EXHIBIT 4.1b
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (the "AGREEMENT") is dated as of
April 3, 1998, made by Atchison Casting Corporation (the "GRANTOR") in favor of
Harris Trust and Savings Bank ("HARRIS") with its mailing address 111 West
Monroe Street, acting as agent hereunder for the Banks and Noteholders
hereinafter defined (Harris acting as such agent and any successor or
successors to Harris acting in such capacity being hereinafter referred to as
the "COLLATERAL AGENT");
WITNESSETH THAT:
WHEREAS, the Grantor, Harris, individually and as agent, and the banks
from time to time party thereto, have entered into an Amended and Restated
Credit Agreement dated as of April 3, 1998 (such Credit Agreement as the same
may be amended, modified or restated from time to time being hereinafter
referred to as the "CREDIT AGREEMENT"), pursuant to which such lenders (Harris
and the other lenders which are now or which from time to time hereafter become
party to the Credit Agreement being hereinafter referred to collectively as the
"BANKS" and individually as a "BANK") have agreed, subject to certain terms and
conditions, to extend credit and make certain other financial accommodations
available to the Grantor;
WHEREAS, the Grantor has entered into that certain Note Agreement dated as
of July 29, 1994 (such Note Agreement as the same has been and may be amended,
modified or restated from time to time being hereinafter referred to as the
"NOTE AGREEMENT") with the purchasers identified therein (each a "NOTEHOLDER"
and collectively the "NOTEHOLDERS") under which the Grantor has issued
$20,000,000 in aggregate principal amount of its Notes (the "SENIOR NOTES");
WHEREAS, as a condition precedent to extending the credit facilities to
the Grantor under the Credit Agreement and for the Noteholders to consent to
certain amendments to the Note Agreement, the Banks and Noteholders have
required, among other things, that the Grantor grant to the Collateral Agent a
lien on and security interest in certain personal properties of the Grantor as
collateral security for such credit facilities and related obligations pursuant
to this Agreement;
NOW, THEREFORE, for and in consideration of the execution and delivery by
the Banks of the Credit Agreement, and other good and valuable consideration,
receipt whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
1. GRANT OF SECURITY INTEREST. The Grantor hereby grants to the
Collateral Agent a lien on and security interest in, and acknowledges and
agrees that the Collateral Agent has and shall continue to have a continuing
lien on and security interest in, any and all right, title and interest of the
Grantor, whether now owned or existing or hereafter created, acquired or
arising,
in and to the following: (a) all promissory notes and other instruments
payable to or otherwise acquired by the Grantor and any and all rights in and
to any and all agreements and collateral securing or relating thereto and the
shares of the capital stock of the issuers, each as listed and described on
Schedule A attached hereto and made a part hereof as such Schedule may from
time to time be amended as hereinafter set forth, and all substitutions and
additions to such shares, notes or instruments (herein, the "PLEDGED
SECURITIES"), (b) all dividends, distributions and sums distributable or
payable from, upon or in respect of the Pledged Securities, (c) all other
rights and privileges incident to the Pledged Securities, and (d) all
proceeds and products of the foregoing (all of the foregoing being
hereinafter referred to collectively as the "COLLATERAL"). This pledge and
assignment constitutes an assignment of the rights of the Grantor with
respect to the Collateral only and not an assignment of any duties or
obligations the Grantor may have with regard to the management of, or the
giving of advice to, the issuers of the Pledged Securities.
2. OBLIGATIONS HEREBY SECURED. The lien and security interest granted
and provided for herein is made and given to secure, and shall secure, the
payment and performance of (a) the Obligations (as defined in the Credit
Agreement), (b) the obligations of the Grantor under the Note Agreement, and
(c) any and all reasonable expenses and charges, legal or otherwise, suffered
or incurred by the Collateral Agent, any Noteholder or any Bank in collecting
or enforcing any of such indebtedness, obligations and liabilities or in
realizing on or protecting or preserving any security therefor, including,
without limitation, the lien and security interest granted hereby other than
any of the foregoing that result from the gross negligence or willful
misconduct of the Collateral Agent, any Noteholder or such Bank (all of the
foregoing being hereinafter referred to as the "OBLIGATIONS").
3. COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. The Grantor
hereby covenants and agrees with, and represents and warrants to, the
Collateral Agent, the Banks and the Noteholders that:
(a) The Grantor is a corporation duly organized and validly existing in
good standing under the laws of the State of Kansas, is the sole and lawful
legal, record and beneficial owner of the Collateral, and has full right, power
and authority to enter into this Agreement and to perform each and all of the
matters and things herein provided for. The execution and delivery of this
Agreement, and the observance and performance of the matters and things herein
set forth, will not (i) contravene or constitute a default under any provision
of law, or any judgment, injunction, order or decree binding upon the Grantor,
or any provision of the Grantor's articles of incorporation, by-laws, or any
material covenant, indenture or agreement of or affecting the Grantor or any of
its property, or (ii) result in the creation or imposition of any lien or
encumbrance on any property of the Grantor except for the lien and security
interest in the Collateral granted pursuant to this Agreement. The Grantor's
chief executive office is located at 400 South 4th Street, Atchison, Kansas
66002, and the Grantor shall not move its chief executive office without first
providing the Collateral Agent 30 days prior written notice of the Grantor's
-2-
intent to do so, provided that the Grantor shall at all times maintain its
chief executive office in the United States of America and, with respect to
any such new location, the Grantor shall have taken all action requested by
the Collateral Agent to maintain the lien and security interest of the
Collateral Agent in the Collateral at all times fully perfected and in full
force and effect.
(b) The certificates, if any, for all shares of the Pledged Securities
shall be delivered by the Grantor to the Collateral Agent duly endorsed in
blank for transfer or accompanied by an appropriate assignment or assignments
or an appropriate undated stock power or powers, in every case sufficient to
transfer title thereto. The Collateral Agent may at any time after the
occurrence and during the continuance of a Default cause to be transferred
into its name or into the name of its nominee or nominees any and all of the
shares of the Pledged Securities. The Collateral Agent shall at all times
have the right to exchange the certificates representing the Pledged
Securities for certificates of smaller or larger denominations. The Grantor
has delivered the only executed original of the Pledged Securities to the
Collateral Agent, the same has not been amended or modified in any respect,
the unpaid principal balance of each Pledged Security that constitutes a note
or instrument as of the date hereof is as set forth on Schedule A hereto; and
there is not any defense, set-off or counterclaim to the obligation of the
obligor thereon to pay the principal of and interest on each Pledged Security
that constitutes a note or instrument as and when the same becomes due and
payable. The Grantor has delivered to the Collateral Agent true and correct
copies of all instruments and documents securing the Pledged Securities or
setting forth terms and conditions applicable thereto (collectively the "LOAN
DOCUMENTS") and the same have not been amended or modified in any respect
(except for amendments and modifications reflected in written instruments,
copies of which have heretofore been delivered to the Collateral Agent).
Each obligor under a Pledged Security that constitutes a note or instrument
is in compliance in all material respects with their respective obligations
thereunder and the applicable Loan Documents, and no default has occurred and
is continuing thereunder.
(c) The Pledged Securities have been validly issued and are fully paid
and non-assessable. There are no outstanding commitments or other
obligations of the issuer of any of the Pledged Securities to issue, and no
options, warrants or other rights of any person or entity to acquire, any
share of any class or series of capital stock of such issuer.
(d) The Collateral and every part thereof is and will be free and clear
of all security interests, liens (including, without limitation, mechanics',
laborers' and statutory liens), attachments, levies and encumbrances of every
kind, nature and description and whether voluntary or involuntary, except for
the security interest of the Collateral Agent therein. The Grantor shall
warrant and defend the Collateral against any claims and demands of all
persons or entities at any time claiming the same or any interest in the
Collateral adverse to the Collateral Agent. The Grantor has the right to
vote the Collateral and there are no restrictions upon the voting rights
associated with, or the transfer of, any of the Collateral, except as
provided by
-3-
federal and state laws applicable to the sale of securities generally or as
otherwise disclosed to the Collateral Agent in writing.
(e) None of the Collateral constitutes margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System).
(f) The Grantor shall not, without the Collateral Agent's prior written
consent, sell, assign, pledge, encumber, or otherwise dispose of the
Collateral or any interest therein.
(g) The Grantor shall promptly pay when due all taxes, assessments and
governmental charges and levies upon or against the Grantor or the
Collateral, in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith by appropriate proceedings which prevent foreclosure
on or other realization upon any of the Collateral and the Grantor shall have
established adequate reserves therefor.
(h) The Grantor agrees to execute and deliver to the Collateral Agent
such further agreements, assignments, instruments and documents and to do all
such other things as the Collateral Agent, any Bank or any Noteholder may
deem necessary or appropriate to assure the Collateral Agent its lien and
security interest hereunder, including such assignments, stock powers,
financing statements, instruments and documents as the Collateral Agent, any
Bank, or any Noteholder may from time to time reasonably require in order to
comply with the Uniform Commercial Code as enacted in the State of Illinois
and any successor statute(s) thereto (the "CODE"). The Grantor hereby agrees
that a carbon, photographic or other reproduction of this Agreement or any
such financing statement is sufficient for filing as a financing statement by
the Collateral Agent without notice thereof to the Grantor wherever the
Collateral Agent in its sole discretion desires to file the same. In the
event for any reason the law of any jurisdiction other than Illinois becomes
or is applicable to the Collateral or any part thereof, or to any of the
Obligations, the Grantor agrees to execute and deliver all such agreements,
assignments, instruments and documents and to do all such other things as the
Collateral Agent, any Bank or any Noteholder in their reasonable discretion
deems necessary or appropriate to preserve, protect and enforce the lien and
security interest of the Collateral Agent under the law of such other
jurisdiction. The Grantor agrees to mark its books and records to reflect
the lien and security interest of the Collateral Agent in the Collateral.
(i) If, as and when the Grantor delivers any securities, notes or
instruments for pledge hereunder in addition to those listed on Schedule A
hereto, the Grantor shall furnish to the Collateral Agent a duly completed
and executed amendment to such Schedule in substantially the form (with
appropriate insertions) of Schedule B hereto reflecting the securities
pledged hereunder after giving effect to such addition.
-4-
(j) After the occurrence and during the continuance of a Default or
failure of the Grantor to perform any of the covenants and agreements herein
contained, the Collateral Agent may, at its option, perform the same and in
so doing may expend such sums as the Collateral Agent may reasonably deem
advisable in the performance thereof, including, without limitation, the
payment of any taxes, liens and encumbrances, expenditures made in defending
against any adverse claims, and all other expenditures which the Collateral
Agent may be compelled to make by operation of law or which the Collateral
Agent may make by agreement or otherwise for the protection of the security
hereof. All such sums and amounts so expended shall be repayable by the
Grantor immediately without notice or demand, shall constitute additional
Obligations secured hereunder and shall bear interest from the date said
amounts are expended at the rate per annum applicable to past due Domestic
Rate Loans (as defined in the Credit Agreement). No such performance of any
covenant or agreement by the Collateral Agent on behalf of the Grantor, and
no such advancement or expenditure therefor, shall relieve the Grantor of any
default under the terms of this Agreement or in any way obligate the
Collateral Agent, any Bank or any Noteholder to take any further or future
action with respect thereto. The Collateral Agent, in making any payment
hereby authorized, may do so according to any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax
lien or title or claim. The Collateral Agent, in performing any act
hereunder, shall be the sole judge of whether the Grantor is required to
perform same under the terms of this Agreement. The Collateral Agent is
hereby authorized to charge any depository or other account of the Grantor
maintained with the Collateral Agent but excluding all accounts of the
Grantor in a fiduciary capacity for the amount of such sums and amounts so
expended.
(k) The Grantor will cause each obligor of a Pledged Security to fully
and completely observe and perform all of its covenants and agreements under
the Pledged Security and Loan Documents and will not amend, modify or waive
any of same in any manner which materially adversely affects the Pledged
Securities or the Collateral Agent's interest therein. The Grantor agrees
that it will not release any collateral or guarantors for any Pledged
Security or otherwise take any action which would impair the value or
collectability of the Collateral or any part thereof. The Grantor further
agrees to promptly deliver to the Collateral Agent notice of any default
under any Pledged Security.
4. SPECIAL PROVISIONS RE: VOTING RIGHTS, DIVIDENDS AND PRINCIPAL
PAYMENTS. Unless and until a Default has occurred and thereafter until
notified by the Collateral Agent pursuant to Section 6(b) hereof:
(a) The Grantor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Collateral or any part thereof for all
purposes not inconsistent
-5-
with the terms of this Agreement or any other document evidencing or
otherwise relating to any of the Obligations.
(b) The Grantor shall be entitled to receive and retain all
dividends which are paid in cash out of earned surplus of the issuer of
the relevant Pledged Securities.
(c) All sums due and to become due on the Pledged Securities that
constitute notes or instruments shall be remitted directly to the
Collateral Agent for application in reduction of the indebtedness hereby
secured in such order and manner and at such times as provided herein;
PROVIDED, HOWEVER, that the Banks and Noteholders agree that unless and
until a Default occurs hereunder the Grantor may collect and receive and
retain for its own use regularly scheduled installment payments of
principal and of interest on the Pledged Securities that constitute notes
or instruments.
(d) In order to permit the Grantor to exercise such voting and/or
consensual powers which it is entitled to exercise under subsection (a)
above and to receive such distributions which the Grantor is entitled to
receive and retain under subsection (b) above, the Collateral Agent will,
if necessary, upon the written request of the Grantor, from time to time
execute and deliver to the Grantor appropriate proxies and dividend
orders.
(e) In order to permit the Collateral Agent to receive all cash and
other property to which it may be entitled under subsection (b) or (c)
above, the Grantor shall, if necessary, upon the written request of the
Collateral Agent, from time to time execute and deliver to the Collateral
Agent appropriate dividend orders.
5. POWER OF ATTORNEY. The Grantor hereby appoints the Collateral
Agent, and each of its nominees, officers, agents, attorneys, and any other
person whom the Collateral Agent may designate, as the Grantor's
attorney-in-fact, with full power and authority upon the occurrence and
during the continuation of a Default to ask, demand, collect, receive,
receipt for, sue for, compound and give acquittance for any and all sums or
properties which may be or become due, payable or distributable in respect of
the Collateral or any part thereof, with full power to settle, adjust or
compromise any claim thereunder or therefor as fully as the Grantor could
itself do, to endorse the Grantor's name on any assignments, stock powers, or
other instruments of transfer and on any checks, notes, acceptances, money
orders, drafts and any other forms of payment or security that may come into
the Collateral Agent's possession and on all documents of satisfaction,
discharge or receipt required or requested in connection therewith, and, in
its discretion, to file any claim or take any other action or proceeding,
either in its own name or in the name of the Grantor, or otherwise, which the
Collateral Agent, any Bank or any Noteholder may reasonably deem necessary or
appropriate to collect or otherwise realize upon all or any part
-6-
of the Collateral, or effect a transfer thereof, or which may be necessary or
appropriate to protect and preserve the right, title and interest of the
Collateral Agent in and to such Collateral and the security intended to be
afforded hereby. Except as set forth in this sentence, the Grantor hereby
ratifies and approves all acts of any such attorney and agrees that neither
the Collateral Agent nor any such attorney will be liable for any acts or
omissions nor for any error of judgment or mistake of fact or law other than
their gross negligence or willful misconduct. The Collateral Agent may file
one or more financing statements disclosing its security interest in all or
any part of the Collateral without the Grantor's signature appearing thereon,
and the Grantor also hereby grants the Collateral Agent a power of attorney
to execute any such financing statements, and any amendments or supplements
thereto, on behalf of the Grantor without notice thereof to the Grantor. The
foregoing powers of attorney, being coupled with an interest, are irrevocable
until the Obligations have been fully paid and satisfied and all agreements
of the Collateral Agent or any Bank to extend credit to or for the account of
the Grantor under the Credit Agreement have expired or otherwise have been
terminated.
6. DEFAULTS AND REMEDIES.
(a) The occurrence of any one or more of the following shall constitute
a "DEFAULT" hereunder: (i) the occurrence of any event or the existence of
any condition which is specified as an "EVENT OF DEFAULT" under the Credit
Agreement and (ii) the occurrence of any event or the existence of any
condition which is specified as an "EVENT OF DEFAULT" under the Note
Agreement. Upon the occurrence of any Default the Collateral Agent may, and
shall, upon written request of the holder or holders of at least 66 2/3% in
principal amount of the Obligations, in addition to such other remedies as
may be available to it under available law, exercise any or all of the
remedies as set forth in this Section 6.
(b) If a Default shall have occurred and be continuing, all rights of
the Grantor to receive and retain the distributions which it is entitled to
receive and retain pursuant to Section 4(b) hereof shall, at the option of
the Collateral Agent, cease and thereupon become vested in the Collateral
Agent which, in addition to all other rights provided herein or by law, shall
then be entitled solely and exclusively to receive and retain the
distributions which the Grantor would otherwise have been authorized to
retain pursuant to Section 4(b) hereof and all rights of the Grantor to
exercise the voting and/or consensual powers which it is entitled to exercise
pursuant to Section 4(a) hereof shall, at the option of the Collateral Agent,
cease and thereupon become vested in the Collateral Agent which, in addition
to all other rights provided herein or by law, shall then be entitled solely
and exclusively to exercise all voting and other consensual powers pertaining
to the Collateral and to exercise any and all rights of conversion, exchange
or subscription and any other rights, privileges or options pertaining
thereto as if the Collateral Agent were the absolute owner thereof including,
without limitation, the right to exchange, at its discretion, the Collateral
or any part thereof upon the merger, consolidation,
-7-
reorganization, recapitalization or other readjustment of the respective
issuer thereof or upon the exercise by or on behalf of any such issuer or the
Collateral Agent of any right, privilege or option pertaining to the
Collateral or any part thereof and, in connection therewith, to deposit and
deliver the Collateral or any part thereof with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Collateral Agent may determine.
(c) Upon the occurrence and during the continuation of any Default, the
Collateral Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the Code
(regardless of whether the Code is the law of the jurisdiction where the
rights or remedies are asserted and regardless of whether the Code applies to
the affected Collateral), and further the Collateral Agent may in accordance
with the requirements of applicable law, sell and deliver any or all
Collateral held by or for it at public or private sale, for cash, upon credit
or otherwise, at such prices and upon such terms as the Collateral Agent
deems advisable. In the exercise of any such remedies, the Collateral Agent
may sell all the Collateral as a unit even though the sales price thereof may
be in excess of the amount remaining unpaid on the Obligations. The
Collateral Agent is authorized at any sale or other disposition of the
Collateral, if it deems it advisable so to do, to restrict the prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing for their own account for investment, and not with a view to the
distribution or resale of any of the Collateral. In addition to all other
sums due the Collateral Agent, Banks or Noteholders hereunder, the Grantor
shall pay the Collateral Agent all reasonable costs and expenses incurred by
the Collateral Agent, including reasonable attorneys' fees and court costs,
in obtaining, liquidating or enforcing payment of Collateral or the
Obligations or in the prosecution or defense of any action or proceeding by
or against the Collateral Agent or the Grantor concerning any matter arising
out of or connected with this Agreement or the Collateral or the Obligations,
including, without limitation, any of the foregoing arising in, arising under
or related to a case under the United States Bankruptcy Code (or any
successor statute). Any requirement of reasonable notice shall be met if
such notice is personally served on or mailed, postage prepaid, to the
Grantor in accordance with Section 11(b) hereof at least 10 days before the
time of sale or other event giving rise to the requirement of such notice;
PROVIDED HOWEVER, no notification need be given to the Grantor if the Grantor
has signed, after a Default has occurred, a statement renouncing any right to
notification of sale or other intended disposition. The Collateral Agent
shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given. The Collateral Agent may
be the purchaser at any such sale or other disposition of the Collateral or
any part thereof. The Grantor hereby waives all of its rights of redemption
from any sale or other disposition of the Collateral or any part thereof.
Subject to the provisions of applicable law, the Collateral Agent may
postpone or cause the postponement of the sale of all or any portion of the
Collateral by announcement at the time and place of such sale, and such sale
-8-
may, without further notice, be made at the time and place to which the sale
was postponed or the Collateral Agent may further postpone such sale by
announcement made at such time and place.
(d) The powers conferred upon the Collateral Agent hereunder are solely
to protect its interest in the Collateral and shall not impose on it any duty
to exercise such powers. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially
equivalent to that which the Collateral Agent accords its own property,
consisting of similar type securities. This Agreement constitutes an
assignment of rights only and not an assignment of any duties or obligations
of Grantor in any way related to the Collateral, and the Collateral Agent
shall have no duty or obligation to discharge any such duty or obligation.
(e) Failure by the Collateral Agent to exercise any right, remedy or
option under this Agreement or any other agreement between the Grantor and
the Collateral Agent or provided by law, or delay by the Collateral Agent in
exercising the same, shall not operate as a waiver; and no waiver by the
Grantor, the Collateral Agent, any Bank or any Noteholder shall be effective
unless it is in writing and then only to the extent specifically stated.
Neither the Collateral Agent nor any party acting as attorney for the
Collateral Agent shall be liable for any acts or omissions or for any error
of judgment or mistake of fact or law other than their gross negligence or
willful misconduct. The rights and remedies of the Collateral Agent under
this Agreement shall be cumulative and not exclusive of any other right or
remedy which the Collateral Agent may have.
7. APPLICATION OF PROCEEDS.
(a) The proceeds of any foreclosure or other realization on the
Collateral or of any other enforcement of this Agreement shall be paid and
applied as follows:
(i) First, to the payment of reasonable costs and expenses of such
foreclosure, realization or other enforcement and of all necessary or
proper expenses, liabilities and advances incurred or made hereunder by
the Collateral Agent, and to the payment of all taxes, assessments,
governmental charges or liens superior to the lien of these presents,
except any taxes, assessments, governmental charges or other superior lien
subject to which said sale may have been made;
(ii) Next, to the Banks and Noteholders in the amount of any unpaid
accrued interest on the Obligations, and any unpaid accrued letter of
credit fees payable by the Grantor under the Credit Agreement, PRO RATA in
proportion to the respective amounts thereof owed to each Bank and
Noteholder;
-9-
(iii) Next, to the extent proceeds remain, to the Banks and
Noteholders in the amount of any outstanding principal amount of the
Notes, the undrawn face amount of the outstanding Letters of Credit, and
the amount of any outstanding principal amount of the Senior Notes, PRO
RATA in proportion to the respective amounts thereof owed to each Bank and
each Noteholder, subject in the case of the outstanding Letters of Credit,
to the provisions of Section 7(b) hereof;
(iv) Next, to the extent proceeds remain, to the Banks and
Noteholders in the amount of any Makewhole Amounts due with respect to the
Senior Notes and any amounts due for breakage or similar amounts as
provided in Section 1.11 of the Credit Agreement and any unpaid accrued
commitment fees, PRO RATA in proportion to the respective amounts thereof
owed to each Bank and Noteholder; and
(v) Finally, to the extent proceeds remain, to the Banks and
Noteholders in the amount of any other unpaid Obligations, PRO RATA in
proportion to the respective amounts thereof owed to each Bank and
Noteholder.
(b) SPECIAL PROVISIONS REGARDING LETTERS OF CREDIT. If at any time any
Bank is entitled pursuant to clause (iii) of Section 7(a) hereof to have any
amount (a "DISTRIBUTABLE AMOUNT") distributed to it as a consequence of the
inclusion in outstanding Letters of Credit of the aggregate amount available
for drawing under any Letter of Credit issued by or participated in by such
Bank, such Distributable Amount shall not be so distributed to such Bank but
shall instead be distributed to the Collateral Agent and deposited by the
Collateral Agent in a special interest bearing account (the "LETTER OF CREDIT
RESERVE ACCOUNT") under the sole dominion and control of the Collateral
Agent, and shall be applied and distributed to such Bank if and to the extent
that such Letter of Credit is honored. If such Letter of Credit is not
honored (or is not honored in the full amount thereof) the balance of the
funds in the Letter of Credit Reserve Account in respect of such Letter of
Credit and not distributed pursuant to the immediately preceding sentence
shall be distributed to the Banks and Noteholders pursuant to clause (iii) of
Section 7(a) hereof, or to whomsoever shall be lawfully entitled thereto.
(c) APPLICATION OF PAYMENTS TO BE SHARED BY BANKS AND NOTEHOLDERS. The
distribution provisions of this Section 7 are for the purpose of determining
the relative amounts of proceeds or other payments to be distributed to the
Banks and Noteholders in respect of the Collateral and not for the purpose of
creating an agreement among the parties as to the manner in which any
proceeds or other payments distributed to them are actually to be applied to
pay the Obligations. Each Bank and Noteholder shall be free, each in its own
discretion, to apply any payment distributed to it hereunder to the
Obligations held by it in such order as it may determine in accordance with
applicable law and the terms of the Credit Agreement and Note Agreement. The
Grantor agrees that in the event any payment is made with respect to any
-10-
Obligations, as between the Grantor and each Bank and each Noteholder the
Obligations discharged by such payment shall be the amount or amounts of the
Obligations to which such Bank and Noteholder applies the portion of such
payment distributed to it under this Section 7 as provided in the preceding
sentence. Notwithstanding the foregoing, for all purposes of this Agreement
the Obligations shall be deemed paid to the same extent that payments
distributed with respect to it pursuant to Section 7(a) notwithstanding the
actual application thereof.
(d) PAYMENTS AND PROCEEDS FROM GRANTOR NOT TO BE SHARED. No Bank and
no Noteholder shall by virtue of this Agreement be required to share with any
other Bank and Noteholder any payments or prepayments received from the
Grantor in respect of the Obligations owed to such Bank and Noteholder by the
Grantor, including without limitation any amounts or other property or
securities collected by or distributed to or otherwise received by such Bank
and Noteholder from or in respect of the Grantor as a result of any
enforcement or the exercise of any remedy or counterclaim or otherwise,
including without limitation, any such amounts received pursuant to the
exercise of any right of offset or bankers' lien, or as a result of the
pendency of any case involving the Grantor under the Bankruptcy Code of 1978,
as amended, or any successor law or under any other bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation or similar law of any jurisdiction.
(e) PAYMENTS AND PROCEEDS FROM GRANTOR UNRELATED TO THIS AGREEMENT NOT
TO BE SHARED. Except as hereinabove provided in this Section 7 with respect
to payments, collections and distributions in respect of obligations
hereunder, no Bank nor any Noteholder shall by virtue of this Agreement be
required to share with any other Bank and Noteholder any payments or
prepayments received from the Grantor in respect of any other indebtedness,
liability or obligation of the Grantor owed to such Bank and Noteholder.
8. CONTINUING AGREEMENT. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until
all of the Obligations, both for principal and interest, have been fully paid
and satisfied and all agreements of the Banks to extend credit to or for the
account of the Grantor under the Credit Agreement have expired or otherwise
have been terminated. Upon such termination of this Agreement, the
Collateral Agent shall, upon the request and at the expense of the Grantor,
forthwith release its security interest hereunder.
9. CONCERNING THE COLLATERAL AGENT. (A) TERMS AND CONDITIONS OF
AGENCY. The Collateral Agent shall act hereunder as the agent for the Banks
and the Noteholders. The Collateral Agent hereby accepts such agency and the
powers and duties imposed upon it by this Agreement in connection therewith
and agrees to execute such agency and perform such powers and duties upon and
subject to the following expressed terms and conditions:
-11-
(i) The Collateral Agent shall not be bound to ascertain or inquire
as to the performance or observance of any covenant, condition or
agreement on the part of the Grantor contained herein; but the Collateral
Agent may require of the Grantor full information and advice as to the
performance of the covenants, conditions and agreements aforesaid and of
the Grantor as to the condition of the Collateral.
(ii) The Collateral Agent shall not be responsible for any recital
herein, or in the Credit Agreement, the Note Agreement or any instrument
related thereto, or for the validity, enforceability, genuineness,
perfection or worth of this Agreement or any instrument related hereto, or
for the sufficiency of the security for or the collectibility of the
indebtedness hereby secured, or for the value or title of any of the
Collateral, or for the recording, filing or refiling of any financing
statement perfecting the lien of this Agreement, or for the payment of
taxes, charges, assessments or liens upon the Collateral or otherwise as
to the maintenance of the security hereof. The recitals and statements
contained in this Agreement hereto shall be taken as statements by the
Grantor and shall not be considered as made by or as imposing any
obligation or liability upon the Collateral Agent.
(iii) The Collateral Agent shall be protected in acting upon any
notice, request, consent, certificate, order, affidavit, letter, telegram
or other paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons. Any action
taken by the Collateral Agent pursuant to this Agreement upon the request
or authority or consent of any person who at any time of making such
request or giving such authority or consent is an owner of a Note, or
Senior Note, shall be conclusive and binding upon all future owners of the
Notes, or Senior Notes.
(iv) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, the
Collateral Agent shall be entitled to rely upon a certificate of the
Grantor signed by any officer thereof the Collateral Agent deems
appropriate for such purpose as sufficient evidence of the facts therein
contained.
(v) The Collateral Agent shall not be accountable for the use of
Notes or the Senior Notes or of any of the proceeds of any such Note or
Senior Note. Any money received by the Collateral Agent under any
provision of this Agreement shall, until used or applied as herein
provided, be held in trust for the purposes for which they were paid, but
need not be segregated from other funds except to the extent required by
law and may be so held without any liability for interest except for such
as the Collateral Agent shall agree to pay thereon during that time. If
any Obligations are payable, either as to principal or interest, or both,
at any office other than the office of the Collateral Agent, the
Collateral Agent shall be permitted to remit funds to such place of
payment, and shall
-12-
not be responsible for the loss or misapplication thereof, and also, if
the Collateral Agent shall by any provisions hereof be required or
permitted to remit funds to others, it shall not be responsible for the
loss or misapplication thereof.
(vi) The Collateral Agent shall have such powers as are delegated to
it by this Agreement, together with such powers as are reasonably
incidental thereto. The permissive right of the Collateral Agent to do
things enumerated in this Agreement shall not be construed as a duty of
the Collateral Agent. The Collateral Agent shall not be liable for any
action taken or omitted to be taken by it in good faith which is
(i) reasonably believed by it to be within the discretion or power
conferred upon it by this Agreement, (ii) in accordance with the direction
of (a) the Bank or Banks holding an interest in two-thirds of the
principal amount of the Notes or (b) the holder or holders of a majority
in principal amount of Senior Notes, unless the Collateral Agent receives
what it in good faith believes to be conflicting directions for such
purpose or (iii) in accordance with the direction of the holder or holders
of a majority in principal amount of the Obligations if the Collateral
Agent receives what it in good faith believes to be conflicting directions
for such purpose; and the Collateral Agent shall not be responsible for
any clerical error, oversight, inadvertence or error of judgment, or for
any action taken or omitted to be taken by the Collateral Agent hereunder
or in connection herewith, unless due to its own gross negligence or for a
willful default.
(vii) The Collateral Agent shall not be required to take notice or be
deemed to have notice of any Default hereunder, unless the Collateral
Agent shall be specifically notified in writing of such Default by (i) the
Required Banks or (ii) the holders of at least fifty percent in principal
amount of the Senior Notes.
(viii) The Collateral Agent shall not be required to give any bond or
surety in respect of the execution of the said agencies and powers or
otherwise in respect of the premises.
(ix) The Collateral Agent shall not be under any obligation to
exercise any of the agencies or powers hereof at the request, order or
direction of any of the holders of the Notes or the Senior Notes pursuant
to the provisions of this Agreement unless such holders shall have
indemnified the Collateral Agent to its complete satisfaction against the
costs, expenses and liabilities which may be incurred therein or thereby
and provided security for such indemnity which is satisfactory to it.
Without in any way limiting the foregoing, none of the provisions
contained in this Agreement shall require the Collateral Agent to expend
or risk its own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the
repayment of such funds or liability is not
-13-
reasonably assured to it. Any sum advanced for reasonable expenses by
any such holder or holders or on their behalf or by the Collateral Agent
in case they should make any such advancement to the extent said sum is
expended shall constitute additional Obligations and shall have priority
over the payment of the Notes and the Senior Notes.
(x) The Collateral Agent may execute any of the agencies or powers
hereof and perform any duties required of it by or through attorneys,
agents or employees, and shall be entitled to advice of counsel concerning
all matters of the agencies hereof and its duties hereunder, and may in
all cases pay such reasonable compensation as it shall deem proper to all
such attorneys, agents and employees as may reasonably be employed in
connection with the agencies hereof, and the Grantor covenants and agrees
to repay upon demand all such outlays and expenditures so incurred and all
other proper charges and expenses of the Collateral Agent incurred in
carrying out the agencies created hereby. The Collateral Agent shall not
be answerable for the default or misconduct of any attorney, agent or
employee appointed in pursuance hereof if such attorney, agent or employee
shall have been selected with reasonable care. The Collateral Agent may
in relation to this Agreement act upon the opinion or advice of any
attorney, surveyor, engineer or accountant, who, prior to the occurrence
to the knowledge of the Collateral Agent of any Default hereunder, may be
retained or selected by the Grantor, if approved by the Collateral Agent,
and shall not be responsible for any loss resulting from any action or non-
action in accordance with any such opinion or advice.
(b) COSTS AND EXPENSES OF COLLATERAL AGENT. The Grantor covenants and
agrees to reimburse the Collateral Agent for all advances made, and pay the
Collateral Agent for all reasonable costs and expenses (including reasonable
counsel fees and court costs) incurred by the Collateral Agent, in the
execution of the agencies hereby created and the exercise and performance of
the powers and duties of the Collateral Agent hereunder and in any action or
proceeding affecting the Collateral or the title thereto or the interest of the
Collateral Agent therein or otherwise having a bearing on the interests of the
holders of the Obligations. The Grantor further agrees to indemnify the
Collateral Agent against any and all liabilities, losses, reasonable costs,
reasonable expenses, damages, actions, claims, judgments, charges and
reasonable attorney's fees incurred or sustained by the Collateral Agent under
this Agreement, except such therefor as are directly caused by the Collateral
Agent's gross negligence or willful misconduct.
(c) RESIGNATION OF COLLATERAL AGENT. The Collateral Agent and any
successor or successors hereafter appointed may at any time resign and be
discharged from the agency hereby created by giving sixty days' written notice
to the Grantor and the holders of the Notes and the Senior Notes, and such
resignation shall take effect at the end of such sixty days, or, if later, upon
-14-
the appointment of a successor agent in the manner provided in 9(d) hereof.
Such notice may be served personally or sent by registered mail.
(d) APPOINTMENT OF SUCCESSOR AGENT. In case at any time the Collateral
Agent hereunder shall resign from such capacity, a successor may be appointed
by the holders of a majority in principal amount of the Obligations by an
instrument or concurrent instruments in writing signed by such holders. If no
appointment of a successor agent shall be made pursuant to the foregoing
provisions of this Section within sixty days after the Collateral Agent
resigns, the resigning Collateral Agent shall then appoint a commercial bank or
trust company who shall then serve as Collateral Agent hereunder.
(e) VESTING OF SUCCESSOR AGENT. Every successor agent appointed
hereunder shall execute, acknowledge and deliver to its predecessor and also to
the Grantor an instrument in writing accepting such appointment hereunder, and
thereupon such successor agent, without any further act, deed or conveyance,
shall become fully vested with all the estates, properties, rights, powers,
agencies, duties and obligations of the Collateral Agent ceasing to act
hereunder, with like effect as if originally named as Collateral Agent herein;
but the Collateral Agent ceasing to act shall, nevertheless, on the written
request of the Grantor, or of such successor agent, or of the holder or holders
of a majority in principal amount of the indebtedness hereby secured, execute,
acknowledge and deliver such instruments of conveyance and further assurance
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in such successor agent all the right, title
and interest of the Collateral Agent ceasing to act, in and to the Collateral
and such rights, powers, agencies, duties and obligations, and the Collateral
Agent ceasing to act shall also, upon like request, pay over, assign and
deliver to the successor agent any money or other property subject to the lien
of this Agreement. Should any deed, conveyance or instrument in writing from
the Grantor be required by any successor agent for more fully and certainly
vesting in and confirming to such successor the estates, properties, rights,
powers, agencies and duties hereby vested or intended to be vested in the
Collateral Agent ceasing to act, any and all such deeds, conveyances and
instruments in writing shall on request be executed, acknowledged and delivered
by the Grantor. The resignation of any Collateral Agent, and the instrument or
instruments removing any Collateral Agent and appointing a successor hereunder,
together with all deeds, conveyances and other instruments provided for in this
Section shall, at the expense of the Grantor, be forthwith duly acknowledged
and filed for recording by the successor agent in each county where this
Agreement shall have been recorded.
(f) ADDITIONAL AGENT. If at any time or times for the purpose of
conforming to any legal requirements, restrictions or conditions in any state
or jurisdiction in which any of the Collateral may be located, or if at any
time or times the Collateral Agent or the holder or holders of a majority in
principal amount of the Obligations shall deem it necessary or prudent so to
do, the Collateral Agent or such holders shall have the power, by an instrument
executed by the
-15-
Collateral Agent or by such holders, to appoint one or more persons approved
by the Collateral Agent or such holders, either to act as separate agent or
agents or co-agent or co-agents jointly with the Collateral Agent, of all or
any specified part of the Collateral; and the person or persons so appointed
shall be such separate agent or agents or co-agent or co-agents with such
rights and remedies as shall be specified in such instrument to be executed
as aforesaid, to the extent not prohibited by law. Any such separate agent
or co-agent may resign in the same manner as can the Collateral Agent. The
Collateral Agent and any separate agent or co-agent shall have no
responsibility for the acts and omissions of each other.
(g) EVIDENCE GENERALLY. The Collateral Agent may in its discretion
require such proof as it deems necessary to establish the ownership of the
Notes and the Senior Notes or any interests therein. The Collateral Agent
shall not be bound to recognize any party as a holder of a Note or Senior Note
or any interest therein unless and until such party's title to the same is
proved in the manner satisfactory to the Collateral Agent.
(h) ASCERTAINMENT OF OUTSTANDING INDEBTEDNESS. Any determination of
whether the holders of a required percentage of the principal amount of the
Obligations have concurred or participated in any direction, request or consent
shall be made on the basis of the principal amount outstanding on such
Obligations as of the time of such determination.
10. PRIMARY SECURITY; OBLIGATIONS ABSOLUTE. The lien and security herein
created and provided for stand as direct and primary security for the
Obligations. The Grantor acknowledges and agrees that the lien and security
hereby created and provided for are absolute and unconditional and shall not in
any manner be affected or impaired by any acts or omissions whatsoever of the
Collateral Agent, any Bank, any Noteholder or any other holder of any of the
Obligations, and without limiting the generality of the foregoing, the lien and
security hereof shall not be impaired by any acceptance by the Collateral
Agent, any Bank, any Noteholder or any holder of any of the Obligations of any
other security for or guarantors upon any of the Obligations or by any failure,
neglect or omission on the part of the Collateral Agent, any Bank, or any
Noteholder or any other holder of any of the Obligations to realize upon or
protect any of the Obligations or any collateral security therefor. The lien
and security hereof shall not in any manner be impaired or affected by (and the
Collateral Agent, the Bank and the Noteholder, without notice to anyone to the
extent allowed by applicable law, are hereby authorized to make from time to
time) any sale, pledge, surrender, compromise, settlement, release, renewal,
extension, indulgence, alteration, substitution, exchange, change in,
modification or disposition of any of the Obligations, or of any collateral
security therefor, or of any guaranty thereof or of any obligor thereon. In
order to foreclose or otherwise realize hereon and to exercise the rights
granted the Collateral Agent hereunder and under applicable law, there shall be
no obligation on the part of the Collateral Agent, any Bank, any Noteholder or
any other holder of any of the Obligations at any time to first resort for
payment to the Grantor or any other obligor on any of
-16-
the Obligations or to any guaranty of the Obligations or any portion thereof
or to resort to any other collateral security, property, liens or any other
rights or remedies whatsoever, and the Collateral Agent shall have the right
to enforce this instrument irrespective of whether or not other proceedings
or steps are pending seeking resort to or realization upon or from any of the
foregoing.
11. MISCELLANEOUS.
(a) This Agreement cannot be changed or terminated orally. All of the
rights, privileges, remedies and options given to the Collateral Agent
hereunder shall inure to the benefit of its successors and assigns, and all the
terms, conditions, covenants, agreements, representations and warranties of and
in this Agreement shall bind the Grantor and its legal representatives,
successors and assigns, provided that the Grantor may not assign its rights or
delegate its duties hereunder without the Collateral Agent, Banks' and
Noteholders' prior written consent. The Grantor hereby releases the Collateral
Agent from any liability for any act or omission relating to the Collateral or
this Agreement, except for the Collateral Agent's gross negligence or willful
misconduct.
(b) Except as otherwise specified herein, all notices hereunder shall be
in writing (including, without limitation, notice by telecopy) and shall be
given to the relevant party at its address or telecopier number set forth
below, or such other address or telecopier number as such party may hereafter
specify by notice to the other given by United States certified or registered
mail, by telecopy or by other telecommunication device capable of creating a
written record of such notice and its receipt. Notices hereunder shall be
addressed:
to the Grantor at: to the Collateral Agent at:
Atchison Casting Corporation Harris Trust and Savings Bank
400 South 4th Street 111 West Monroe Street
Atchison, Kansas 66002 Chicago, Illinois 60690
Attention: Chief Financial Officer Attention: Len Meyer
Telecopy: (913) 367-2155 Telecopy: 312-293-5041
Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid, or (iii) if given by any other means, when delivered at
the addresses specified in this Section.
-17-
(c) No Bank or Noteholder shall have the right to institute any suit,
action or proceeding in equity or at law for the enforcement of any remedy
under or upon this Agreement; it being understood and intended that no one or
more of the Banks or Noteholders shall have any right in any manner whatsoever
to affect, disturb or prejudice the lien of this Agreement by its or their
action or to enforce any right hereunder, and that all proceedings at law or in
equity shall be instituted, had and maintained by the Collateral Agent in the
manner herein provided and for the benefit of the Banks and Noteholders.
(d) All capitalized terms used herein without definition shall have the
same meanings herein as such terms have in the Credit Agreement.
(e) In the event that any provision hereof shall be deemed to be invalid
or unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed
as not containing such provision, but only as to such locations where such law
or interpretation is operative, and the invalidity or unenforceability of such
provision shall not affect the validity of any remaining provisions hereof, and
any and all other provisions hereof which are otherwise lawful and valid shall
remain in full force and effect.
(f) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws
of the State of Illinois. All terms which are used in this Agreement which are
defined in the Code shall have the same meanings herein as said terms do in the
Code unless this Agreement shall otherwise specifically provide. The headings
in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of any provision hereof.
(g) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument. The
Grantor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by the Grantor to the Collateral Agent, and it shall not
be necessary for the Collateral Agent to execute this Agreement or any other
acceptance hereof or otherwise to signify or express its acceptance hereof.
(h) The Grantor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in the City of Chicago for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. The Grantor irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient form. THE GRANTOR, THE COLLATERAL AGENT, THE
-18-
BANKS AND THE NOTEHOLDERS EACH HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
-19-
In Witness Whereof, the Grantor has caused this Agreement to be duly
executed and delivered the day and year first above written.
ATCHISON CASTING CORPORATION
By /s/ Kevin T. McDermed
Its V.P. & Treasurer
Acknowledged and Agreed to as of the date first written above.
HARRIS TRUST AND SAVINGS BANK, as
Collateral Agent
By /s/ Len E. Myer
Its Vice President
-20-
SCHEDULE A
PLEDGED SECURITIES
STOCK
ISSUER JURISDICTION OF NO. OF CERTIFICATE PERCENT OF
NAME ORGANIZATION SHARES NO(S). OWNERSHIP
Atchison Casting U.K. 12,870,000* 1 100%**
UK Ltd.
NOTES
OUTSTANDING MATURITY
OBLIGOR PRINCIPAL AMOUNT DATE DATE
Atchison Casting *** April 3, 1998 April 3, 2003
UK Ltd.
- -------------------------------
* 12,870,000 "A" shares pledged of 19,800,000 total "A" shares
** Grantor will own 100% of pledged shares, but approximately 95% of total
shares, after including "B" shares (owned by management) and "C" shares
(reserved for granted option).
- -------------------------------------------------------------------------------
*** The aggregate unpaid principal amount of all loans, advance and other
Indebtedness owing at the time of demand from Atchison Casting UK Ltd. to
the Grantor, together with interest thereon.
-2-