in the obligations and liabilities secured hereby, or the creation of

additional obligations and liabilities secured hereby, may from time to time be

made or occur without affecting the provisions of this Agreement or the provisions

of any obligation or liability which this Agreement secures.

 

(g)                                 Any third person at any time and from

time to time holding all or any portion of the Collateral shall be deemed to,

and shall, hold the Collateral as the agent of, and as pledge holder for,

Secured Party.  At any time and from

time to time, Secured Party may give notice to

 

4

 

any third person holding

all or any portion of the Collateral that such third person is holding the

Collateral as the agent of, and as pledge holder for, the Secured Party.

 

(h)                                 Notwithstanding anything herein to the

contrary, Debtor is permitted to sell, move, lease or otherwise dispose of any

Collateral provided that (i) the aggregate value of all Collateral sold,

moved, leased or otherwise disposed of in any calendar year shall not exceed

$500,000, (ii) Debtor shall replace the sold or disposed of Collateral

with property having an aggregate value equal to or greater than the value of

the sold or disposed of Collateral and the replacement Collateral shall be free

and clear of all liens and encumbrances other than Permitted Liens and (iii)

within thirty (30) days after the end of each calendar year Debtor delivers to

Secured Party a written report describing in reasonable detail the item(s) of

Collateral having an original invoice cost of $100,000 or more that have been

sold, moved, leased or disposed of and the Collateral that has replaced such

item(s).

 

4.                                      INSURANCE.

 

The Collateral shall at all times be held at Debtor’s risk, and Debtor

shall keep it insured against loss or damage by fire and extended coverage

perils, theft, burglary, and for any or all Collateral which are vehicles, for

risk of loss by collision, and where requested by Secured Party, against other

risks as required thereby, for the full replacement value thereof, with

companies, in amounts and under policies reasonably acceptable to Secured

Party.  Secured Party acknowledges that

the policies of insurance currently in effect that have been delivered to it

are acceptable.  Debtor shall, if

Secured Party so requires, deliver to Secured Party policies or certificates of

insurance evidencing such coverage. 

Each policy shall name Secured Party as loss payee thereunder, shall

provide for coverage to Secured Party regardless of the breach by Debtor of any

warranty or representation made therein (if available), shall not be subject to

co-insurance, and shall provide for thirty (30) days written notice to Secured

Party of the cancellation or material modification thereof.  Debtor hereby appoints Secured Party as its

attorney in face to make proof of loss, claim for insurance and adjustments

with insurers, and to execute or endorse all documents, checks or drafts in connection

with payments made as a result of any such insurance policies, provided that

Secured Party agrees that it shall not exercise such power unless an Event of

Default has occurred and is continuing. 

Proceeds of insurance shall be applied, at the option of Secured Party,

to repair or replace the Collateral or to reduce any of the Indebtedness

secured hereby, provided however, as long as no Event of Default has occurred

and is continuing hereunder, the proceeds of insurance shall be distributed to

Debtor if (a) the Collateral has been repaired or replaced in a timely

fashion with Collateral of equal or greater value, free and clear of all liens

and encumbrances or (b) the proceeds of insurance are less than $2,000,000.00.

 

5.                                      REPORTS.

 

(a)                                  Debtor shall promptly notify Secured

Party in the event of (i) any change in the name of Debtor, (ii) any

relocation of its chief executive offices, (iii) any relocation of any of

the Collateral but subject to Section 3(h) hereof, (iv) any of the

Collateral having an aggregate value in excess of $250,000 being lost, stolen,

missing, destroyed or materially damages, or (v) any lien, claim or

encumbrance attaching or being made against any of the Collateral other than

Permitted Liens.

 

5

 

(b)                                 Debtor will within ninety (90) days of

the close of each fiscal year of Debtor, deliver to Secured Party, Debtor’s

complete financial statements, certified by a recognized firm of certified

public accountants.  Debtor will, within

thirty (30) days after the date on which they are filed, deliver to Secured

Party all Forms 10-K and 10-Q filed with the Securities and Exchange

Commission.  Upon request Debtor will

deliver to Secured Party quarterly, within ninety (90) days of the close of

each fiscal quarter of Debtor, in reasonable detail, copies of Debtor’s

quarterly financial report certified by the chief financial officer of

Debtor.  Upon request, Debtor will

deliver to Secured Party one copy of each financial statement, report, notice

or proxy statement sent by Debtor to shareholders generally and one copy of

each regular or periodic report, registration statement or prospectus filed by

Debtor with any securities exchange or the Securities and Exchange Commission

or any successor agency, such copies to be delivered to Secured Party within

thirty (30) days after they become available or are otherwise filed.  Any and all financial statements submitted

and to be submitted to Secured Party have and will have been prepared on a

basis of generally accepted accounting principles, and are and will be complete

and correct and fairly present Debtor’s financial condition as at the date

thereof.  Secured Party may at any

reasonable time examine the books and records of Debtor and make copies

thereof.

 

(c)                                  Within thirty (30) days after any request

by Secured Party, Debtor will furnish a certificate of an authorized officer of

Debtor stating that he has reviewed the activities of Debtor and that, to the

best of his knowledge, there exists no Event of Default (as described in

Section 7) or event which with notice or lapse of time (or both) would become

an Event of Default.

 

6.                                      FURTHER ASSURANCES.

 

(a)                                  Debtor shall, upon request of Secured

Party, furnish to Secured Party such further information, execute and deliver

to Secured Party such documents and instruments (including, without limitation,

Uniform Commercial Code financing statements) and do such other acts and

things, as Secured Party may at any time reasonably request relating to the

perfection or protection of the security interest created by this Agreement or

for the purpose of carrying out the intent of this Agreement.  Without limiting the foregoing, Debtor shall

cooperate and do all acts deemed necessary or advisable by Secured Party to

continue in Secured Party a perfected first security interest in the

Collateral, and shall obtain and furnish to Secured Party any subordinations,

releases, landlord, lessor, or mortgagee waivers, and similar documents as may

be from to time to time reasonably requested by, and which are in form and

substance reasonably satisfactory to, Secured Party.

 

(b)                                 Debtor hereby grants to Secured Party the

power to sign Debtor’s name and generally to act on behalf of Debtor to execute

and file applications for title, transfers of title, financing statements,

notices of lien and other documents pertaining to any or all of the Collateral

but Secured Party may not exercise such rights unless an Event of Default has

occurred and is continuing.  Debtor

shall, if any certificate of title be required or permitted by law for any of

the Collateral, obtain such certificate showing the lien hereof with respect to

the Collateral and promptly deliver same to Secured Party.

 

(c)                                  Debtor shall indemnify and defend the

Secured Party, its successors and assigns, and their respective directors,

officers and employees, from and against any and all claims, actions and suits

(including, without limitation, reasonable attorneys’ fees incurred in

connection

 

6

 

therewith) of any kind,

nature or description whatsoever arising, directly or indirectly, in connection

with any of the Collateral.

 

7.                                      EVENTS OF DEFAULT.

 

Debtor shall be in default under this Agreement and each of the other

Debt Documents upon the occurrence of any of the following “Event(s) of

Default”:

 

(a)                                  Debtor fails to pay any installment or

other amount due or coming due under any of the Debt Documents within ten (10)

days after its due date;

 

(b)                                 Any attempt by Debtor, without the prior

written consent of Secured Party, to sell, rent, lease, mortgage, grant a

security interest in, or otherwise transfer or encumber (except for Permitted

Liens) any of the Collateral or the real property at which the Collateral is

located, except as expressly permitted pursuant to Section 3(h) hereof;

 

(c)                                  Debtor fails to procure, or maintain in

effect at all times, any of the insurance on the Collateral in accordance with

Section 4 of this Agreement;

 

(d)                                 Debtor breaches any of the financial

covenants set forth in Section 2(m);

 

(e)                                  Debtor breaches any of its other

obligations under any of the Debt Documents and fails to cure the same within

thirty (30) days after written notice thereof;

 

(f)                                    Any warranty, representation or statement

made by Debtor in any of the Debt Documents or otherwise in connection with any

of the Indebtedness shall be false or misleading in any material respect;

 

(g)                                 Any of the Collateral being subjected to

attachment, execution, levy, seizure or confiscation in any legal proceeding;

 

(h)                                 Any default by Debtor under any other

agreement between Debtor and Secured Party, including but not limited to, those

certain Negative Pledge Agreements dated the date hereof and recorded or to be

recorded with the land records of Atchison County, Kansas and Buchanan County,

Missouri;

 

(i)                                     Any insolvency or business failure of

Debtor;

 

(j)                                     The appointment of a receiver for all or

any party of the property of Debtor, or any assignment for the benefit of

creditors by Debtor;

 

(k)                                  The filing of a petition by Debtor under

any bankruptcy, insolvency or similar law, or the filing of any such petition

against Debtor if the same is not dismissed within sixty (60) days of such

filing;

 

(l)                                     Any default by Debtor under any payment

obligation for borrowed money, for the deferred purchase price of property or

any lease that is uncured for thirty (30) days after the date such amount was

due and payable and provided that such default allows for the acceleration of

such obligations or repossession of the collateral;

 

7

 

(m)                               Any dissolution, termination of

existence, merger or consolidation of Debtor (such action being referred to as

an “Event”), unless not less than sixty (60) days prior to such Event:  (x) such person is organized and

existing under the laws of the United States or any state, and executes and

delivers to Secured Party an agreement containing an effective assumption by

such person of the due and punctual performance of this Agreements; and (y)

Secured Party is reasonably satisfied as to the credit worthiness of such

person; or

 

(n)                                 As a result of or in connection with a

material change in the ownership of Debtor’s capital stock, Debtor’s

debt-to-worth ratio equals or exceeds twice Debtor’s debt-to-worth ratio as of

the date of this Agreement (unless Secured Party shall have given its prior

written consent thereto).  As used

herein, “debt-to-worth

ratio” shall mean the ratio of (x) total liabilities which, in

accordance with generally accepted accounting principles (“GAAP”) would be included in

the liability side of a balance sheet, and (y) tangible net worth including the

sum of the par or stated value of all outstanding capital stock, surplus and

undivided profits, less any amounts attributable to goodwill, patents,

copyrights, mailing lists, catalogs, trademarks, bond discount and underwriting

expenses, organization expense and other intangibles, all determined in

accordance with GAAP.

 

8.                                      REMEDIES ON DEFAULT.

 

(a)                                  Upon the occurrence of an Event of

Default under this Agreement, the Secured Party, at its option, may declare any

or all of the Indebtedness, including without limitation the Notes, to be

immediately due and payable, without demand or notice to Debtor.  The obligations and liabilities accelerated

thereby shall bear interest (both before and after any judgment) until paid in

full at the lower of one percent (1%) per annum above the interest rate

specified in the applicable Note or the maximum rate not prohibited by

applicable law.

 

(b)                                 Upon such declaration of default, Secured

Party shall have all of the rights and remedies of a Secured Party under the

Uniform Commercial Code, and under any other applicable law.  Without limiting the foregoing, Secured

Party shall have the right to (i) notify any account debtor of Debtor or

any obligor on any instrument which constitutes part of the Collateral to make

payment to the Secured Party, (ii) with or without legal process, enter any

premises where the Collateral may be and take possession and/or remove said

Collateral from said premises, (iii) sell the Collateral at public or private

sale, in whole or in part, and have the right to bid and purchase at said sale,

and/or (iv) lease or otherwise dispose of all or part of the Collateral,

applying proceeds therefrom to the obligations then in default.  If requested by Secured Party, Debtor shall

promptly assemble the Collateral and make it available to Secured Party at a

place to be designated by Secured Party which is reasonably convenient to both

parties.  Secured Party may also render

any or all of the Collateral unusable at the Debtor’s premises and may dispose

of such Collateral on such premises without liability for rent or costs.  Any notice which Secured Party is required

to give to Debtor under the Uniform Commercial Code of the time and place of

any public sale or the time after which any private sale or other intended

disposition of the Collateral is to be made shall be deemed to constitute

reasonable notice if such notice is given to the last known address of Debtor

at least ten (10) days prior to such action.

 

(c)                                  Only upon the occurrence of an Event of

Default under this Agreement, the Secured Party may record any or all mortgages

or deeds of trust executed by Debtor in favor of Secured Party in connection

with the Notes and proceed to enforce all rights and remedies

 

8

 

granted Secured Party

under such documents.  All fees and

costs (including mortgage registration taxes) incurred in connection with

recording the mortgages and deeds of trust shall be paid by Debtor.

 

(d)                                 Proceeds from any sale or lease or other

disposition shall be applied:  first, to

all costs of repossession, storage, and disposition including without

limitation reasonable attorneys’, appraisers’, and auctioneers’ fees; second,

to discharge the obligations then in default; third, to discharge any other

Indebtedness of Debtor to Secured Party, whether as obligor, endorser,

guarantor, surety or indemnitor; fourth, to expenses incurred in paying or

settling liens and claims against the Collateral; and lastly, to Debtor, if

there exists any surplus.  Debtor shall

remain fully liable for any deficiency.

 

(e)                                  In the event this Agreement, any Note or

any other Debt Documents are placed in the hands of an attorney for collection

of money due or to become due or to obtain performance of any provision hereof,

Debtor agrees to pay all reasonable attorneys’ fees incurred by Secured Party,

and further agrees that payment of such fees is secured hereunder.

 

(f)                                    Secured Party’s rights and remedies

hereunder or otherwise arising are cumulative and may be exercised singularly

or concurrently.  Neither the failure

nor any delay on the part of the Secured Party to exercise any right, power or

privilege hereunder shall operate as a waiver thereof, nor shall any single or

partial exercise of any right, power or privilege preclude any other or further

exercise thereof or the exercise of any other right, power or privilege.  Secured Party shall not be deemed to have

waived any of its rights hereunder or under any other agreement, instrument or

paper signed by Debtor unless such waiver be in writing and signed by Secured

Party.  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.

 

(g)                                 DEBTOR HEREBY UNCONDITIONALLY WAIVES ITS

RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING

OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE OTHER DEBT

DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR

AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY

RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN

DEBTOR AND SECURED PARTY.  THE SCOPE OF

THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY

BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT

CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY

CLAIMS).  THIS WAIVER IS IRREVOCABLE,

MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER

SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR

MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER

DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED

TRANSACTION.  IN THE EVENT OF

LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE

COURT.

 

9

 

9.                                      MISCELLANEOUS.

 

(a)                                  This Agreement, any Collateral Schedules,

any Note and/or any of the other Debt Documents may be assigned, in whole or in

part, by Secured Party without notice to Debtor, and Debtor hereby waives any

defense, counterclaim or cross-complaint by Debtor against any assignee,

agreeing that Secured Party shall be solely responsible therefor.  Debtor agrees that if Debtor receives

written notice of an assignment from Secured Party, Debtor shall pay all

payments and other amounts due under the assigned Note and Collateral Schedule

to such assignee or as instructed by Secured Party.  Debtor further agrees to confirm in writing receipt of the notice

of assignment as may be reasonably requested by Assignee.

 

(b)                                 All notices to be given in connection

with this Agreement shall be in writing, shall be addressed to the parties at

their respective addresses set forth hereinabove (unless and until a different

address may be specified in a written notice to the other party), and shall be

deemed given (i) on the date of receipt if delivered in hand or by facsimile

transmission, (ii) on the next business day after being sent by express mail,

and (iii) on the fourth business day after being sent by registered or

certified mail.  As used herein, the

term “business day” shall mean and include any day other than Saturdays, Sundays,

or other days on which commercial banks in New York, New York are required or

authorized to be closed.

 

(c)                                  Time is of the essence hereof.  This Agreement shall be binding, jointly and

severally, upon all parties described as the “Debtor” and their respective

heirs, executors, representatives, successors and assigns, and shall inure to

the benefit of Secured Party, its successors and assigns.

 

(d)                                 This Agreement and its Collateral

Schedules constitute the entire agreement between the parties with respect to

the subject matter hereof and supersede all prior understandings (whether

written, verbal or implied) with respect thereto.  This Agreement and its Collateral Schedules shall not be changed

or terminated orally or by course of conduct, but only by a writing signed by

both parties hereto.  Section headings

contained in this Agreement have been included for convenience only, and shall

not affect the construction or interpretation hereof.

 

(e)                                  This Agreement shall continue in full

force and effect until all of the Indebtedness has been indefeasibly paid in

full to Secured Party.  The surrender,

upon payment or otherwise, of any Note or any of the other documents evidencing

any of the Indebtedness shall not affect the right of Secured Party to retain

the Collateral for such other Indebtedness as may then exist or as it may be

reasonably contemplated will exist in the future.  This Agreement shall automatically be reinstated in the event

that Secured Party is ever required to return or restore the payment of all or

any portion of the Indebtedness (all as though such payment had never been

made).

 

(f)                                    Debtor acknowledges that is has been

advised that General Electric Capital Corporation is acting hereunder for

itself and as agent for certain third parties (each being herein referred to as

a “Participant”

and, collectively, as the “Participants”); that the interest of the

Secured Party in this Agreement, the Notes, the Collateral Schedules, related

instruments and documents and/or the Collateral may be conveyed to, in whole or

in part, and may be used as security for financing obtained from, one or more

third parties without the consent of Debtor (the “Syndication”).  Debtor agrees reasonably to cooperate with

Secured Party in connection with the Syndication, including the execution and

delivery of such other documents, instruments,

 

10

 

notices, opinions,

certificates and acknowledgements as reasonably may be required by Secured

Party.

 

IN

WITNESS WHEREOF,

Debtor and Secured Party, intending to be legally bound hereby, have duly

executed this Agreement in one or more counterparts, each of which shall be

deemed to be an original, as of the day and year first aforesaid.

 

 

	

  SECURED

  PARTY:

  	

   

  	

  DEBTOR:

  
	

   

  	

   

  	

   

  
	

  General Electric Capital Corporation,

  for itself, and as agent for certain

  Participants

  	

   

  	

  Atchison Casting Corporation

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  By: 

  	

  /s/ Louis J.

  Vigliotti

  	

   

  	

   

  	

  By:

  	

  /s/ Kevin T.

  McDermed

  	

   

  
	

   

  	

   

  	

   

  
	

  Title:

  Transaction & Syndication Senior Manager

  	

   

  	

  Title: V.P.

  & Treasurer

  
							

 

11

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